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4-Hour Body Principles in Trading

  
  Education
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I was reading The 4-Hour Body by Tim Ferriss and found two quotes that are highly applicable to trading:

On psychology:

Does that mean [the workout routine] won’t work for some people? No, it just means that it will fail for most people. We want to avoid all methods with a high failure rate, even if you believe you are in the diligent minority. In the beginning everyone who starts a program believes they’re in this minority.
Take adherence seriously: will you actually stick with this change until you hit your goal?
If not, find another method, even it it’s less effective and less efficient.

On listening to others:

Everyone you meet (every male, at least) will have a strong opinion about how you should train and eat. for the next two to four weeks, cultivate selective ignorance and refuse to have bike-shed discussions with others. Friends, foes, colleagues, and well-intentioned folks of all stripes will offer distracting and counterproductive additions and alternatives.

Nod, thank them kindly, and step away to do what you’ve planned. Nothing more and nothing different.

5-Qualities essential to the equipment of the speculator

  
  Education
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  1. Self-Reliance. A man must think for himself, must follow his own convictions. George MacDonald says: “A man cannot have another man’s ideas any more than he can another man’s soul or another man’s body.” Self-trust is the foundation of successful effort.
  2. Judgment. That equipoise, that nice adjustment of the faculties one to the other, which is called good judgment, is an essential to the speculator.
  3. Courage. That is, confidence to act on the decisions of the mind. In speculation there is value in Mirabeau’s dictum: “Be bold, still be bold; always be bold.”
  4. Prudence. The power of measuring the danger, together with a certain alertness and watchfulness, is very important. There should be a balance of these two, Prudence and Courage; Prudence in contemplation, Courage in execution. Lord Bacon says: “In meditation all dangers should be seen; in execution one, unless very formidable.” Connected with these qualities, properly an outgrowth of them, is a third, viz: promptness. The mind convinced, the act should follow. In the words of Macbeth; “Henceforth the very firstlings of my heart shall be the firstlings of my hand.” Think, act, promptly.
  5. Pliability the ability to change an opinion, the power of revision. “He who observes,” says Emerson, “and observes again, is always formidable.”

Why is self efficacy important

  
  Education
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Life does not come with a neatly designed manual.No one gives you a manual on trading when you start. You have to figure out things on your own.
Traders spend so much time moaning about lack of good training resources or programs. Or claiming this does not work, that does not work. Many of these issues are related to self efficacy.
When I did bulk of my work on Market Breadth there was no book on market breadth. I got the same help manual that you get with Telechart when I started using Telechart. In fact when I did bulk of my work on designing my trading methods, Internet was not such a big source of information.Life is much easier now, you can find so much information for fraction of effort and cost. Same thing that I figured out you can also figure out if you spend sufficient time going in to depth and peeling the layers.
That is the story of every successful independent traders. They figured out the market on their own.

This is where self efficacy becomes very critical. If you have strong perceived sense of self efficacy, you would spend your time and energy on finding solutions to your ignorance problems and overcoming inhibitors.
People with strong sense of self efficacy never have inertia problem. They have intrinsic motivation.
 
See my earlier post on “Three most common problem faced by traders”
The three most common problems when it comes to trading profitably are:

  1. Ignorance
  2. Inhibitors
  3. Inertia

Ignorance problems can be solved by acquiring knowledge. These are easiest problems to fix. If I don’t understand something, I need a strategy to overcome my ignorance. It might be reading, attending courses/training program, researching .

For example many users of Telechart do not know how to use many functionality. That is easily fixable problem.Same is true of say IBD methodology. Many people are ignorant of how say EPS or RS rating is calculated. People of ignorant of momentum or risk management or growth investing.

If you overcome your ignorance problem, you might encounter next set of problem.

Inhibitors are things which inhibit us from acting on our knowledge. I know IBD 200 works and how it works and it can be profitable, but I do not have time to input the 200 stocks. Or I know how I can make money trading Double Trouble, but i do not have software to do this for me.

All inhibitors kind of problem require innovation . A little innovation and resourcefulness can solve most inhibitors kind of issues. If A route or scan does not work, you find B route or plan B. When faced with constrains, you have to innovate.

If you are motivated enough trader, you will find solving the ignorance and inhibitors problem is not very difficult. The third set of problem is the most difficult to solve.

Inertia is lack of action on what we know and inability to act on overcoming inhibitors. Inertia makes most people stick to their current orbit of success or performance. You can spend years living suboptimal life and wasting your potential if inertia is your problem.

Inertia problems have one simple solution. A kick in the ass.

 
To overcome all three you need to have higher perceived self efficacy. If you have that then you will find several ways to overcome your ignorance problem. If you have that you will innovate around the inhibitors and if you have that motivation will not be a problem.
The concept of self efficacy is applicable not only to trading but to everything else in your life and career. You will see same thing in organisation, the vast majority is waiting for “the manual”, “the instructions”, “the rules” , “the holy grail” and so on. Few people in any organisation will have the self efficacy to figure out many of the things themselves and they will be the real leaders.
 
The concept of self efficacy is very critical if you have kids and you want them to be successful in life. Much of the school system and learning tools used are not geared to developing self efficacy. Plus parents are so indulgent that they hinder self efficacy development. Kids get rewarded for little efforts.
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