Have you ever stopped to consider how many different trading strategies there are? How about time frames for each strategy? And what about the best instrument to trade that strategy within the time frame selected? What about the indicators? Which ones are we planning to apply to the strategy? If we were to add it all up there are literally hundreds, if not thousands of strategies, just in one time frame! And what about the other traders trading one of these strategies that may be designed specifically to trade the opposite of what you trade? There is absolutely no way humanly possible to master all, or even a large number of, the strategies available to us. Therefore, we must focus on a particular strategy and become a strategic specialist. In doing so, we defeat the ego’s need to know everything, which we know is impossible in the first place. With focus, we can think clearly about our specialized strategy knowing when and where to enter and exit the market since we know exactly what the market is supposed to look like to do either one. This focus helps eliminate the confusion and frustration we experience when the market does not make sense (which is most all of the time!).
Archives of “confusion” tag
rss17th Century Rules of Speculation
Rules of Speculation
- Never advise anyone to buy/sell shares. Where guessing correctly is a form of witchcraft, council cannot be put on airs.
- Accept both your profits and regrets. It is best to seize what comes to hand when it comes, and not expect that your good fortune and the favorable circumstances will last.
- Profit in the share market is goblin treasure: at one moment it is carbuncles, the next it is coal, one moment diamonds, and the next pebbles. Sometimes, they are the tears that Aurora leaves on the sweet morning’s grass, at other times, they are just tears.
- He who wishes to become rich from this game much have both money and patience.
Note: these rules are from “Confusion of Confusions” by Jose de la Vega in the year 1688. Vega was a successful merchant, poet, and philanthropist residing in the 17th century Amsterdam. This book represents the oldest known hints of technical analysis and his accounts of the Dutch markets in the 17th century.
Open Mind
Nothing is infallible in the stock market — no theory, no measure of the market be it technical, fundamental, or cyclical. The basic tenet of any investment or trading methodology worth its salt should be that it’s not infallible.
Those that demand the least from a method will gain the most from it. Those who demand the most from a method will be the ones most frustrated by it.
The only way to gain control is to give up control. The only way to gain control is to give up the idea of trying to have control.
The market is more art than science: The good and bad part of any genuine approach to the market is that it requires interpretation, which is what makes markets and opportunity, but is bad because it’s frustrating.
The study of the market is part theoretical and part philosophical. That’s what makes it so intriguing. The market is a mystery. Despite all the artificial intelligence and computer power available, no one has solved the mystery. There’s no sure thing in the markets.
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This is no-man’s-land. Every technical benchmark and data point seem but an island in the market’s stream of confusion.
As a trading bro said to me over the weekend, “If you have an opinion in this market, you’re wrong.”
Keep an open mind.
Nothing is infallible in the stock market — no theory, no measure of the market be it technical, fundamental, or cyclical. The basic tenet of any investment or trading methodology worth its salt should be that it’s not infallible.Four Poisons
There is a Korean martial art called Kum Do. This is a brutal game that involves a fight to the death with very sharp swords. The way it is practiced today is with bamboo sticks, but the moves are the same. Kum Do teaches the student warriors to avoid what are called “The Four Poisons of the Mind.” These are: fear, confusion, hesitation and surprise. In Kum Do, the student must be constantly on guard to never anticipate the next move of the opponent. Likewise, the student must never allow his natural tendencies for prediction to get the better of him. Having a preconceived bias of what the markets or the opponents will do can lead to momentary confusion and—in the case of Kum Do—to death. A single blow in Kum Do can be lethal, and is the final cut, since the object is to kill the opponent. One blow—>death—>game over.
Instead of predicting, anticipating, and being in fear and confusion, you must do exactly the opposite if you are to survive a death blow from the market movements. You must watch with a calm, clear and collected attitude and strike at the right time. A few seconds of anticipation, hesitation or confusion can mean the difference between life and death in Kum Do—and wins or losses in the stock markets. If you are not in tune with the four poisons of fear, confusion, hesitation or surprise in the markets, you are at risk for ruin. Ruin means that your money is gone and the game is over.
How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise?
Replace fear with faith—faith in your trading model and trading plan
Replace confusion with the attitude of being comfortable with uncertainty
Replace hesitation with decisive action
Replace surprise with taking nothing for granted and preparing yourself for anything.