- Your income can grow only to the extent you do
- If you want to change the fruits, you will first have to change the roots. If you want to change the visible, you must first change the invisible.
- Money is a result, wealth is a result, health is a result, illness is a result, your weight is a result. We live in a world of cause and effect.
- Thoughts –> Feelings–>Actions–>Results TFAR
- When the subconscious mind must choose between deeply rooted emotions and logic, emotions will almost always win
- If your motivation for acquiring money or success comes from a non-supportive root such as fear, anger, or the need to “prove” yourself, your money will never bring you happiness
- The only way to permanently change the temperature in the room is to reset the thermostat. In the same way, the only way to change our level of financial success “permanently” is to reset your financial thermostat.
- Consciousness is observing your thoughts and actions so that you can live from true choice in the present moment rather than being run by programming from the past.
- You can choose to think in ways that will support you in your happiness and success instead of ways that don’t.
- Money is extremely important in the areas in which it works, and extremely unimportant in the areas in which it doesn’t.
- When you are complaining, you become a living breathing “crap magnet”
- There is no such thing as a really rich victim!
- If your goal is to be comfortable, chances are you’ll never get rich. But if your goal is to be rich, chances are you’ll end up mighty comfortable.
- The number one reason most people don’t get what they want is that they don’t know what they want.
- If you are not fully, totally, and truly committed to creating wealth, chances are you won’t.
- The Law of Income: You will be paid in direct proportion to the value you deliver according to the marketplace.
- “Bless that which you want.” -Huna philosophy
- The secret to success is not to try to avoid or get rid of or shrink from your problems; the secret is to grow yourself so that you are bigger than any problem.
- Money will only make you more of what you already are.
- The true measure of wealth is net worth, not working income.
- The habit of managing your money is more important that the amount
- Either you control money, or it will control you.
- The Rich see every dollar as a “seed” that can be planted to earn a hundred more dollars, which can then be replanted to earn a thousand more dollars
- Action is the “bridge” between the inner world and the outer world
- It is not necessary to try to get rid of fear in order to succeed
- If you are willing to do only what’s easy, life will be hard. But if you are willing to do what’s hard, life will be easy
- The only time you are actually growing is when you are uncomfortable
- Training and managing your own mind is the most important skill you could ever own, in terms of both happiness and success
Archives of “Mind” tag
rssSuccessful trading is about making money…not about being right
According to Mark Douglas…
In any particular trade you never really know how far prices will travel from any given point. If you never really know where the market may stop, it is very easy to believe there are no limits to how much you can make on any given trade. From a psychological perspective this characteristic will allow you to indulge yourself in the illusion that each trade has the potential of fulfilling your wildest dream of financial independence. Based on the consistency of market participants and their potential to act as a force great enough to move prices in your direction, the possibility of having your dreams fulfilled may not even remotely exist. However, if you believe it does, then you will have the tendency to gather only the kind of market information that will confirm and reinforce your belief, all the while denying vital information that may be telling you the best opportunity may be in the opposite direction.
There are several psychological factors that go into being able to assess accurately the market’s potential for movement in any given direction. One of them is releasing yourself from the notion that each trade has the potential to fulfill all your dreams. At the very least this illusion will be a major obstacle keeping you from learning how to perceive market action from an objective perspective. Otherwise, if you continually filter market information in such a way as to confirm this belief, learning to be objective won’t be a concern because you probably won’t have any money left to trade with (italics mine).
From Chapter Four of THE DISCIPLINED TRADER
Inside the Mind
When I impulsively take the first type of countertrend trades (i.e. missed a good trend), here’s what is going through my mind:
- Woah, the move has already gone quite a distance.
- Sigh, I should’ve taken that entry earlier. I shouldn’t have followed my trading plan so strictly.
- Should I get in now? No, I cannot get in any more, I cannot chase the market, it’s too risky, I have no logical stop nearby, you don’t know when it might reverse down quickly.
- I have already missed the move. I need to wait to enter in the opposite direction when the trend ends.
- The trend has gone too far, it must turn soon
- Look! There’s a bit of resistance, the trend is about to turn, go short! (for an uptrend)
And the countertrend trade is made! Below are what I think are the psychological process at work:
- Observation
- Regret
- Trading is always full of regrets. You always think you can do better.
- Indecision, uncertainty, anxiety
- Fear of losing out starts to take hold.
- When you don’t have a well-defined trading plan that caters for all scenarios, or if you don’t believe in your trading plan, you will face indecision and anxiety.
- Resignation
- I accepting that I can no longer enter in the direction of the trend.
Emotions as Information for Traders
Start with a premise: Suppose you were empathic and could experience the emotions of the trading crowd.
You could feel their fear.
You could sense their greed.
What they felt, you felt.
If that premise were true, then emotion would not be something you would fight, ignore, or minimize.
Nor would emotion be something you’d blindly follow.
For the empath, emotion would be information: valuable information. It would be an indicator no less than market price or volume.
How would it change your trading to view every trading emotion as information to be scrutinized? How would it change your experience of your trading?
Amazing what a difference a premise can make.
6 Elements of Trading
1) What you’re trading – Why are you selecting one instrument to trade (one stock, one index) versus others? Which instruments maximize reward relative to risk?
2) How much you’re trading – How much of your capital are you going to allocate to the trade idea versus other ideas?
3) Why you’re trading – What is the rationale for the trade? Why does the trade idea provide you with an “edge”?
4) What will take you out of the trade – What would lead you to determine that your trade idea is wrong? What would tell you that the trade has reached its profit potential?
5) Where you will enter the trade – Given the criteria that would take you out of the trade, where will you execute your idea to maximize the reward you’ll obtain relative to the risk you’ll be taking?
6) How you will manage the trade – What would have to happen to convince you to add to the trade, scale out of it, and/or tighten your stop loss?
A beginning trader will take time to answer these questions, much as a new driver will need time to properly steer and brake a car. With experience, however, planning can occur very quickly, as much of a trader’s homework is accomplished before the market opens. For instance, before the open, I already have identified the short- and intermediate-term trend of the market; pivot points that will serve as profit targets; and volatility that will guide my position sizing. From there, much of the trade is a function of pattern recognition and execution–seeing selling or buying dry up in a rising or falling market and entering the trade at a level in which I’ll make more by hitting my target than by hitting my stop.
A Study in the Psychology of Gambling- Written in Year 1873
In a 1873 letter to The Spectator entitled “A Study in the Psychology of Gambling” Saxon-les-Bains describes his gambling experience in Monte Carlo.
And what was my experience? This chiefly, that I was distinctly conscious of partially attributing to some defect of stupidity in my own mind, every venture on an issue that proved a failure; that I groped about within me something in me like an anticipation or warning (which of course was not to be found) of what the next event was to be, and generally hit upon some vague impulse in my own mind which determined me: that when I succeeded I raked up my gains, with a half impression that I had been a clever fellow, and had made a judicious stake, just as if I had really moved skillfully as in chess; and that when I failed, I thought to myself, ‘Ah, I knew all the time I was going wrong in selecting that number, and yet I was fool enough to stick to it,’ which was, of course, a pure illusion, for all that I did know the chance was even, or much more than even, against me. But this illusion followed me throughout. I had a sense of deserving success when I succeeded, or of having failed through my own willfulness, or wrong-headed caprice, when I failed. When, as not infrequently happened, I put a coin on the corner between four numbers, receiving eight times my stake, if any of the four numbers turned up, I was conscious of an honest glow of self-applause…
Evidently, in spite of the clearest understanding of the chances of the game, the moral fallacy which attributes luck or ill luck to something of capacity and deficiency in the individual player, must be profoundly ingrained in us. I am convinced that the shadow of merit and demerit is thrown by the mind over multitudes of actions which have no possibility of wisdom or folly in them, granted, of course, the folly in gambling at all, as in the selection of the particular chance on which you win or lose. When you win at one time and lose at another, the mind is almost unable to realize that there was no reason accessible to yourself why you won and why you lost. And so you invent what you know perfectly well to be a fiction, the conception of some sort of inward divining rod which guided you right, when you used it properly, and failed only because you did not attend ‘adequately to its indications.’
12 Reflections on Life and Markets
I’ve never seen a trader succeed whose explicit or implicit goal was to not lose. The trader who trades to not lose is like the person who lives to avoid death: both become spiritual hypochondriacs.
No union was ever destroyed by a failure of romance. It is the loss of respect, not love, which ends a relationship.
Love, once present, never dies. It must be killed.
Sometimes we select markets–and trading styles–much as we choose romantic partners: by their ability to validate our deepest-held images of ourselves. Our choices generally succeed, for better or for worse.
Many a trader fears boredom more than loss, thereby experiencing the two in sequence.
1+14 Mental Behavior of Traders
Boredom: The trader wants some “action” so they put on a trade. Trades are for when entry signals are hit not to alleviate boredom.
- Pessimism: The trader starts to have a negative attitude about losing money. Be positive if you are learning form losses becasue you are paying tuition for this education.
- Frustration: Frustration comes from expectations not being met. Don’t focus on your P& L, focus on executing your trading plan.
- Overwhelm: Focus and simplicity are the keys to profits, complexity and lots of information are the road to be overwhelmed and unprofitable.
- Disappointment: Disappointment should not come from losing trades, disappointment should only come because of a lack of discipline in trading your plan.
- Doubt:Only trade a system AFTER you have thoroughly researched, back tested, or studied it in real time. Trade only with proven faith in a system, naive hope quickly leads to doubt and failure. (more…)
Mistakes Were Made (But Not By Me)-Book Review
One of the best things I came across this past week was this terrific review by Morgan Housel where he shared insights from the book “Mistakes Were Made (But Bot By Me)” by Elliot Aronson and Carol Tavris. Several members have recommended this book to me so I was very interested to read his review.
According to Mr. Housel, this are the six most important things all of us should learn from this book, many of which are very important to investors and traders alike:
1. Everyone wants to be right and hates admitting the possibility of being wrong.As fallible human beings, all of us share the impulse to justify ourselves and avoid taking responsibility for any actions that turn
out to be harmful, immoral, or stupid. Most of us will never be in a position to make decisions affecting the lives and deaths of millions of people, but whether the consequences of our mistakes are trivial or tragic, on a small scale or a national canvas, most of us find it difficult, if not impossible, to say, “I was wrong; I made a terrible mistake.”
The higher the stakes — emotional, financial, moral — the greater the difficulty. It goes further than that: Most people, when directly confronted by evidence that they are wrong, do not change their point of view or course of action but justify it even more tenaciously. Even irrefutable evidence is rarely enough to pierce the mental armor of self-justification.
2. You brain is designed to shut out conflicting information.In a study of people who were being monitored by magnetic resonance imaging (MRI) while they were trying to process dissonant or consonant information about George Bush or John Kerry, Drew Westen and his colleagues found that the reasoning areas of the brain virtually shut down when participants were confronted with dissonant information, and the emotion circuits of
the brain lit up happily when consonance was restored. These mechanisms provide a neurological basis for the observation that once our minds are made up, it is hard to change them. (more…)
A Psychological Checklist for Traders
Here is a checklist that might be useful for self-evaluation:
1) Have you experienced one or more recent large losses in markets that shook you emotionally?
2) Have you experienced a recent painful loss in your personal life that has left you feeling more vulnerable in your finances and/or your personal sense of security?
3) Have you experienced a recent threat to personal safety that shook you emotionally, such as a violent attack or a serious accident?
4) Do you find yourself emotionally “overreacting” to what should be normal trading stresses and losses? Are you experiencing significant anxiety, frustration, anger, or depressed feelings when trades don’t work out?
5) Do you find yourself “overreacting” in your trading behaviors during what should be times of normal stress? Are you freezing up and not acting on your ideas or impulsively lurching into trades after losing periods in markets?
6) Do you look back on your trading and feel confusion, shame, or puzzlement over actions that you took that run completely contrary to your plans for the day?
7) Have you tried to reduce your emotional and/or behavioral reactivity to markets, only to see the same destructive patterns return during times of stress? (more…)