Thursday, May 26, 2016

Open Yourself Up to the Risks of Life

Values, not disasters, are the goal, the first concern, and the motive power of life.
Ayn Rand. 

This implies that while people and the world are imperfect, while pain, suffering, and disasters do exist, they do not have to be and should not be the focal point of living. Too often, pain and disasters are the focus of living. Rather than spending their time and energies on the pursuit of values, they spend it trying to avoid pain, and that makes pain the focal point in life. 

If avoiding pain is the focus of life, positive action is limited. If you allow pain to
become the dominant force in life, you sabotage your ability to think, grow, and to produce. If the avoidance of pain is your focus, it becomes extremely difficult to experience the process of living with the passion and spontaneity that you are capable of.

Life involves risks. The essence of maintaining your mental well-being as a trader is taking a position in which you feel confident, while always knowing that you may not be rewarded for your work, your thoughts, and your willingness to take a risk. Even more important, when you don't win, you have to be willing to pick up and do it again. You have to be open to the pain that so often accompanies honesty and growth. The same is true of every aspect of living. 
Virtually every act in life should be an act of love, the essence of giving of yourself, but giving with the knowledge that you may not get anything in return and, then being able to pick up when you are unrewarded and give again. By giving in this way, the returns come back manifold both financially and in terms of the happiness you experience. 

You can give of yourself by using your mind, and get your return by having new opportunities and experiences available. Through your actions and efforts you bestow upon yourself new options and alternatives. You can give to yourself by taking risks in the financial markets, and receive financial benefits. You can give to others simply by opening yourself up and letting others see the real you. By dropping the self-protective shields designed to prevent people from hurting or rejecting you, and get your return from those special friends who make you feel seen and understood, who act as the mirrors of your soul. 

Opening yourself up to the risks of life may be frightening, but the fact is, there is no alternative. You will suffer pain one way or the other. There is no freedom from risk. There is no freedom from fear. There is no freedom from pain. There is no freedom from the possibility of failure. There is freedom in the acceptance of all of these as part of trading, as a part of life, and moreover, as the least important part of both.

Friday, May 20, 2016

A Self-Fulfilling Prophecy

Whatever we expect with confidence becomes our own self-fulfilling prophecy. 
Brian Tracy

Most people have similar end values, but each of us experience them differently. This is simply because of both major and subtle differences in our beliefs. Beliefs take two forms: Broad generalizations about life, people, and things; and rules we use to measure the worth of our own and others' actions. Rules are more definitive. Rules determine, in our minds, the things and events that must happen in order to experience results in a particular way. Rules take the form of "if, then" statements such as "If I make a million dollars in the market I can quit my job and then I'll be happy" or "If I make a mistake on a trade, then I'll learn from it." All of us have our own unique set of beliefs and rules, and it is this unique set that gives each of us a distinctive personality. 

One of the attributes of a successful investor is self-confidence. Feeling self-confident comes from recognizing your personal worth and effectiveness. How you feel about yourself depends not so much on what you actually do, but how you judge what you do, and how you judge what you do depends on your beliefs about what it takes to be a worthwhile person. To gain self-confidence, you must establish standards that make it possible. Suppose, as a successful trader, your standard is to cover your overhead and make a profit each month. Now suppose, instead, that your standard is to net $1 million dollars each month. It would be hard to be self-confident under those circumstances. Set your goals high, but be easy on yourself in setting standards for evaluating your self-worth. 

Your beliefs are the ultimate self-fulfilling prophecy. Your subconscious is gullible - it believes what you tell it to believe. If you believe you don't deserve to be successful, it won't let you be successful. If you believe you don't deserve love, it won't let you achieve love. If you believe that you aren't intelligent enough, it will make you stupid. Believe me when I say to each and every one of you, you are intelligent enough! 

The statements we make to ourselves and the questions we ask are both a cause and a consequence of our beliefs. When you say something to yourself like "I am so stupid!", after a losing trade, you are both stating and reinforcing a belief, however briefly you may think it is true. You may not mean this in a fundamental sense, but if you say it often enough and especially in a highly emotional state, then your mind is very likely to start believing it. 

When defining new rules that you want to adopt, remember to rig the game of life so it's easy to win. Rules that allow you to feel passion, love, happiness, success, and so forth don't have to be difficult or even impossible. We all need challenge in our life, but there is more than enough challenge in striving, for a constant progression of goal achievement without setting ourselves up for failure. Life is too short, too precious, and too full of potential to waste time by setting ourselves up to experience life as futile.

Thursday, May 12, 2016

Enable Yourself to Become Aware

Self-awareness is not the same thing as self-approval, any more than imagination is the same thing as day-dreaming.   Francis Spufford
If you show a stock chart to someone who knows virtually nothing about graphs and the financial markets, what do you suppose they see? Basically, they would see a confusing collection of lines, numbers, and so on and at most they would see some sort of wavy pattern. 

Your range of awareness is contextual. In order to be aware of anything, you must understand the nature of what you are dealing with. Your subconscious mind can only make sense of that which it is programmed to make sense of. That is why knowledge is so very important. In this example the subconscious will simply not take in very much information - it just doesn't know what to do with it. 

The biggest block to awareness is the often-inadvertent programming of our minds. If we instruct our subconscious, that something is unimportant, not to take in certain kinds of
information, then it won't. It will be impossible to be fully aware of what is occurring. When you aren't getting the results that you want, something is wrong - there is a contradiction somewhere in your mind blocking you. Probably the biggest block to achieving, is the limitations to awareness that we inadvertently place in our minds, through the acceptance of negative associations and beliefs. Conversely, positive associations and beliefs enable awareness. 

You and only you are responsible for the results you realize. Super-trader and trainer Dr. Van K. Tharp explains it this way: 

"The best thing and investor (or anyone) can do, when things go wrong, is to determine how he or she produced those results. Now, I don't mean that you should blame yourself for mistakes either. I mean that at some point in time, for any situation, you made a choice that produced those results. Determine what that choice point was and give yourself other options to take when you encounter a similar choice point in the future. Change the decision at similar choice points in the future and you will change the results you get. And by imagining doing so now you can make it easy to select those alternatives in the future." Dr. Van K. Tharp, The Psychology of Trading, from Market Wizards, by Jack D. Schwager 
It is extremely tempting to blame our mistakes, failures, and pain on other people or events. If, however, you continually remind yourself that they are yours and are a result of your action, then you enable yourself to become aware of what caused them. Mistakes, failures, and pain are a part of life, and we all want to avoid them. But you can't avoid them by denial. If you choose to accept them as a part of life then they lose their power over us. They become OK, acceptable, normal, even a positive opportunity to learn, and grow. 

In Reminiscence of a Stock Operator, Jesse Livermore said, "I don't mind making mistakes, what I don't like is being wrong." What I believe he meant was that making an error is okay, but what isn't okay is making an error, not admitting it, not learning from it, and continuing to do it.

Thursday, May 5, 2016

Impulsive Behavior and Trading

I've always loved to play games, and face it: investing is one big game. You need to be decisive, open-minded, flexible and competitive.
Stanley Druckenmiller
Impulsive people have a way of reaching conclusions and taking action that, in comparison with normal deliberations and intentions, would be considered impaired. Acting on a whim, giving in to temptation, doing what you have told yourself time and again not to do, is acting impulsively. Impulsive people are not self-confident but simply hope and wish for results. Quite simply they have no long-term goals, within which trades and management should be planned, only immediate urges. Their behavior is abrupt and unplanned. The time between thought and action is very brief.

The net outcome of unplanned behavior is when failure occurs, the process of analyzing bad trades and malfunctions, that person cannot accrue effective lessons from the loss. Without a plan, impulsive people can't develop methods to determine what works and what doesn't. They can't understand why they failed.

Impulsive people are also deficient in a certain method of thought process. Normal people weigh, analyze, research and develop an initial impression. Impulsive people guess and bet heavily without much thought. Impulsive people are often victim blamers. The results are reflective of character and personality, not intelligence. 

Victim blamers tend to interpret anything in life that doesn't go their way as somehow aimed against them, believing somebody or something is working against their welfare. It may be a boss, a girlfriend or an entity such as a company or the government. Or it may be outside forces such as "bad luck," "nature," "evil forces". They never learned to assume personal responsibility for their own actions versus blaming others. While everyone tends to lapse into blaming others at least sometimes for their misfortune, this trading type makes blaming their primary defense mechanism to deflect their own sense of urgency. 

Because they are looking for someone to blame for their investments that lose money, they are among those most in favor of intense governmental investigation and prosecution of market manipulation of any kind. With each fresh uncovering of company accounting fraud, brokerage-analyst duplicity, insider trading or any other type of market manipulation, they smile and say, "See, I told you they're all out to get us!" But this only tends to make them feel more helpless and assume less responsibility for their own investing decisions. 

If you have a tendency to be impulsive, the cure is to put together realistic and sound goals along with a realistic trading plan. Make yourself work towards the attainment of those goals by not violating the rules of your trading plan.