Wisdom from Market Wizards
“How do you lose money? It is either bad day trading or a losing position. If it’s a bad position that is the problem, then you should just get out of it.”
“Clear thinking, ability to stay focused, and extreme discipline. Discipline is number one: Take a theory and stick with it. But you also have to be open-minded enough to switch tracks if you feel that your theory has been proven wrong. You have to be able to say, “My method worked for this type of market, but we are not in that type of market anymore.”
“Until recently, I set goals on a monetary level. First, I wanted to become a millionaire before I was thirty. I did it before I was twenty-five. Then I decided I wanted to make so much a year, and I did that. Originally, the goals were all numbers, but the numbers are’t so important anymore. Now, I want to do some things that are not only profitable, but will also be fun.”
Dr Van K. Tharp
“The composite profile of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behaviour and would be more likely to be a crowd follower. In addition, losing traders tend to be disorganized and impatient. Thet want action now. Most losing traders are not as bad as the composite profile suggest. They just have part of the losing profile.”
“One of the basic problems that most traders face is dealing with risk. For example, two primary rules to successful speculative trading are: Cut your losses, short and let your profits run. Most people cannot deal with those two rules. For example, if making money is important to you – as it is to most people who play investment games – then you will probably have trouble taking small losses. As a result, small losses turn into moderate losses, which are even harder to take – all because it was so hard to take a small loss. Similarly, when people have a profit, they want to take it right away. They think, “I’d better take this now before it gets away.” The bigger the profit becomes, the harder it is to resist the temptation to take it now. The simple truth is that most people are risk-averse in the realm of profits – they prefer a sure, smaller gain to a wise gamble for a larger gain – and risk-seeking in the realm of losses – they prefer an unwise gamble to a sure loss. As a result, most people tend to do the opposite of what is required for success.”
“Generally, I find that top traders believe 1) Money is NOT important; 2) It is OK to lose in the markets; 3) Trading is a game; 4) Mental rehearsal is important for success; 5) They’ve won the game before they start.”
Market Beating lessons
On the school of hard knocks:
The
game taught me the game. And it didn’t spare me rod while teaching. It
took me five years to learn to play the game intelligently enough to
make big money when I was right.
On losing trades:
Losing
money is the least of my troubles. A loss never troubles me after I
take it. I forget it overnight. But being wrong – not taking the loss –
that is what does the damage to the pocket book and to the soul.
On trading the trends:
Disregarding
the big swing and trying to jump in and out was fatal to me. Nobody can
catch all the fluctuations. In a bull market the game is to buy and
hold until you believe the bull market is near its end.
On sticking to his plan:
What
beat me was not having brains enough to stick to my own game – that is,
to play the market only when I was satisfied that precedents favoured
my play. There is the plain fool, who does the wrong thing at all times
everywhere, but there is also the Wall Street fool, who thinks he must
trade all the time. No man can have adequate reasons for buying
or selling stocks daily – or sufficient knowledge to make his play an
intelligent play.
On speculation:
If
somebody had told me my method would not work, I nevertheless would
have tried it out to make sure for myself, for when I am wrong only one
thing convinces me of it, and that is, to lose money. And I am only
right when I make money. That is speculating.
On respecting the tape:
A
speculator must concern himself with making money out of the market and
not with insisting that the tape must agree with him. Never argue with
it or ask for reasons or explanations.
On human nature and trading:
The
speculator’s deadly enemies are: Ignorance, greed, fear and hope. All
the statute books in the world and all the rule books on all the
Exchanges of the earth cannot eliminate these from the human animal.
On riding the trend to the big money:
Men
who can both be right and sit tight are uncommon. I found it one of the
hardest things to learn. But it is only after a stock operator has
firmly grasped this that he can make big money. It is literally true
that millions come easier to a trader after he knows how to trade than
hundreds did in the days of his ignorance.
Confusion and Frustration for Traders
Maslow one commented that, when all you have is a hammer, you tend to treat everything as a nail. So it is with psychologists that involve themselves in markets. Lacking an understanding of actual speculative strategies and tactics–not to mention portfolio construction–they reduce performance problems to the lowest, psychological denominator. In so doing, they confuse cause and effect: they observe frustrated traders and assume that relieving frustration is the key to making money.
The professional speculator, unlike the retail daytrader, rarely falls into performance problems because of derelict discipline or runaway emotions. Rather, it is the very competence of the professional that leads to performance challenges. *It is when pros are most in sync with markets, identifying and profiting from themes and patterns, that they are most vulnerable to ever-changing patterns of direction, volatility, and correlation*. The confidence that permits healthy risk-taking under the best of speculative conditions inevitably gives way to confusion and frustration when skilled participants are no longer in sync with their markets.
The wise speculator utilizes this confusion and frustration as information: they often are early signs that something meaningful has shifted in the marketplace. The proper intervention in such circumstances is not to quell the frustration with psychological exercises. Rather, it is to extract the information from the situation and feed that forward into strategy and tactics. Very often, today’s bad trade was a good trade in yesterday’s regime: there is information in that.
It is when the confusion and frustration are taken personally, as threats, that setbacks are most likely to turn into slumps. If one stops looking for ever-changing market patterns, then the only other source of changed performance is oneself. The internal focus leads to altered trading behavior, much as a pitcher experiencing a control problem might start aiming the ball and altering his delivery. Such alterations begin vicious cycles of diminished performance and unhelpful adaptations.
Ironically, in embracing ever-changing patterns–and the inevitable responses to those as regimes shift–traders are most able to make helpful adaptations. It is when good trades turn out to be losing trades that speculators gain some of their most important information about markets.
A to Z -Motivational Tips
■A – Achieve your dreams.
Avoid
negative people, things and places. Eleanor Roosevelt once said, “the
future belongs to those who believe in the beauty of their dreams.”
Consume yourself with the motivation to achieve tremendous results from
everything you attempt
■B – Believe in your self, and in what you can do.
Motivation comes from within, if you trust in your abilities you will come out on top.
■C – Consider things on every angle and aspect.
Motivation
comes from determination. To be able to understand life, you should
feel the sun from both sides. Never say never, there is a way of
accomplishing anything if you keep an open mind and never give up.
■D – Don’t give up and don’t give in.
Thomas
Edison failed once, twice, more than thrice before he came up with his
invention and perfected the incandescent light bulb. Make motivation as
your steering wheel. The only way you lose for sure is when you quit.
■E – Enjoy. Work as if you don’t need money.
Dance
as if nobody’s watching. Love as if you never cried. Learn as if you’ll
live forever. Motivation takes place when people are happy. Maintain a
positive attitude under any circumstance. Fill your mind with positive
thoughts and the whole world will be your playground.
■F – Family and Friends – are life’s greatest ‘F’ treasures.
Don’t
loose sight of them. So often we look past our greatest treasures,
remain motivated to always seek the treasures in your family bonds.
■G – Give more than what is enough.
Where
does motivation and self improvement take place? At work? At home? At
school? When you exert extra effort in doing things. Try to give more
than what is asked of you, this shows true self motivation.
■H – Hang on to your dreams.
They
may dangle in there for a moment, but these little stars will be your
driving force. Dreams keep us motivated to go after the things that
excite us in life. Holding onto your dreams shows a strength in your
character of positive expectations.
■I – Ignore those who try to destroy you.
Don’t
let other people to get the best of you. Stay away from toxic people –
the kind of friends who hates to hear about your success. Surround
yourself with positive people and you will all keep each other motivated
to seek out the positives in life.
■J – Just be yourself.
The
key to success is to be yourself. And the key to failure is to try to
please everyone. Believe in your strengths and live by your positive
terms.
■K – keep trying no matter how hard life may seem.
When
a person is motivated, eventually he sees a harsh life finally clearing
out, paving the way to self improvement. Motivation keeps you striving
for the best, hang onto the values brought on through positive thinking.
■L – Learn to love yourself.
Now
isn’t that easy? You cannot give love to others unless you love
yourself. Learn how to motivate yourself into working on your own
personal development. You will never grow as a person until you learn to
take responsibility for your own self improvement.
■M – Make things happen.
Motivation
is when your dreams are put into work clothes. Motivation is one of the
strongest characteristics you can have. When you live your life filled
with motivation you become a person who really gets things done.
Let’s Take A Motivational Break Now That We Have Made It To The Half-Way Mark!
Now
you have to ask yourself; is stopping half-way through any projects you
have taken on something you find yourself doing often? This tends to be
the breaking point for many, they set out to complete a task but at the
first sign of trouble they give up because their motivational skills
are weak. Is this what happens to you?
It
is up to you to not allow your dreams to slip away in night. You must
do whatever it takes to keep yourself motivated if you are to achieve
any type of significant success in your life. The next time you are
working towards a goal and you come across a bit of resistance remember
to put your motivational skills to work. It’s OK to stop and re-group at
the half-way mark but that is all that you do, once you are sure your
still on the right path it’s time to get moving again.
■N – Never lie, cheat or steal.
Always
play a fair game. A person with a good moral standing will go further
in life than an unmotivated cheat. Never look for short-cuts to good
things, this will lead to missed opportunities and challenging
possibilities.
■O – Open your eyes.
People
should learn the horse attitude and horse sense. They see things in 2
ways – how they want things to be, and how they should be. Life is full
of possibilities, keep the motivation to go after the wonders in the
world.
■P – Practice makes perfect.
Practice
is about motivation. It lets us learn repertoire and ways on how can we
recover from our mistakes. Maintaining the motivation to work hard
towards the things you truly want out of life will bring you more
rewards than sitting back and expecting things to happen.
■Q – Quitters never win.
And winners never quit. So, choose your fate – are you going to be a quitter? Or a winner?
■R – Ready yourself.
Motivation
is also about preparation. We must hear the little voice within us
telling us to get started before others will get on their feet and try
to push us around. Remember, it wasn’t raining when Noah build the ark.
The boy scout motto is “Be Prepared” and this is a way of life we should
all adapt to.
■S – Stop procrastinating.
Nothing kills motivation more then procrastination. Choose to spend your time accomplishing positive things in your life.
■T – Take control of your life.
Discipline
or self control jives synonymously with motivation. Both are key
factors in self improvement. When you know what you want out of life and
you are motivated to work towards the attainment of your dreams, you
will accomplish more then the average person lacking motivation.
■U – Understand others.
If
you know very well how to talk, you should also learn how to listen.
Yearn to understand first, and to be understood the second.
Understanding another persons problems in life and being motivated to
offer help to others, builds your own character.
■V – Visualize it.
Motivation
without vision is like a boat on a dry land. Your mind can bring you
whatever you desire in life. Visualize success and success will be
yours, visualize defeat or loss and failure will encompass your life.
Maintain the motivation to visualize success and achievements.
■W – Want it more than anything.
Dreaming
means believing. And to believe is something that is rooted out from
the roots of motivation and self improvement. When you have strong wants
this leads to the motivation to attain what you truly desire.
■X – X Factor is what will make you different from the others.
When
you are motivated, you tend to put on “extras” on your life like extra
time for family, extra help at work, extra care for friends, and so on.
Set yourself apart from others, stand out in the crowd, hold your head
up high with pride and conviction.
■Y – You are unique.
No
one in this world looks, acts, or talks like you. Value your life and
existence, because you’re just going to spend it once. Use the fact that
you are one of a kind to excel at everything you do in life. True
motivation is for you and you alone, use it to move forward in life,
show your uniqueness.
■Z – Zero in on your dreams and go for it!!!
Never lose your motivation to go after your dreams because living your dreams means you are living your life.
Implicit memory and Decisions
These are the types of behavioural patterns laid down implicitly in the brain:
How do you feel about yourself?
Are you good at self-care? Do you accept all aspects of your personality? Or do you tend to deny yourself, or verbally beat yourself up?
How are you with others?
Do you naturally gravitate towards others and enjoy their company? Or do you prefer being on your own?
Implicit memory guides our behavior automatically, without thought or effort. You can think of implicit memory as a set of instructions or procedures encoded in the brain. However, a procedure can’t easily be described in words or contained in images. These procedures are nonconscious and nonverbal.
Implicit memory starts early
For the first 18 months of our lives the implicit memory system is online establishing the basis of our character. Explicit memory, the kind of memory we can consciously recall (“I remember the time when I….”), doesn’t come fully online until much later.
After an infant learns to identify her mother’s face, voice, touch and smell, she learns how to communicate her needs to this “person”, all based on trial and error. Successes and failures are recorded, with particular attention given to memories of interactions with caregivers, and gradually a patterned and predictable way of responding to the world evolves.
This kind of memory is necessarily implicit because the newborn has no conceptual or verbal ability and must depend on its inborn capacity to learn what it needs quickly and nonconsciously, in an environment where survival itself depends on emotional connection.
Implicit memory is procedural. This means implicit memory is difficult to change. For instance, you just can’t tell yourself, “Don’t be stubborn” and hope this will change you permanently. This is like the left brain telling the right brain what to do. It is not going to happen this way. This is not how our brain works. It takes hundreds of hours of deliberate practice and constant repetition to turn a desired behavior into a habit.
Procedural memory is the basis for our character.
The procedural memory system stores the instructions for our habitual responses. In other words it patterns how we do things. More profoundly, it is about who we are.1
In other words, procedural memory is the basis of our character, those aspects of ourselves that make us unique.
When we learn a behaviour or an emotional response it becomes part of our procedural memory. Once it’s been “programmed” into the procedural memory system we don’t need to decide how to respond to a specific situation because it has now become automatic–after all, that’s the whole point.
You see these “overlearned” patterns are the “behind the scenes” kind of memory that frees up our attention for more important tasks.
For instance, I can drive my car and carry on a conversation at the same time. The ‘driving’ behaviour is encoded in procedural memory. Since I’ve overlearned the skills needed for driving I don’t need to be conscious of every detail in order to keep my car on the road.
When procedural memory kicks in, it’s like being “on autopilot”.
Procedural memory is important in counseling because many of our emotions and behaviours that accompany them occur ‘automatically’. In order to change a behaviour we need to bring it into conscious awareness and ‘out of procedure’.
Procedures take a while to learn but they make life a lot easier. Can you imagine for instance if we had to sound out every letter of every word in order to read? Reading becomes a procedural skill.
An important feature of procedural memory is that it tends to persist; it’s resistant to change. This is a good thing because you don’t want to have to keep re-learning behaviours. But this also means that you can’t change a procedure, unless and until you pay attention to how and when it operates. And procedural patterns take a while to unlearn.
Let’s say you like to play tennis; you were self-taught and have played for years. You decide to take some lessons. The instructor shows you how to swing the racquet more effectively.
But you soon discover that you just can’t just tell yourself to swing it differently. The old pathways interfere with the new ones. It’s hard to interrupt a well-established procedure.
In fact, those original neural pathways, though weakened, will always be there, for we currently have no reason to think that they will deteriorate. Under conditions resembling the initial circumstances in which they were laid down they may even be reactivated!
But the good news is that the new, regulated pathways will eventually override the old ones.
Once you unconsciously trigger a procedure, which could be any routine task, it’s difficult to stop yourself from completing it. That is, it’s difficult to interrupt the procedure.
Want to know why you repeat the same pattern in relationships even though these strategies clearly don’t work? You’re not alone. Benjamin Franklin once observed that “the definition of “insanity” is doing the same thing over and over again, but expecting different results”.
Once you understand how procedural memory works you’ll have a better handle on why you repeat ineffective, even self-defeating, behaviours.
Once a procedure is initiated it acquires a forward momentum that is uncomfortable to stop. This is the source of the desire to continue the procedure. Procedural memory dances with our cortex which can always come up with a “rational” explanation or justification for our automatic behaviors.
It takes many repetitions of a behaviour or an emotional response before it’s ingrained, and once that procedure is established it’s difficult to change.
For the same reason, we can’t change our way of relating (i.e. implicit memory) simply by tellingourselves to feel differently. It requires special conditions for the change to occur.