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     stickman
Member
Username: stickman
Post Number: 854
Registered: 05-2004Rating: 
Votes: 2
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| | Friday, June 23, 2006 - 11:13 am: |  
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Janice Dorn, M.D., Ph.D.
There is a Zen Koan that says: Don't just do something-sit there.
How appropriate for these markets!
The most difficult thing for traders to do is to sit there and wait. Why? Because, we live in a society that is on a total dopamine, hypomanic binge. This is never more clearly manifest than by those who absolutely have to be in the markets at all times, desperately need to be trading and simply cannot wait. They are human do-ings, rather than human be-ings.
At one level, this is a type of addiction to excitement, mediated in part by the neurochemical called dopamine. It is the thrill of the game, and the rush that comes from the anticipation of reward. "I have to get in NOW because the price is running away from me. If I just chase it this once, it should be OK because it makes me feel so good when I see the price going up, and I am convinced that I can make a killing on this one. Why should I wait for the price to come to me? Maybe it won't, and then I will have missed it all. There's no fun in that. "This sounds all well and good, and the dopamine brain pathways, which are activated by potential for reward, kick into high gear. The dopamine neurons are firing on all cylinders, and the feeling is one of pure exhilaration. It's all good and wonderful-until it isn't.
Suddenly, the position starts to turn against you. You chased, it came back in and now you are looking at a drawdown. How do you feel, and what do you do?
Well, there's no fun in losing, either. The dopamine reward pathways of the brain shut down, and the brain connections that mediate fear start begin to activate. This is trader volatility, as emotions rush back and forth from highs to lows. Markets do this to unseasoned and impatient traders who are greedy when they should be fearful, and fearful when they should be greedy. The end result is confusion, frustration, blaming, self-sabotage, addiction and systemic toxicity. All of these drain the trader and leave him feeling empty, confused, disillusioned and just plain worn out.
There is a wonderful advantage to waiting for the right entry and exit points. This allows you to be neutral, and frees you from looking frantically for bearish or bullish views to justify your positions. Granted, you are not making money, but you are also (and much more importantly) not losing it. You can take time to reflect, study, hone and refine your trading plan, adopt some healthy exercise and dietary habits, and become a better person. Simply waiting, without stress, for the right opportunity, allows you to become a more rational and impartial observer.
Patience frees you from active involvement in the chaotic, and often reckless, behavior of others in the markets, and it puts you and your trading plan into a clearer perspective. It allows you to see yourself as a human be-ing, rather than a human do-ing.
Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish
-John Quincy Adams
When you first started trading, what did you hear constantly? Preserve your capital. Preserve your capital. You heard it, but maybe you did not listen, or did not understand. If you have no financial capital to use, you are out of the game. If you are chasing or getting in just to get in and are getting whipsawed daily; and you are losing, drip by drip, or in larger chunks, you are out of the game. If you are cutting your winners too quickly and letting your losers ride, you are out of the game.
If you wait, take time, assess the situation and then pounce like a jaguar at the right opportunity, your chances for trader longevity increase significantly. You have preserved your financial capital, and deployed it appropriately with a good risk/reward ratio.
However, there is something much more important about capital. It is both financial and psychological.
Your financial capital is critical, of course. Money is money, and money buys stuff and makes some people happy. If you do not have money, you are out of the game. However, money is a by-product of the great game of trading.
Your psychological capital is the essence of the person you are...as a trader, an investor or a human being. The number-one rule of trading is: preserve your psychological capital. This means making yourself emotionally, mentally, physically and spiritually strong and healthy. Stand apart from yourself, and look with a critical eye, almost as if you were advising someone else what to do, how to trade or how to live. When you are able to remove yourself from yourself, you minimize emotional charge. Since emotions are often the greatest enemy of the trader, you then put yourself in a neutral position. You allow the newer, thinking portions of your brain to put the older primitive, dopamine-driven brain into perspective.
This is the most difficult journey you have as a trader. Your psychological capital is all you really have. You can go out and earn more money, you can turn your money over to someone else to manage, or you can stop trading and invest in some new activity. You have infinite choices about what to do with your money. But, you have only one body, one mind and one spirit.
When you are stressed, sleep-deprived, contaminated with continual worrisome thoughts or in a toxic state because of bad trades, junk food, unpleasant environment or dysfunctional relationships, you have nothing but despair, self-loathing, anger or depression. You are in a state of mental and physical dis-ease and whipsaw, and should absolutely not be trading.
In the end, if you lose your health, you lose everything. Money might be able to assuage this misery, somewhat like putting a bandage on a large, gaping wound.
However, the wound breaks open, becomes infected and just gets systemically worse unless you deal with the source of it. As always, you have the power to be the best you can be in every aspect of life. It's really quite awesome when you think about it. You are the problem, and you are the solution. Find the freedom and serenity that accrue to you when you refurbish and restore your psychological capital.
If you want to get a true picture of who you really are, what you are capable of doing and becoming as a trader and a human being, then stop looking outside of yourself. Go within, as the answers are all there. I promise you that it will be the most amazing journey of your life.
Trade to Learn, Not to Earn.
when you lose,don't lose the lesson.
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villageidiot
Member
Username: villageidiot
Post Number: 2
Registered: 06-2006
Rating: N/A
Votes: 0
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| | Friday, June 23, 2006 - 07:52 pm: |
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Great post Stickman. I got a lot out of it and it seems to describe a lot of what I have been doing and shouldn't
Thx
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peterloh
Member
Username: peterloh
Post Number: 1885
Registered: 03-2003Rating: N/A
Votes: 0
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| | Saturday, June 24, 2006 - 10:29 am: |
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stickman,
I am on a similar wave length.
-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.
The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.
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brian916
Member
Username: brian916
Post Number: 24
Registered: 08-2003Rating: N/A
Votes: 0
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| | Sunday, June 25, 2006 - 08:34 pm: |
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Great stuff stickman
Check this; innerworth.com
Gets a little bit repetitive but a good read every day
Cheers, Brian
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palmtrees
Member
Username: palmtrees
Post Number: 105
Registered: 10-2005Rating: N/A
Votes: 0
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| | Sunday, June 25, 2006 - 11:09 pm: |
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Thanks for the honest and reflective post Stickman! I'm only now beginning to appreciate the debilitating effects of depreciating "psychological capital". It's easy to underestimate the importance of clarity of mind when trading. There are no doubt times when t'ai chi might be better for the hip pocket.
With thanks , Mark
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stickman
Member
Username: stickman
Post Number: 861
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Wednesday, June 28, 2006 - 09:04 am: |
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Hi All
Thanks for the link Brian
cheers
Trade to Learn, Not to Earn.
when you lose,don't lose the lesson.
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spider
Member
Username: spider
Post Number: 2453
Registered: 10-2002
Rating: N/A
Votes: 0
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| | Wednesday, June 28, 2006 - 02:58 pm: |
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nice one.
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rockon
Member
Username: rockon
Post Number: 38
Registered: 08-2003Rating: N/A
Votes: 0
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| | Wednesday, June 28, 2006 - 07:41 pm: |
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Hello All
There is more good reading along similar lines if you follow the links in the thread entitled EMOTION FREE TRADING way down the list about 22 January '05.
For some reason I/C will not allow the particular site to be named here ???
The e/book titled Emotion Free Trading seems to have been canned by the site. Maybee someone can help out with another link
Regards rockon.
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stickman
Member
Username: stickman
Post Number: 923
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Thursday, August 17, 2006 - 02:40 pm: |
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TOXIC TRADING (PART 2 OF 2)
When you first started trading, what did you hear constantly? Preserve your capital. Preserve your capital. You heard it, but maybe you did not listen, or did not understand. If you have no financial capital to use, you are out of the game. If you are chasing or getting in just to get in and are getting whipsawed daily; and you are losing, drip by drip, or in larger chunks, you are out of the game. If you are cutting your winners too quickly and letting your losers ride, you are out of the game.
If you wait, take time, assess the situation and then pounce like a jaguar at the right opportunity, your chances for trader longevity increase significantly. You have preserved your financial capital, and deployed it appropriately with a good risk/reward ratio.
However, there is something much more important about capital. It is both financial and psychological
However, there is something much more important about capital. It is both financial and psychological
Your psychological capital is the essence of the person you are...as a trader, an investor or a human being. The number-one rule of trading is: preserve your psychological capital. This means making yourself emotionally, mentally, physically and spiritually strong and healthy. Stand apart from yourself, and look with a critical eye, almost as if you were advising someone else what to do, how to trade or how to live. When you are able to remove yourself from yourself, you minimize emotional charge. Since emotions are often the greatest enemy of the trader, you then put yourself in a neutral position. You allow the newer, thinking portions of your brain to put the older primitive, dopamine-driven brain into perspective.
This is the most difficult journey you have as a trader. Your psychological capital is all you really have. You can go out and earn more money, you can turn your money over to someone else to manage, or you can stop trading and invest in some new activity. You have infinite choices about what to do with your money. But, you have only one body, one mind and one spirit.
When you are stressed, sleep-deprived, contaminated with continual worrisome thoughts or in a toxic state because of bad trades, junk food, unpleasant environment or dysfunctional relationships, you have nothing but despair, self- loathing, anger or depression. You are in a state of mental and physical dis-ease and whipsaw, and should absolutely not be trading.
In the end, if you lose your health, you lose everything. Money might be able to assuage this misery, somewhat like putting a bandage on a large, gaping wound.
However, the wound breaks open, becomes infected and just gets systemically worse unless you deal with the source of it. As always, you have the power to be the best you can be in every aspect of life. It's really quite awesome when you think about it. You are the problem, and you are the solution. Find the freedom and serenity that accrue to you when you refurbish and restore your psychological capital.
If you want to get a true picture of who you really are, what you are capable of doing and becoming as a trader and a human being, then stop looking outside of yourself. Go within, as the answers are all there. I promise you that it will be the most amazing journey of your life
There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily---or sufficient knowledge to make his play an intelligent play. I proved it..Jesse Livermore
Janice Dorn, M.D., Ph.D
Trade to Learn, Not to Earn.
when you lose,don't lose the lesson.
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kate
Member
Username: kate
Post Number: 343
Registered: 04-2005Rating: N/A
Votes: 0
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| | Friday, August 18, 2006 - 07:42 am: |
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Thanks again Stickman.
Kate
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