You are here: Home / Archives for Subconscious

Learn to Focus when Investing

July 25, 2007 by 13 Comments

It is never the system or author that fails. It is YOU! It is your lack of focus.
Focus on yourself and then you can focus on trading successfully.

Trading is at least 98% psychological. It’s a mental state of mind based upon your beliefs of what may happen. Books, systems and technical indicators can only take you so far! You must submit and understand that the market is all in your head. It is you versus the other guy or gal. If you don’t understand yourself, how will you ever understand other traders; therefore taking advantage of market moves based on their mental state of mind and their underlying beliefs.

072507_focus.jpg

Many investors, both novice and experienced, switch from book to book to book and system to system to system and never understand why they aren’t consistently profitable. They are confused, looking at too many things, complicating the entire process while ignoring the essentials to success.

Follow this statement: Keep it Simple Stupid.

Why complicate things when simplicity works; especially when it comes to trading? We know that trading may be the most difficult endeavor that any human may attempt to undertake.

Thousands of different systems work in the stock market; it’s the user that ultimately fails because of lack of concentration and motivation to stay the course. It is hard work to play in Wall Street and not many people can hang because they never sharpen their own mental skills while applying basic money management techniques

We all see people come and go every day: rags to riches to rags. They are motivated for weeks, months and sometimes years but most fizzle away after they fail and can’t figure out what they are doing wrong. Some investors copy a system from a so-called guru and may find success for a while but they don’t tailor it to their personality, integrate it with their investing style and focus on their mental state of mind, therefore, it will become obsolete and they will fail. Traders work, then they work hard and finally they work even harder to become successful in the market but understand that working smarter will always take you further.

072507_psychology.jpg

Our goal as traders is to understand the crowd and anticipate how they will act based on thoughts you used to have when you were just one of the sheep!

Focus on what is important and the success will follow.

Stop focusing on stochastics, Bollinger bands, MACD, ADX, earnings releases and bullshit news stories. Yes they can aid you to success but the main focus is on you!

Personally, I need specific fundamentals, price, volume and basic daily and weekly charts but they are secondary tools. They can help me make money as long as I am focusing on the overall picture which is my mental focus and my emotional balance.

I know I am getting all Dr. Perruna on you but it is true.

Once your conscious mind understands how the beliefs of the crowd work, your subconscious mind takes over and intuition kicks in and you start making some of the best decisions of your life by flawlessly following your system.

As Jesse Livermore said:

“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes”

Why? Because humans never change!

Once you understand this and learn to trade other humans, you will become successful. Yes, you will need some of the tools mentioned above but don’t focus your attention in this area. Focus when investing by mastering the beliefs of the crowd and you will always be one step ahead.

Filed Under: Psychology, Subconscious

The Holy Grail of Trading: It’s not your System

July 11, 2007 by 14 Comments

Do you have a wonderful trading system, one that consistently makes you money? You probably believe that you have found your holy grail but this couldn’t be further from the truth. Your system has very little to do with consistent profitability in the markets.

I often here amateur investors talk about that the “best way” or “only way” to invest and argue why their way is better than everyone else’s. The passion and energy exuded by these novice investors is wonderful but they are missing the point completely. No one can say that options are better than stocks, commodities are better than options or forex is better than everything, etc… Each investor develops a system that is suited to their own personal character traits and they use a vehicle (stocks, options, forex, commodities, real estate, etc…) that can help them reach their goals.

Investors also debate systems within a market such as: trend trading, swing trading, scalping, shorting, day trading, buy and hold, fundamental trading, technical trading, Elliot wave theory, moving average crossovers, etc… They all work if the “person” understands the holy grail of trading. And that is being able to understand YOU and how your mind works.

However, it is not the system that makes one successful. It is YOU that makes the system work properly. What do I mean? Each individual must master their own personal psychological impacts on their trading results. You must work on YOU to become consistently successful! I recommend reading The Disciplined Trader by Mark Douglas if you would like to understand the psychological trader in you.

To say that one system or vehicle is the “way to go” is ignorant.

Pick up any Market Wizard book and read how these men and women made hundreds of millions in the markets using different systems. The only thing they all had in common was money management and risk management. That’s ALL! Every one of them traded in different ways and used different vehicles but they all watched their risk, calculated proper position sizing techniques and understood their system’s expectancy.

Money management, also termed as risk management is a major part of the holy grail of investing, NOT THE SYSTEM! Novice investors will eventually understand this after many years of trading (some quicker than others).

So, if someone ever tells you that their “system” is better than yours, turn away and run and run fast because they don’t know what the hell they are talking about.

Here are some examples supporting this idea from the Market Wizard books:

  • Michael Marcus turned $30,000 into $80 million trading futures
  • Michael Steinhardt ran a fund that averaged 30% annual return over 21 years trading stocks
  • Tom Baldwin started with $25,000 and eventually traded $2 billion a day in T-bond futures on the floor or in the pit.
  • Paul Tudor Jones ran funds that averaged triple digit returns for five consecutive years trading multiple markets
  • Ed Seykota realized an astounding 250,000% return over 16 years (yes that says 250,000%) managing accounts trading in the futures markets – possibly the best trader of our time
  • Bill Lipschutz traded currencies with a staring account of $12,000 (started out as an architect – very motivating for me since I started the same way).

The list can go on forever but the point remains the same; they all traded different markets with unique systems from different locations (the floor, an office or their home in the mountains) but they all had one major factor in common: money management and risk management.

Just about every market wizard refers to position sizing as a major part of the “holy grail” of trading. Van Tharp (also featured in Market Wizards) coined the phase in the first edition of his book but he only realized that money management was the holy grail after studying and speaking with hundreds, if not thousands of very successful traders. Tharp’s Book, Trade Your Way to Financial Freedom, is a must read if you would like to understand position sizing and expectancy and learn more about understanding “you”.

The Holy Grail of Trading:
Understanding you and combining that with sound money management rules. Conquer these two entities and you will be successful beyond your wildest dreams!

Filed Under: Education, Expectancy, Position Sizing, Psychology, Subconscious

Think and Grow Rich – Napoleon Hill

May 18, 2007 by 11 Comments

Napoleon Hill, the author of Think and Grow Rich, may be one of the greatest inspirational speakers of all-time (which is still in print in several versions, and has sold more than thirty million copies). Reading the book is one thing but listening to the man on audio CD is amazing. The enthusiasm, the passion and authority he commands can make any long trip skip by in a flash. I always leave the car energized and pumped-up to accomplish amazing things after listening to his tapes.

Many of these tapes I am referring to were recorded more than 50 years ago but they are as relevant as anything today and certainly more genuine than the so-called guru’s of modern personal-success literature.

I am not speaking about the audio CD of the book Think and Grow Rich but rather the actual recording of the lectures that Hill held around the country while rising to and after achieving prominence.

If I had to recommend one set of tapes, it would have to be Your Right to be Rich which includes inspiring lectures by Hill himself.

In these rare recordings on CD you will hear a complete and thorough exposition of Napoleon Hill’s philosophy as you listen to him interpret and amplify the 17 universal principles of success. These lectures are designed to motivate you and teach you the goals and strategies that will carry you to new heights of personal success. Before there was The Secret, Napoleon Hill was the father of success around the world.

The lectures in this audio, recorded in the 1950s, are fascinating glimpses into his steadfast, somewhat authoritarian, and eminently relevant teachings. Though his speaking style often has an overly aggressive quality, there’s something magical about hearing it. We are handed many gifts, Hill says, many opportunities for meaning, but we can tap into them only when we connect with the guiding force that put them there. We do this by dedicating ourselves to a single purpose in life, and paying daily attention to programming our subconscious minds. This is a seminal work on the basics of personal motivation.

For those of you that are not familiar with Hill’s work, I can tell you that he personally studied some of the most successful businessmen and leaders of his time, including but not limited to Andrew Carnegie, Thomas Edison, Alexander Graham Bell, George Eastman, Henry Ford, Elmer Gates, John D. Rockefeller, Charles M. Schwab, F.W. Woolworth, William Wrigley Jr., John Wanamaker, William Jennings Bryan, Theodore Roosevelt, William H. Taft, Woodrow Wilson, Charles Allen Ward and Jennings Randolph.

By listening and understanding the keys to success, you can achieve a level of mental self-mastery that will enable you consistently to:

  • Overcome fears to reach your achievements
  • Maintain self-discipline and self-confidence
  • Develop strong personal initiative
  • Focus your thoughts into clear plans of action
  • Mental skills needed to meet the challenge of transforming your ideas into realized accomplishments.
  • Discover proven strategies for bouncing back from failure.
  • Manage your time effectively.
  • Inspire others to work with you.

These teachings and recordings have helped with all aspects of my life including trading, business, marriage, personal relationships and my own emotional and mental makeup.

For further reading on Hill, please visit his wonderful page over at Wikipedia:
Napoleon Hill Biography

“Whatever the mind of man can conceive and believe, it can achieve.” – Napoleon Hill

Filed Under: Books, Psychology, Subconscious
« Previous Page