Hello Laissez Faire, Great discussion I can only speak for myself on this. What helps me mentally in this trading business is: 1. Having Alot of money in savings account. Have all the personal things I want in life. Family is happy and satifisfied. My career is great. My house is great and in good condition and all the remodeling is done. My health is good. I am eating good. My dogs are good. 2. I have 2 times the amount of trading capital in the bank. So if my trading capital is $20,000, I need $40,000 in my savings just sitting there. And I only go risk $20,000 for the trading. 3. All other long term investing is set and in place. 401K maxed out to government limits, all invested in SP 500 index. 4. Only debt in my life is car not and house mortgage. 5. NOONE knows about me getting ready to risk $20,000. NOONE, not even my family or friends. Once all 5 is compete, then and only then, I proceed with risking $20,000 to trading business. Why is this? Because scared money, do not make no money. When I am trading day to day, I need ALL fear of losing the $20,000 gone from my memory. I am at war, and all my mental ready to make money. I do not need NO mental distractions at all. And if all 5 is not done before, my risk of losing money while trading goes up.
Working on psychology has before I started being consistently profitable. Don't think would have made it otherwise. Trading basics are simple but is in a conflict with the way most people's neural pathways are wired IMO. Some re-wiring needs to happen and it's very difficult. Van Tharp was useful but has some dangerous rabbit holes. "The Daily Trading Coach" book by Steenbarger is great.
Hey SML; Only one suggestion is to look at your borrowing. Borrow money to buy appreciating assets or at least borrow so that your interest is tax deductable. Years ago if I wanted a new car for $25K I would borrow 25K and invest the proceeds. When the loan was paid off I would buy a new car. Sometimes I could buy a new car and have dollars left over and sometimes I'd end up with a used car but I got to write the loan interest off.
%% DAVE Ramsey loves to tell + tell about the time he had lunch with a billionaire + his favorite book was the kid's book on The Race Between Rabbit+ Turtle/LOL [ I re-read that one + really the rabbit was super lazy loser ; markets need like turtles + rabbits + bears , bull elephants......] Dr Van Tharp also spilled the beans so to speak, about why the top 2 military target shooters won, if i remember right. The #1 winner rehearsed all 1,000 shots, before real time match. Happy Columbus Day\ Canada Day Thanks Time Month
Through the years I developed a personal mantra about my attitude towards the markets - "The market is an ocean of money and today I'm here to take my share." Later I had to incorporate a part about reaping losses, because not every day is a day where you take your share out of the market and I realized it would develop internal conflicts. The market is on my side to make me wealthy, but it owes me nothing. Show up every day and do the work.
%% Assume an accurate pic+ that rabbit knows how to count green-LOL NO such thing as a business without expenses [losses]. Part of the problem, most think of losses as negative = oops lost the football game or oops i lost my pen\oops Sure would rather rake off a profit than rake leaves or take a loss[ expense]; same coin but different sides. WATCH out for rabbit holes , in the dark= danger. Funny cartoon ,Lucy in Peanuts charged $00.25 for her psycho-babble\overpriced joke
Best one I use is heartrate and breathing. They provide solid feedback on your reactions. A lot of the "state of mind" stuff, one has to go around in their head and correct things. I think it is easier to just keep on track, and not go "off", rather than psychoanalyze yourself ad nauseum. Also I think they tend to be "lagging indicators", to use the TA parlance. The goal is trade consistently with a positive expectation over 10,000 trades. Not to be a "master of the universe". From Pit Bulls: "Be dispassionately interested."
I just did a psych assessment this week which helped me better understand some of my strengths and weaknesses as a trader. Lots more to discuss here.
%% I like the solution time in ''Pit Bull''[ Marty S] where the P&L got out of line on the loss side + his wife Audrey keeps saying, keeps saying ''get smaller\ get smaller'' Good advice with a good hit rate; but with a real low hit rate= keep shooting. Average hit rate on migratory birds[doves= low+ 20%\ hit 1 bird for 5 shots] Easy to run out of ammo, unless plans are in place..... [Edit= personality tests, like Flo Littauer are helpful +wise + not to be confused with mudddy psycho-babble ]
Hello deaddog, Thank you for the advice. Just to make sure I perfectly understand what you are saying buddy. Are you saying if I want to buy a car that cost $30K, do not get a loan from car dealership for $30K? Are you saying instead get a personal loan for $30K with interest, invest it to make another $30K to buy the car cash? Then give $30K back to the bank. Is that right or am I confused?