Some Valuable Things I Learnt From Mr. Market

Discussion in 'Psychology' started by gettinglucky, Nov 30, 2010.

  1. Here are a couple of valuable things i've learnt from Mr. Market, which might save some newbies a few years of aggravation:

    1. Whenever you are faced with a long losing streak (ie. n > 10) or a massive drawdown, you don't need some time off. Sure, take one-two days off, go on a long walk if it may help you to clear your mind. It is important that you get back to the market ASAP. As someone else had already mentioned on these forums, "feel good/feel bad" crap has no place in becoming profitable. You don't want to run away from the problem, but confront it. You want to analyze where you went wrong, which leads to point #2.

    2. Less is more. #1 has occured, you are treading in deep and unfamiliar water. In other words, you are in deep $h1t. You need to get back to the shore/shallower waters to get a survey of of where you are at before you proceed to head out again. What I'm saying is that you need to get rid of your "indicators" and what not, start with the basics again. Start with a simple candlestick chart, or strip down your "system". Spend as much time as you need with your barebones system. Only then, will you rebuild the system -- add the "indicators" and "accessories" back, slowly, one at a time -- now this is the important part -- but only the ones that will improve your trade, or help you gain a better understanding of market behavior, not make it more confusing. You want to find out which part which part wrecked your system, and this is how you do it.

    3. Wait for confirmation. Putting down all your money at once in any given trade is almost arrogant. In every trade setup, there is a price level at which the manipulators will fully commit to marking that stock up/down. Find out what that price level is and wait for it. Everything before that is the "maybe" stage -- "maybe we will pool our resources into manipulating this stock/w/e market instrument".

    will add more as they are discovered.
  2. Fando


    This is really a Good post. Looking forward for more such use full posts. I am new to this community and this is the first post that I read.
  3. After getting almost no response for a whole day, I was ready to give up on this thread. Anyways, here are a few more:

    4. Become the minion of fortune. Let's face it, in the real world we live in, you need more than skills to make it big in the stock market game, you also need luck.

    "In a nutshell, my experience has been that money is colour-blind, race-blind, sex-blind, degree-blind and couldn't care less who brought you up or in what circumstances.
    Money is one of the most neutral substances on earth. Others may conspire against you obtaining it through bigotry or prejudice. But they can only succeed if you permit them to." ~ Felix Dennis

    In other words, almost no one is borned a minion of fortune, but everyone is welcomed to become one. Access to this exclusive club is not based on race, sex, religion, degrees, upbringing, etc. as has already been mentioned.

    However, you have a choice through which door you'd like to enter the club. What I am really saying is that there are only two ways to strike it rich and/or become successful in trading:

    1. You won't be able to spend the money by the time you have it. I personally know someone who became blind as he was about to become filthy rich.

    2. You promise not to spend the money on things you really don't need when you finally have it. Extravagance is a sign that people are inwardly poor. People go and buy stuff because inwardly they feel not enough. The real you never feels not enough. It is the darkness within you, which you feed when you seek identity in external things. The unspoken rule is that whenever you reinforce your negative psychological elements, you are automatically booted from the "Fortune 500" club.

    So, choose wisely which door you'd like to enter the club.

    5. Stop losses just plain suck. Remember, all warfare is based on deception. You're not deceiving anybody when you decide to advertise your whereabouts through the use of actual stop losses. (Also, having actual physical stop losses will make you mince meat for flash crashes -- best to wait 1-2 minutes before excuting mental stop to make sure it ain't a flash crash).

    6. You must shed your old carapace in order to grow. Remember, the insect that does not shed its shell remains the same size throughout its lifespan. A stagnating equity curve goes straight up or sideways. Draw downs are a necessary evil and are a blessing a in disguise. You are most vulnerable right after you've shed your old skin. You will lose size and weight after you've shed your old skin (your account goes down).

    Will post more as they are discovered...
  4. What did you want everyone to say? Shower you with praise? I found them interesting as points like these are definitely things I like to read about every now and then to keep me on the right path, but there is no need to be looking for anything in return. No offense.

    7. Leave your ego at the door

    8. Remain Humble

    (you can figure out the explanations.)

    As far as your #5, if I understand it correctly then you're totally wrong and it pretty much taints every other point made here. It hurts your credibility. And if I misunderstood it, then I take back what I said, but I think it requires an explanation.
  5. Oh? Some criticism? I must be doing something wrong.
  6. Not at all. I think this is a great idea. This is very helpful to me and I'm sure to others. Little tidbits of things you learned can accelerate the learning curve for everyone.

    My only problem is the fact that (from what I understood) you don't believe in using stops because you're showing where your exit is. It sounds like you'd rather use mental stops so that no one can see where your stop is and you can trick the market.

    It's bad advice, plain and simple.

    The two examples I gave as far as ego and humble were ideas that came to my mind in response to what you said, but actually apply to everyone and compliment what you already said.

    I have a friend who thinks he's God's gift to the world and brags about buying everything from a new car, college basketball and football tickets, an iPad, laptops, computers, a house.

    "A poor person with a lot of money is still a poor person."

    Honestly, don't take offense to what I said. Just correcting where I don't think you're entirely correct.

    EDIT: Just realized you edited your post after I responded the first time. I get the impression that you are doing some kind of swing trading with a longer holding time than just intraday? I daytrade where my trades last anywhere from a few seconds to 10-15 mins. I don't really feel like going into a long detailed explanation on how I feel about stops so maybe we can just politely disagree.

    What's this about waiting 1-2 minutes to make sure it's not a flash crash? So you're going to wait longer while your trade goes against you while taking more losses? Do you see what I'm getting at here?
  7. Not at all. But what exactly does one do to become humble? Anyways, I can see that discussing stop losses will be about as beneficial to one's personal development as a trader as debating politics and religion, so let's leave it at that.
  8. I'll just leave the discussion about the stop losses alone, except for my last point. The problem with politics and religion is no matter how long you argue, nobody is right or wrong. However, in the field of trading, your goal is to not lose money. There is a difference between right and wrong.

    Anyways, remaining humble is just a process of not feeling overly proud, not letting your ego get so big that you start feeling entitled or bigger than everyone else, and not getting ahead of yourself.

    The way I see it, Warren Buffett and Bill Gates are very humble. They don't let their money define who they are. On the other hand, you see all the time how people burn through their money going from millionaire to broke over night only to precede that by bragging about how much they have. Most people with flashy possessions are broke or struggling.

    Did you ever see someone who did something extraordinary, called a hero, but to them it was just who they were? They don't see how it's such a big deal because to them it's not. They don't expect to be showered with praise. It feels good if it happens, but it's not expected. They often feel like they don't deserve it.

    I just think remaining humble will bring you further in life. I'm not going to get all religious, but I think these speak for themselves. They all have a good message and you can apply it as you will. I'm not trying to push any religion on anyone.

    Psalm 147:6 "The Lord lifts up the humble; He casts the wicked down to the ground."

    James 4:6 "God resists the proud, But gives grace to the humble."

    The book of James is worth a read. It's very short.

    1 Peter 5:6-8 "Therefore humble yourselves under the mighty hand of God, that He may exalt you in due time, casting all your care upon Him, for He cares for you. Be sober, be vigilant; because your adversary the devil walks about like a roaring lion, seeking whom he may devour."

    Proverbs 22:4 "By humility and the fear of the Lord are riches and honor and life."
  9. Redneck


    If I may be permitted – I would like to add one please;

    There is one level of discipline we can all live with/ get by on...

    The discipline necessary to trade profitably - is exponentially higher

    On a different note = During the day – Stops are my best friend

  10. You have the ultimate responsibility for the outcome of your trades.
    The only thing you can control in the market is yourself.
    #10     Dec 2, 2010