| |
| |
|
Investing | Online-Information-Directory.com |
Home >> Finance >> Investing
Discipline in Trading and Investing
The one thing I can think of that most affects both trading and investing has to be self-discipline. Being disciplined is fully 50% of the job of trading or of investing. I don't care how good your trading system is, without the discipline needed to follow the system you don't have much of a chance for success in meeting your goals. It doesn't matter how great a planner or organizer you are, without discipline your plans will most likely fail to bear fruit.Discipline involves self-control, and self-control involves your ego. If you want to succeed, you must learn to trade without your ego getting in the way. Don't be fooled. A person's self image must be separated from his trading or his investing. When personal self-worth gets tangled up with your business activities, it not only wrecks your best trading or investing intentions, but it also damages your self-esteem. You hear and read about great traders and investors who have done amazing things. They tell about how great they are. They talk about "The Big" trades they made. They talk about "Big" numbers. It all derives from their oversized egos. Don't be misled. Sooner or later, there are "Big Downfalls." It goes with the territory. For a moment, let's look at the results of what a huge ego can do. Due to his oversized ego, Nick Leeson brought down the Barings Bank. Victor Niederhoffer ran his fund into deficit. John Merriweather was so sure his strategies would work that he ended up threatening the health of the entire banking system by betting more than fifty times his capital that he could forecast, without any chance of a loss, the direction of various bond markets. As we study the examples of these three men, there seems to be a pattern of temporary real success followed by a collapse for themselves and for those caught up in blindly following them. Here are the kinds of problems that arise from putting your ego into the mix. - Not putting in stops: You don't want to be proven wrong. - Hesitation before entry: You want reassurance before you act. - Overtrading: You want to prove how really big you are. - Not getting out when you should: You have married your trade and just don't want to get a divorce. Getting out would mean you were wrong. - Adding to a losing trade: You are making a massive effort to prove you were originally right. - Grabbing a profit too soon: You want affirmation that you did the right thing. - Missing an opportunity because you can't pull the trigger on a trade: You are still living with past mistakes. In my 47 years of trading, I have seen great traders and investors come and go. All too many of them lost everything they had ever made. The great W.D. Gann died a pauper. The legendary Jess Livermore was flat broke when he committed suicide. I have known dozens of traders who lost money because their egos got in the way. I agree 100% with the following statement by Marty Schwartz, the great S&P 500 daytrader. "I've said it before, and I'm going to say it again, because it cannot be overemphasized - the most important change in my trading career occurred when I learned to DIVORCE MY EGO FROM THE TRADE. Trading is a psychological game. Most people think that they're playing against the market, but the market doesn't care. You're really playing against yourself. You have to stop trying to will things to happen in order to prove that you're right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago. The sole objective of trading is not to prove you're right, but to hear the cash register ring." To that I would add, "trade what you see, not what you think." You cannot afford to get your ego or your opinion involved in your trading activities.Because both trading and investing are uncertain businesses of probabilities filled with uncertain outcomes, a huge ego or a fragile ego can easily get smashed. Defending your ego saps you of energy, distorts your perception, and will eventually destroy your business. If your self-esteem is connected to your trading and investing choices, if it goes up and down with the results of your activities, you and your business are in trouble. Your self-image needs to be strong, not at the mercy of the outcome of your trading or investment choices. To succeed in the markets, you have to have confidence in what you are doing and confidence in yourself. But self-confidence must not become confused with self-image. Remember not to marry a market or a trade. If you see you are not right, be quick to get out. Run your trading or investing as a business. Practice self-discipline. You'll be glad you did. All the best in your trading, Joe Ross Joe Ross has been trading for more than 47 years, and is a well known Master Trader. He has survived all the up and downs of the markets because of his adaptable trading style, using a low-risk approach that produces consistent profits. Joe is the creator of the Ross hook, and has set new standards for low-risk trading with his concept of "The Law of Charts?." Joe was a private trader for most of his life. In the mid 80's he shift his focus and decided to share his knowledge. After his recovery, he founded Trading Educators in 1988 to teach aspiring traders how to make profits using his trading approach. He has written 12 major books on trading. All of them have become classics and have been translated into many different languages. Joe holds a Bachelor of Science degree in Business Administration from the University of California at Los Angeles. He did his Masters work in Computer Sciences at the George Washington University extension in Norfolk, VA. Joe still tutors, teaches, writes, and trades regularly. Joe is still an active and integral part of Trading Educators.
MORE RESOURCES:
Investing - Google News |
|
|
|
RELATED ARTICLES
Trading Tips No 7: Developing a Casino Mentality for the Day Trader I submit that the successful day trader would profit well to adopt a casino mentality. At first glance, this sounds reckless and nothing more than a gambling attitude - but it's not. Who Wants To Be A Millionaire? I am sure you have probably read about the power of compound interest. And how if you invested $10,000 at 10% return and let it compound for 50 years you would have a little over 1 million dollars. 25 Ways to Find Companies to Buy When you start your program to purchase your "ideal" company, you quickly realize that your ultimate success will depend on two primary skill sets: 1) Your ability to FIND viable companies that are for sale, and 2) Your ability to effectively qualify the potential acquisition investment once found.This article is about only step one, how to creatively find viable companies and one's that are able to be purchased. Foreign Investing - US Investors Still Missing Out? Investors are still too slowly realizing what the academics have long pointed out -- adding foreign stocks to your portfolio will, over the long term, increase your returns and lower the overall risk of your portfolio.US investors embracing foreign investing are both realists and optimists. The 8 Biggest Mistakes When Designing Portfolios - and How To Avoid Them Are you as good an investor as you think? Do you consider yourself a well-informed investor able to anticipate and avoid nearly all pitfalls associated with investing? Chances are, you are making one of the common errors that could cost you hundreds or even thousands of dollars, or worse yet, your financial independence, control and security."I see people making the same costly mistakes over and over," says Scott Frush, CERTIFIED FINANCIAL PLANNER and author of Optimal Investing: How To Protect and Grow Your Wealth With Asset Allocation (Marshall Rand Publishing; available by calling 1-800-247-6553). Copy Cat or How to Use a Successful Trading System How many books have you read about successful traders? How they did this or that and made a fortune and are still doing it. You say to yourself, "I'm going to follow his method and get rich". How to Use Annual Report There are many steps in calculating the fair value of a company. However, before we even do that, it is imperative to know how a company earns its profit. Discipline in Trading and Investing The one thing I can think of that most affects both trading and investing has to be self-discipline.Being disciplined is fully 50% of the job of trading or of investing. July 2005: Hurricane Forecasts for Weather Traders Tropical Storm Arlene formed as a tropical depression on June 8, 2005 near 83 West Longitude and 17 North Latitude. Although Dr. Top Ten Investment Mistakes 1. Lacking an investment plan a/k/a/ "Don't take a trip without packing the map". Making Every Penny Count More and more workers are leaving their jobs and taking their 401 k retirement plan funds with them. While some are rolling their funds over into IRAs or other qualified plans; many are taking their distributions in cash. Are You An Investment Dummy Like Me? I am good at a few things. I can certainly market well and I consult with others about how to bring more attention to their products and services on the internet for a living. Waiting 20 Years Can Cost You Millions - Dont Wait Start Today Many Young people live for Today. They really don't fully understand the power of compound interest. Moving Average Convergence Divergence ( MACD ) Charts The Moving Average Convergence Divergence charts, or MACD charts for short, are a technical indicator that is derived from the more simple moving average.The MACD charts are oscillating indicators, meaning that they move above and below a centerline or zero point. Super Rules, OK? Do you rule your superannuation or does it rule you?It's easy to fall for some myths about your super unless you do some clear thinking about who is in charge. Virtually all Australian employees now have a superannuation account, many have several, even more than they know about. When NOT to Invest Unfortunately, many investors who are seduced by the lure of easy money try to become "active" investors before they have the skills, the resources, or the appropriate intellectual framework to do so.This is not to say that investing in stocks is extraordinarily difficult . Investors: Avoid These 5 Common Tax Mistakes For many investors, and even some tax professionals, sorting through the complex IRS rules on investment taxes can be a nightmare. Pitfalls abound, and the penalties for even simple mistakes can be severe. How to Setup a Profitable Trading Business In my opinion trading is the most exciting and best way to earn a living in the world. With just a small amount of equipment and space you can do it from anywhere on the planet. Love The Thrill of Risk? Invest in an Annuity! With the stock market in steep decline, people are looking for safe places to invest their savings. Many banks and investment companies are pushing annuities. Oil and Gasoline Price Uncertainties The Light Crude Continuous Contract hit an all-time high at $70.85 a barrel, while Unleaded Gasoline Futures spiked 50% or $1 a gallon on Tuesday.
|
| site map © 2006 Online-Information-Directory.com |
