Your success and failure can be predicted

So your habits have feelings. And you relate to those feelings you’re used to them. There’s nothing that’s going to catch you off guard. People don’t like surprises. You probably don’t either. So when you look at what you do, it’s likely because you’re very, very sure and have great certainty about the outcome and also how you were going to feel before, during, and after that particular habit now people and traders, investors all have different responses to how they deal with uncertainty. You know there are, it deals with managing risk, for example, do you only have on risk during the day? And do you take it home or do you take it home overnight? Cause there’s varying degrees of uncertainty. There’s more randomness around what we do in the markets than we probably want to admit. That’s for sure. But I think how a person responds to randomness and has to process the feelings around uncertainty has a lot to do with their behavior around trading smaller folks who don’t have enough money and are underfunded who, and in who, my opinion probably shouldn’t be trading.

You should be saving your money and building up a grub stake so that you can afford to trade higher priced securities rather than having a smaller account of less than $10,000 and trying to trade your way up to financial freedom with penny stocking. And otherwise during the day, to me, you’re just starting with a whole bunch of bad habits, but we’ll get back to that at another time when we’re dealing with uncertainty, depending on how you feel about that. Because uncertainty means risk. And there’s a barometer of that or a thermostat of risk. If you have a trade on for five minutes there’s lower risk doesn’t mean an outlier event can’t happen to you during that period of time. But it’s probably an okay estimate to say that the less time you have money committed in the market, the less you’ll have to deal with the uncertainty. It’s probably safe to say that the longer you have positions on the greater degree of uncertainty from an emotional standpoint, but when you look at it probabilistically and you know that each instrument that you could buy as an investment or hold as a trade has risk premia attached, you’re typically rewarded for that risk premia. And when it goes against you, you can cauterize it and move on.

Remember we talked about this wive’s tale about stops getting run to hurt the long investors. I understand that there’s computers. And I can understand that when orders get executed, people learn commissions, but if something’s going down I don’t find that market makers are going to want to drive the security down to buy something. That’s going down. You see what I’m saying? Because then they’re going to sell it to whom. And at what price, a lower price you see. So I don’t, I don’t necessarily agree with that type of what must some people think areconventional wisdom. The problem is is that people overhear it and they hear it hear it said once or twice. And now all of a sudden they accept it as truth without really fully thinking about what the moving parts are, how are they served by running stops and committing their own firm’s capital to an instrument that’s going down. Because they can see the entire market. Why wouldn’t they wait for the thing to bottom and consolidate and then buy it on the way back up.

Now in certain circumstances, market makers have to buy. Because that’s where they stand in the marketplace. They have to publish quotes and they have to bring stock in and, and they have to have stuff to sell. And that’s part of the deal. But I feel like the reason I bring this up in particular is because now that gives you a feeling tone that you can’t trust the market. And it’s really not about the market. It’s about you. You have to trust yourself, you’re powerless over whatever else happens. All you can do is control your own behavior. So you need to have absolute clarity about what it is that you’re doing and also why you’re doing it because it’s your emotions that are driving the whole thing.

Now, this is why I find it difficult to support a lot of the stuff that I see for sale on the internet, because until a person knows how he or she or they are built, there’s no guarantee that any of what you see is going to be meaningful for you. It might be interesting as a data point. But when you think about life and from your emotional equations, each system, each chart pattern has its own vibe that it gives off. And if it happens to gel with you, then that’s a happy accident, but that’s random in and of itself. That’s why I like to say, it’s not really about systems or chart patterns. It’s about something that works for you that you can back test and see at least will it have made money or would it have made money over 10 or 20 years?

Anyway, I don’t want to go on, we’ll pick this up again tomorrow. Please consider subscribing because I’m able to get some good data about the episodes that you like more than others. And then I can focus my efforts on those or those topics. If you haven’t already gotten a copy of the audiobook version of The Inner Voice of Trading, you can get it for free at MartinKronicle. It’s on me. The download link will be in the email. And , thanks for being here. Folks. I will see you tomorrow.

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