hen you trade, are you attuned to the market and its trends and moves? Or are you constantly forming new belief systems (consciously or sub-consciously) that can lead to losing trades?”
As traders, we want to “attune” ourselves to the market’s moves. We want to feel the markets ebb and flow. The trouble is we are exposed to a million messages by way of the internet and financial networks—all day, every day. Our senses are bombarded with images and ideas, and they come at us non-stop.
As humans, we have learned to be effective with messages we are confronted with—to either block them or fast-forward them. This is called a learned response. For example, say your wife or husband starts to tell you something. If you have a lot on your mind, you will either pretend to listen, but you really don’t hear at all (blocking), or you move into “fast forward,” thinking you already know what he or she is going to say.
In the stock market, we look at a chart and say, “I’ve seen this pattern a hundred times before. I know what it is going to do.” But we really don’t know what price is going to do next. If it moves the way we believe it will, then all is well. If it doesn’t, we are usually not well-served to block the message it is giving us.
Part of our problem is that we read newspapers, or watch financial networks, and form belief systems. If we get a strong belief system going that a stock is going to rise in price, and it doesn’t… we may still believe that it will rise soon, even as it progressively falls lower.
I stress to my students to maintain a nimble mindset. Yes, of course, you must assess the facts and charts, and you must believe that there are opportunities in front of you that have the potential for making you money. Still, you’ll want to avoid the human reactions of fast-forwarding— believing you know what will happen next, or blocking—believing a stock price will rise, even as it falls.
Still, you will increase your profits if you can keep mind flowing nimbly with the market, trade what is (not what you think should happen) and keep an open mind at all times.