Ego and Trading

By | May 3, 2012

By: Terry Ashman

  1. If you take a long or short position in the market, the market doesn’t care what price you got in at. It doesn’t care what price anyone got in or out at. It doesn’t care about your analysis or your trading methods.
  2. The market is totally impassive. It is always right. It rolls along and no-one can tell it what to do. If it doesn’t go where your analysis and your trading methods say it should, and you are losing money, it’s no good blaming the market, your broker, or even your trading method.
  3. If you are a “high powered” business executive who can manipulate and persuade people, it won’t work on the market. The market is impassive and takes no notice.
  4. If you take some losses and get emotionally upset, and aim your fury at the market, it won’t work. The market will not respond to you. It’s impassive and takes no notice.
  5. If you take some losses and aim your emotional fury at your broker, it won’t work. He’ll probably be impassive and take no notice either!
  6. If you take some big wins and in your elation imagine that you are now the Omnipotent Master Trader, be careful because you are now emotionally very vulnerable. Don’t let your suddenly acquired wealth and your feeling of euphoria cause you to get careless with your trading methods or your money management. Don’t, whatever you do, bet too large a proportion of your account on the next trade!

On Page 6 of Gann’s Stock Market Course,

Gann Says …”You must learn to realize that you cannot make the market go your way, you must go the market’s way and must follow the trend.

Many successful businessmen who are accustomed to giving orders to others and have them carried out will often, when they get into the market, especially for the first time, expect the market to follow their orders and move their way. They must learn that they cannot make the market trend go their way. They must follow the market trend as indicated by fixed rules and protect their capital and profits with STOP LOSS orders.”
This point concerning “They must learn that they cannot make the market trend go their way” actually happens far more often than most people realise. The classic repeating example is the Australian government’s reaction to the fall in the Australian dollar currently in the news (10th June 1998). The government don’t want the dollar to fall too much more so they step in and buy. This invariably results in a small rally and then the dollar falls again. Government buying will not halt the established downtrend. Every government of every country does this. The Swiss did it when the Swiss franc was falling, the US government did it when the US dollar was falling, the Hawk Government did it when the Australian dollar was falling back then. And leaders in government are “accustomed to giving orders to others and have them carried out”, but they can’t turn an established downtrend by buying heavily because the downtrend has not finished yet. As soon as they stop buying it will resume. In fact, their buying sets up nice rallies on which to sell short for short term trades.
A further example is the Hong Kong government’s reaction to the fall in the Hong Kong share market, reported in the “Courier Mail” September 1st 1998 …”A savage 7% plunge in Hong Kong share prices rocked the Asian markets yesterday ….. After spending the past two weeks pouring more than $HK100 billion ($23 billion Australian dollars) into the share market in an attempt to fight speculators and lift the Hang Seng off five year lows, the Hong Kong government ended its intervention yesterday. ……… In turn, the Hang Seng plummeted 554 points to close at 7275……..”
The speculators they are “fighting” are the frightened investors selling shares. When hundreds of thousands or even millions of people are all panicking and losing money, no force on the planet is going to stop them from bailing out!

What all these points come down to is that …

1. No matter what happens to you in the market, you must take full responsibility for it yourself. You can’t blame anybody else. The buck stops with you.
2. Maintain a calm, level-headed approach and treat trading as a business.


Gann says …”HUMAN ELEMENT THE GREATEST WEAKNESS”

When a trader makes a profit, he gives himself credit and feels that his judgement is good and that he did it all himself. When he takes losses, he takes a different attitude and seldom ever blames himself or tries to find the cause with himself for the losses. He finds excuses; reasons with himself that the unexpected happened, and that if he had not lisened to someone elses advice, he would have made a profit. He finds a lot of ifs, ands, and buts, which he imagines were no fault of his. This is why he makes mistakes and losses a second time”.
“The investor and trader must work out his own salvation and blame himself and no one else for his losses, for unless he does, he will never be able to correct his weaknesses. After all, it is your own acts that cause your losses because you did the buying and the selling. You must look for the trouble within and correct it. Then you will make a success, and not before.”

One thought on “Ego and Trading

  1. steveo

    I have long been amazed that what I consider to be “basic data” can be so hard to come by. Ask your realtor for a time series of prices in a certain neighborhood, and they will look at you like you are from Mars. Why? Well because this is a good time to sell (insert vacacious reason of whim here) and this is a good time to buy (insert vacacious reason of whim here), so historical pricing makes no sense.

    Try to get good data on the indices going back a hundred years….good luck.

    Even getting commodity prices is a feat. Wish I still had access to the full on Bloomberg, but alas that is no more. Costs around $30,000 a year, I had it for free.

    So here is the project. Search out and upload “Real Data Series” of all sorts, and post them as direct downloads on Hawaii Trading.

    You got Data? Send it over, I will post it up. Knowledge can be freedom and power. Let’s create freedom and power, for free.

    First chart / Excel is by me (Courtesy of the Perth Mint). This chart data is down-loadable in Excel at Hawaii Trading. Within 2 months, my goal is to have 25 spreadsheets with valuable data, available for free.

    The Excel format is sloppy, it took me 30 minutes to whip it into this shape as they had odd date formatting.

    http://oahutrading.blogspot.com/p/real-data-series.html

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