Trader’s IQ Test

To see things as they are and not the way you want them to be requires good vision and a reasonable intellect. Actually, it is better if we have no intellect working at all. This test will illustrate what it takes to be a successful in Stock Market.

Start with the vision test. Keep this page at a reasonable distance from your nose. Now read aloud the following numbers:
27 28 29

Did you say twenty-seven, twenty-eight, and twenty-nine? Brilliant! You have passed the second-hardest part of doing well in the market.

Now for the hardest part. Look again at the numbers and say out loud the number that is the highest. Now say the lowest. Which number is between both numbers?

Did you say that twenty-seven was the lowest and that twenty-nine was the highest?

If you also said that twenty-eight was in the middle, then you have passed the test with flying colors!  You are on your way to being very successful in the markets. You may be laughing, but I am dead serious. If it really is that
simple to recognize what the market is saying at all times, why do you have to complicate it?

The vision test that you have taken proves that you can recognize different numbers, and the I.Q. test demonstrates that you know the relationships among them. Believe me when I say that no other knowledge of the market is necessary.

This exam determines that you are clearly capable of an egoless view of the market a Zen view, if you wish. A view that is free of personality needs. Twenty-nine is higher than twenty-seven. No one can dispute that. Not even your ego, no matter how hard it may try.

You have proven beyond a shadow of a doubt that you can tell when you have got a profit and when you have got a loss. There is no question about it. Absolutely none.

When you buy something at 27 and it goes to 29, you know that you are showing a profit. Absolutely no doubt about it. Conversely, when you do the opposite, you know that you are sitting with a loser.

If you bought at 29 and now the price is lower, you must recognize that you have a loss. Donít rationalize and say that you donít have a loss until you sell. And donít say that you know it will come back. You do not know that, either.
And if you say itís a long-term investment, youíre just kidding yourself. Thatís just another way of not having to deal with a mistake. Your ego is just hoping, trying to shield itself from the pain of being wrong. You have proven that you know the difference between a profit and a loss. That ís the easy part. Doing something about it is where the difficulty lies.

Before going farther, lets review once more the basic rules all successful investors and traders must constantly follow in order to profit in the market. These rules are:

1. Never add to a loser.
2. Add to a winner only.
3. Let profits run.
4.Cut losses fast.
5. Donít pick tops.
6. Donít pick bottoms.

And most important of all:
7. Let the market make the decisions, not your ego.

The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie?

What makes it so hard to apply the rules?

There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Letís call it ego.

Until we learn to get rid of our ego, we will never make money in the market consistently. Those who have not identified the egos ways will eventually be destroyed in the market because of their egos tendencies. It is just that powerful. The market rewards those who have subdued their egos.

Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.