Michael Lewis sums up nicely about the psyche of a typical Wall Street dad when he said, “He thinks emotions are stupid, for example, because emotions cost him money when he’s trading. He spends his day trying not to feel anything, so he sort of gets used to it.”
Jokes aside, I have stumbled across this great article about the parallels between a great trader and athlete. In essence, a great trader must be devoid of all emotions and stay focused on the game, regardless of the market gyrations. This holds true even for value investors, i.e. typically contrarians to buy when the market is in reek of blood.
Here are the seven lessons copied in their entirety from Stockcharts:
- You don’t choose the stock market; it chooses you. A little bit of early trading success can have a profound effect on a person’s soul. If it does choose you, you’ll have to accept that your life and investing will become forever connected.
- Your methodology must provide an unshakeable foundation that you believe in totally, and you must have the conviction to trade based upon it. If your belief is tentative or if you don’t have complete faith in your methodology, then a few bad trades will destabilize and erode your confidence.
- A calm mindset that can focus on the execution and not on the outcome is what produces profits. It takes total emotional control. You must maintain your balance, rhythm and patience. You need all three to stay in the game.
- The markets are always conniving with ingenious techniques to get you to lose your patience, to get you frustrated or mad, to bait you to do the wrong thing when you know you shouldn’t. A champion doesn’t allow the markets to get under his skin and take him out of his game.
- Like a great painting, all good trades start with a blank canvas. Winning traders first paint the trade in their mind’s eye so that their emotional selves can reproduce it accurately with clarity and consistency, void of emotions as they play it out in the markets.
- The “here and now” is all that matters. You can’t think about the last trade or the last shot or worry about the future. You need to put on your “amnesia hat” in order to remain completely unfazed by what came before. Only by doing so can you be totally absorbed in executing your present trade.
- Being prepared and having put in the work results in the bringing together of your intuition and confidence. The two go hand in hand. Extraordinary results can be expected when you are able to see it, feel it and trust it.