Stock Trading and a Positive Mental Attitude

Over the years of my trading career, I have noticed that there are three main components to winning in the stock market: Mind, Method, and Money. Through study and one-on-one coaching, you know there are many great methods out there and it’s only obvious that it does take money to make money. But having a winning attitude I feel has to be the most important aspect of a successful trader.

Have you ever noticed traders who don’t seem to have any method to their trading, or even lack some money, yet they still have great results? Notice that it’s their mental attitude that propels them to that level of success. One of the most popular phrases I have come across is this: “As a man thinks in his heart, so is he.” And this universal truth is just as applicable to traders as it is to anyone else. When you notice the attitude of a winner you will notice a level of confidence and certainty that is almost beyond belief.

Do not make the mistake of assuming that winners are confident and certain because they win, but rather the fact that winners consistently win because they are confident and certain. Not even the best methods will work for those traders who mentally picture themselves losing before they even place the trade. And not even a large amount of money can save the trader who secretly thinks to themselves that every trade they make will eventually melt away.

Choose now to have a higher set of thoughts when you approach this wonderful opportunity called trading. You will never fail, or even feel like a failure, if you can simply remember the fact that you are not your results. There is plenty of room up at the top with all the dedicated traders, but first you must believe you belong there, and then you must start acting like you are. Think the part, then act the part, and the rest just simply takes care of itself. But don’t take my word for it. JUST DO IT.

So what does your mind see when you think of the market? Does it look like a big evil game of chance? How about a massive place of confusion and uncertainty? Is it your friend or your foe? These are good questions to ask yourself because they offer you with a good understanding of what your attitude is towards trading. As traders we are constantly perfecting our techniques and strategies like we should be.

However, I feel not enough time is spent on developing the proper mental attitude necessary for better results in trading. If you keep thinking that the market is out to get your money, then every decision you make will lack confidence. Each of the actions you take will show your weakness, and this enemy you have created in your mind will haunt you all the way to your account balance of $0. You should view the market as “the field of all possibilities,” or your “play ground,” to use two popular phrases.

I like to view this in my own mind because then I can truly be; on my own. I know that my fate lies with me and no one else. If I fail, it is because of my own decisions, no one else. Yes, it can be scary at times, but you will see your attitude towards the market change immensely and results will be more profitable. The market is not our enemy; it truly is our friend. In this vast market lies the potential fulfillment of your every desire. You know this; this is why you are so intrigued by the market. All of this desire you have is yours for the taking-but you must go get it. Don’t beg for it, Go get it! So the next time one of your friends asks you “How is the market treating you?” you respond by saying, “You mean how am I treating the market?” Remember that the market is your world. Trade it with a positive mental attitude. This is what winners do.

The way we view the market in our minds has a funny way of becoming the reality we face as traders. If we view it as a massive casino trying to take all our money then that’s what it will be. If we view it as a place where we can achieve all of our goals and desires, then that is what it will be. Focus this month on your thoughts of the market and each of your trades closely. It will reveal to you all of your strengths and weaknesses. If you do this you will catch yourself with the wrong mental attitude more than once and it’s crucial that you correct that attitude and change it to the WINNING MENTAL ATTITUDE. Each day you wake up remind yourself that the market is here for only one reason: to make you money!

Think it, act it, do it.

Happy trading.

Poker and the Stock Market

I was out of town this weekend in Southern NJ, Atlantic City to be exact. After finishing my business at the convention center, I traveled back to the newest casino, the Borgata where I was staying for the night. I don’t consider myself a gambler and have never enjoyed losing money at the tables. When I do gamble, my preferred games have always been craps and blackjack. Until recently, I had never played at a poker table in a casino environment but I enjoy the game of poker and have only played in backyard and basement games with old buddies. Many people consider the game of poker pure luck but this is not an accurate observation. Many factors run parallel with the game of poker and the game of stock market investing. Luck may play a part but rules, odds and money management are the largest components of the two entities.

When investing in the stock market, it is essential to have a sound set of rules or a system that has been tested in real time, no back testing or historical testing needed. After the system has been tested, the investor needs to follow rules in order to preserve capital and cut losses. The investor must also consider the odds of his/her stock making a gain or making a loss. Price objectives and targets should be a large part of every investor’s system. With proper money management and calculated expectancy, the investor should aim to trade only in situations where the odds are in his/her favor. In a strong bull market, it may not be wise to start shorting many stocks; the odds of making a big gain with this strategy could be very low. Another major component that works its way into investing is psychology and/or human emotion. Stocks are made up of human character traits, similar to the type of people that own them. Some stocks are risky and volatile while other stocks are conservative and predictable. The market repeats cycles and specific chart patterns because humans repeat their actions and character tendencies.

Now, back to the poker table; as I sat down and started to play, my first goal was to become familiar with the character traits of the players around me. With 10 players at the table, I had plenty of time to evaluate the people I was playing with, without risking a great deal of money. After several rounds of play, I was aware that the gentleman to my right would only bet high odd hands and would fold every other hand. He was very edgy and nervous and folded his cards with force when he was angry. The gentleman to the left would also play hands with high odds but I did see him call bets with some hands that were risky with lower odds. One gentleman across the table was the bluffer and always had a smirk on his face with a pair of dark glasses. I challenged this man on several occasions and paid to see his cards because I felt he had nothing. More times than not, I was right and still beat him with an average hand. I could go on but you understand the point I am trying to make: all poker players and investors bring their emotions to the table.

I won’t get into the exact rules of playing poker but I can tell you that only two players are required to bet per round while the other eight can view their first two cards without risking a cent. My game of choice is Texas Hold’em, the current craze across the country and one that excites me when I am in the environment. The two players required to bet represent the big and small blinds. If you are the dealer or anoy other players at the table, you can view your first two cards for free without an bet. If the hand is weak, you can fold and keep your gambling stake.

Here is where it gets interesting; if I have a decent hand, I can decide to call the larger blind and see the next three cards on the flop, which is still a low risk investment. If the flop doesn’t provide me with the cards I need, I can immediately cut my losses short by folding and wait for the next game. The same is true in investing; I can cut a loss short and wait for the next opportunity without risking the farm if I realize an immediate loss. If the cards are good and my probabilities of winning the hand are high, I can call the bet or raise the bet. A fourth and fifth card (the turn and the river) are placed on the table after the flop and betting continues with each round. Again, I can decide if I would like to call, raise or cut my losses short. The connection I am trying to make with investing in the stock market and playing poker relates directly to cutting losses short (capital preservation and money management) and my odds of winning the game (in the stock market this could be called expectancy).

In my opinion, the best game to play at the casino is $1-$2 no limit style. This means that the blinds are held to a minimum and it will only cost you a couple of dollars to see the flop in many cases. The “no-limit” aspect allows your upside potential to be unlimited which carries through to investing. If you cut losses short and ride your winner, the up-side potential in investing can also be unlimited, especially when using options (but that is for another discussion). Last night, I could see my first two cards for free, eight out of every ten hands and I could fold if they were no good. If they were good, I put money on the table after my idea. In the real world, the world of stock investing, you should always put money after your best ideas. The ensuing gain or loss will tell you if you are right. Again, for the umpteenth time in this article, the most important part of both games is cutting losses short and moving on without mixing emotions into the decisions.

All investors and poker players bring emotions to the table, some people control them better while other people employ better systems and understand the odds on a higher level. The bottom line is to understand the situation around you and to use a sound system to raise your odds. Never bet a hand that represents a low chance of winning and never ride a loss that could multiply overnight. Cut losses short and get out of the game and wait for the next opportunity because they are always around the corner.