Wednesday May 25, 2022

The key to wealth is business psychology

The ability to remain consistent, not to panic and not to skepticize at a time when it is impossible for them (and such a period is often committed even by the best traders in the world), is called discipline, self-esteem and the ability to cope with losses.

Ed Seykota, one of the world’s most respected and best commodity traders (also famous for turning $ 5,000 into one of his friends in $ 15,000,000 in 10 years), once wrote: At a 4-day seminar group of students founding the Donchians 5 & 20 trading system, it took only a week for the students to fully understand the system. I gave 3 weeks then spent around teaching students how to cope mentally with losses. ”

If you ask the landlord the question, which is the longest prerequisite for long-term investment in commodities, they are most likely to answer that these are entry strategies. In the second place he is likely to introduce money-management and only then in the same psychology. This is usually the opinion of 80% of the losing business opinion of God, very far from reality.

Dr. Van Tharp, a respected author of countless commodity literature, and an active trader, among other things, says in his book Trade your way to financial freedom that 60% of psychology, 30% money management and only 10% of entry strategies. I do not fully agree with this. If you ever wondered (as we did here) about how the world’s best traders use strategies and methods, you would be disappointed. This is not a “super secret” and highly mathematical strategy, as a number of traders mistakenly believe. In the overwhelming period, the most successful traders use such complex entry strategies as moving averages and several-day breakthroughs.

Therefore, if traders use strategies that are so easily accessible, and thus it is most likely to use the entire descent of other traders, the question automatically arises: what is the secret, thanks to which the trader could make so much, and thus lose a lot of traders repeatedly. pensions, even if everyone uses a similar business strategy? The answers are discipline, self-esteem and the ability to cope with loss. Don’t look for the day of the secret, we can 100% make sure that the day of the day does not exist (and that we have found a job!).

As simple as it may sound, the lack of discipline and self-sufficiency is the first thing that 80% of traders can very easily lead to (financial) loss (and the remaining 20% ​​to net wealth). And yet 80% of traders will continue to underestimate this psychological aspect of trading in their world, and that if they have a system that always determines the right direction of the market (such a system does not exist and should never exist), there is no need for minimal psychology.

For are discipline, self-interest and the ability to cope with loss so important?
So let’s look at these psychological aspects of business a little lightly now. As the best way to understand them, the classic example of the newcomers in actions and komoditch will be sent:

Every novelty in the commodity and stock world is full of inadequate self-confidence and exaggerated optimism. It is firmly believed that accepting small losses will not be a problem for him and far more than many losses with confiscated profits. He fulfills how he buys a car for his first big store, how he will go on an exotic holiday every year and while he lies by the sea, his pensions will multiply without any work, as he will be a multimillion in the years. Don’t lose your heart, it’s not unthinkable.

Coincidentally, he will just do the first few trades and the trader will get a (completely wrong) feeling that the stock and commodity trading is actually extremely easy (we say that in principle, commodity and stock trading are simple, not easy, which is a big difference). Novkv’s optimism is at its peak, as is his self-confidence.

But then it becomes completely unexpected after a series of profitable trades comes the first trade of losses. Slightly surprised by the new taste of his first loss, however, he quickly applauds and with the knowledge that “losses are a natural part of the shop, according to which he prefers to fulfill what he wants for the profits from other trades.

The only thing that doesn’t happen to put a deal is not lost! And then he gave and gave and gave, and suddenly a newcomer to him, for which he has not yet been prepared (and what is a common practice in commodities and real estate stocks), will take a long time to lose! The accumulated profit from the last trades is slowly fading away, and hey, the newcomer has even lost more, not yet released!

What’s next? The biggest mistake the novice can make me. With the feeling of total failure, they are new to their stores. The trader will be convinced that something must be wrong with his trading system that the furnace should not lose the system so much and for so long, and on his spirits selected and tested system in just the first day.

What happens to the team always and darkly: the trade that the newcomer first missed is the re-profitable trade and the abnormally profitable trade! Yes, that’s right, often in commodity and stock trading after a series of new trades coming from the lost, but only so that she can follow, go to the new! Only this novelty considers it completely pointless, or at the same time begins to look for another system, one that could be considered more reliable (such a system does not exist, among other things) and thus taught our novelty from the pain of further loss. .

And so there is one endlessly closed circle in which the newcomer begins to spin around so fast that he loses all his pension: the new system first loses the system left the system gave the first losses left the system and finds a new one until the inevitable crash occurs.

What will the novelty say in the end?
patn systm? This would then have to be all systems in place and there would not be a single profitable trader in the world. A good good writer: “There is no bad system, just bad traders. N novek became a bad trader at the very moment when he missed the trade due to the loss of the series (which would return his lost pension back), and thus ignored his long-term and diligent system built and tested.

The first ability to remain consistent, not to panic and not to lose skepticism at a time when it is impossible to do so (and such a similar time is often committed by even the best traders in the world) is called discipline, self-esteem and the ability to cope with losses.

What would happen if a newcomer was able to cope with losses and had enough self-determination and discipline not to disrupt trading during the losses of Sri Lanka and not start looking for another system? Most likely, he would get out of the loss-making trade very quickly again, get into the black countryside (or start to profit again) and thus continue on the path of business. Thousands of lost people will go on their way to travel, but the pesto will be in a known profit for most of the time.

As simple as I know this, only the best traders can do it. The traders who consistently earn huge pensions are the same pensions that 80% of bad traders lose in the markets.

ryvek is from the book
“Trading on commodity markets”
vydan nakladatelstvm
City Publishing,
For more information, visit
www.grada.cz

ryvek is from the book
“Trading on commodity markets”
vydan nakladatelstvm
City Publishing,
For more information, visit
www.grada.cz

ryvek is from the book
“Trading on commodity markets”
vydan nakladatelstvm
City Publishing,
For more information, visit
www.grada.cz

ryvek is from the book
“Trading on commodity markets”
vydan nakladatelstvm
City Publishing,
For more information, visit
www.grada.cz

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