In today’s Money Weekend…work harder not smarter…decisions need structure…a different approach…and more…
I’ve just returned from a holiday in Hawks Nest, NSW, where I caught up with old friends and went out fishing in a beat-up old dinghy most mornings.
What has this got to do with investing?
There was a moment when I was sitting on the dinghy with my line out and the sun was coming up over the water. All of a sudden I realised that my mind was completely still.
No thoughts bouncing around about what the market may do next or whether I had taken the garbage out.
I was just soaking up everything in front of me without a filter.
Zen state of mind
Source: Beat-up dinghy in Hawks Nest
It was an overwhelming sense of calm that had every atom of my body jumping around with joy.
It was blatantly obvious at that point that I had not had that feeling in a long time.
I have Daniel, my six-year-old son, and a job giving stock trading advice to thousands of people. I deal with the responsibilities by working harder and harder and staying as focused as I can at any moment.
I have had one week of holidays in two and a half years and that holiday was in Queensland at Dreamworld! Not very relaxing.
Work smarter not harder
But is working harder trying to find ‘the answer’ to the riddle of the markets the solution?
Sitting on that boat made me realise that there are answers found in silence.
As an investor you are constantly making decisions. Even choosing to do nothing is a decision.
The market is jumping around all over the place tempting you into bad trades and scaring you out of good ones. A good decision may be taking a loss and a bad decision may be taking profits too early.
The only thing you have to guide you about whether you are on the right track is your P+L and even that may be the result of a bullish market rather than your skill.
Having confidence in your own decision-making process is paramount, but at every turn there is room for the monkey mind to creep in and sow doubt.
Once the mind becomes too busy and self-doubt is lurking around, it can become an internal circus of voices pulling you in different directions. Knowing which one is ‘you’ can become tricky.
That’s when you become vulnerable to outside influences. Rather than trusting yourself, it becomes easier to hand over responsibility to someone else. Or you grind to a halt and stop making decisions altogether.
I reckon the reason why most investors and traders end up throwing in the towel well before they become consistently profitable is because of the internal chaos that trading the markets can create.
It can be incredibly draining, and most people don’t have the stomach for it.
It’s the space between thoughts where we reside. Most of our thoughts are repetitive patterns that lead to repetitive behaviours.
When the mind is full of its usual garbage, there is no room for anything else. When it becomes silent there is room for something deeper to pop up and surprise you.
Sitting on that dinghy and becoming silent for the first time in ages has been the best thing I could do for my trading. The internal dialogue has changed. There is less noise.
Decisions need structure
There is no answer out there about the markets that I can give you which will convert you into a gun trader. You can learn as much as you like about the ‘market’ but if you don’t know what’s going on in between your ears you are dead in the water.
That’s why I keep banging on about my technical analysis model and how I use it to help my decision-making. You need something that turns the sea of grey into as much black and white as possible.
Without a solid process that helps you decide when to get in, where you are proven wrong, and where your initial target is, you are flying by the seat of your pants.
It doesn’t have to be technical analysis if that doesn’t float your dinghy. That’s just the path I’ve found to make clear decisions.
A different approach
My good mate Callum has a completely different approach to the markets, and it works well for him because he has a solid process that he follows. He trades much shorter term than I do, and he relies on his fundamental analysis of upcoming catalysts for stocks that he covers.
If you like the excitement of shooting for quick exciting returns in stocks and then moving onto the next opportunity, you should definitely check out Callum Newman’s strategy.
We play golf together and I always enjoy chatting about the markets with him because we have many similarities in how we search for opportunities. But our set of rules for making decisions is different.
There are many ways to make money in the markets. But there are even more ways to lose money.
My way of making money may not suit your personality. When I discuss my approach, I am not saying that it is the final word on trading. I am just showing you what I have developed over the last few decades to guide my decision-making.
Hopefully, it can help you on your journey to finding your own path to consistent profits.
For Money Weekend
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