There are so many ways to succeed in the market but it is amazing that we still manage to find failure! Perhaps people are not looking or searching enough for the ways to succeed or perhaps they are being unmindful of the routes to failure. A simple few pointers to succeeding drawn from the experience of my own life.
First up, becoming profitable. In a business sense, this can be equated with being productive. Our success is a function of handling many forces that work upon us all the time. Among those are unproductive forces. We need to learn to ignore or avoid the impact of the unproductive forces as much as we can. But we expend too much energy and time and effort into thinking about how to become productive (i.e. profitable) and very little thinking about how to avoid losses. One of the most common words used in the market is Stop Loss. But everyone derides it, saying I have come here to make profits and not stop losses! In an arena where there are only two possible outcomes- profits or losses- not thinking about the latter is stupid. But that is what most people do. If you avoid the friction to actions taken, then productivity can be increased. In trading terms, if we avoid getting into every tip that we get, every stock that we fancy for some reason or the other etc., we can sharply reduce the amount of losses that we rake up. Know that every trade you take carries an element of risk and therefore, the more you trade, the more risks you run. Risk is friction. However, it cannot be avoided. But it can certainly be controlled or even minimized. Think about that.
While dealing with life, we encounter two different types of situations when related to Value. There are somethings that create value right from the start. Like, for instance, getting into shape. If you start doing a small workout, hit the gym a couple of times a week even, you should soon start seeing the results on your body and even in your spirit. Then there are other things that deliver value only at the end. Like, for instance, building a bridge. You can’t build half a bridge and start using it. You need to wait till it is finished before its value can be realised. The market is unusual in that it needs you to start as well as finish before you derive value. The start deals with buying the right stock at the right price and in a right trend environment. But that doesn’t automatically bring in the money. You also have to finish by being able to sell at the right time or in the right market condition in order to finally reap the value. Therefore, market is a place of delayed gratification. You start the process, you wait, nurture it and then you exit.
Most people don’t realize that there is a full circle that has to be undergone before value (or profit) accrues. To short circuit this cycle they engage into Day Trading, hoping to derive value on the same day. While theoretically this is indeed possible, it is also quite difficult because it requires gathering some additional skills, which, most are either not bothered about or are ignorant of it. Thus, not the cup of tea of most folks. No wonder they meet with failure. Understanding the cycle and creating a process to go through with it would be a simple answer to eliminating the losses that emerge and then move on to gains. Know where and how you are starting and know how and where you shall finish is the key learning to take.
Market is an area of uncertainty- that is the only absolute thing you can say about it! In this area of uncertainty, people come with all kinds of plans for specific scenarios and outcomes (most of which is based on certainty!). So, when the eventual uncertainty hits, very few are really prepared with the right kind of mind set to deal with it. Hence it is more important to spend the time and effort to gather a correct mind set than to think about scenarios and outcomes. But very few people even realise, leave alone understand, the importance of this aspect. I have found often, in our training programs, that people want to skip thru the psychology sessions and get to the methods. They never ask questions when one is talking about mind set but they can’t stop asking questions when it is about details of a method! We need to understand that friction occurs in the mind and not in the markets! If we don’t learn how to deal with those frictions in the mind and practice them diligently, we will never be able to overcome their debilitating impacts. A good quote that I can recall with regard to this is ‘It’s not the load that breaks you down, it’s the way you carry it’. You have to learn how to carry the loads- for, the load will always be there!
Profiting in the market comes from a proper synchronization random vacillations of the human minds with the seemingly random movements of the market. This happens through methods (to be learnt), proper money management (to be learnt) and thru the right mind set (to be learnt). Note that there is a hell of lot of ‘to-be-learnt’ here and if we don’t do that the chances of becoming productive, avoiding friction, creating value and dealing with the load can never happen.
If you are not profitable enough, look inward.