Janice Dorn, MD, PhD
Neuropsychological Trading Coach
Janice Dorn, M.D., Ph.D., has been a full-time futures trader since 1994. Doctor Janice holds an M.D. in psychiatry and is board-certified by the American Board of Psychiatry and Neurology in general psychiatry and addiction psychiatry. She holds a Ph.D. in brain anatomy. A graduate of Coach University, she is a pioneer market psychiatrist and financial neurobehaviorist. Doctor Janice has written over 500 articles on the financial markets and coached over 600 traders worldwide. She is the Global Risk Strategist for Ingenieux Wealth Management Group, Sydney, Australia.
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To accomplish great things, we must not only act, but also dream; not only plan, but also believe…Anatole France
It is abundantly clear that we trade to make money. Almost without exception, every person who enters the markets does so because of the promise of making his or her life better through buying and selling in the financial markets. So many are called to this activity because of the lure of easy money and the proliferation of this or that system, method, software, trading technique, seminar or infomercial. Never in the history of mankind has it been easier for people to tap into the markets. These people visualize themselves as sitting in their pajamas, making trades from home and earning a really good living. Moreover, trading goes on all over the world, and people can buy and sell at almost any time of the day or night. What’s not to like about this? How easy can this be?
At their core, trading and investing are simple. The challenge is that they are not easy. Trading is unlike any other activity that a human being experiences. The reason for this is that the markets are an open, adaptive system that is always in motion. Other than the regulations set by the exchanges, there are very few rules. Trading is a game where we make our own rules and strive to take money from other people before they take our money. This is serious business, because it is our hard-earned money that we put at risk every time we enter a position. There is almost no way, short of complex hedging strategies, to put money into the markets without putting it into the realm of risk.
Why do so many traders fail? Why are so many called and so few chosen? There are several main reasons for this, but the fundamental one centers around belief systems. When you think about it, you realize that the market is pretty much a level playing field. Granted, there are those who have so-called inside information, and deception abounds. However, for the most part, everyone has access to similar information, charting systems, and trading platforms. For a price, you can get just about anything you think you need in terms of trading. The one thing you really need to be successful is not for sale: That is your belief system and the belief system of others.
We are not really trading the markets. We are trading our beliefs about the markets against the beliefs of everyone else who is trading. This is the area where the majority fail; i.e., they do not have a good understanding of their belief system and thus struggle to put it into action to generate profits. You are what you believe, and if you don’t know who you are or what you believe, the market is a very expensive way to find out. Why? Because you will act out your insecurities and telegraph them to others in the markets who will exploit them. This happens every day on a very large scale—those who know themselves take money from those who do not know themselves.
Let’s look at a price chart as one example of this. What is a price chart? John Lansing from www.trending123.com has said many times that price is emotion plotted on a grid. That’s it. A price chart is the sum total of belief and emotion. Why do you execute on that chart? Because you believe something about it. The thousands of others who are executing on that chart are also trading their beliefs. In order to have a chart, it is necessary to have both buyers and sellers. Think about that concept for a moment or two. In order for price to occur, there have to be both buyers and sellers. Someone is buying, and someone is selling to them. That means that these people are trading their beliefs in that moment. That also means that they have beliefs which are completely in contradiction. If it were not so, there would be no price movement and no chart.
How can we understand this even more clearly? A price print means different things to different people. Those who win have learned to focus on what the price means to others, rather than to themselves. Put another way, top traders are always looking to find out where the other person is going to execute. Where is the other person who is already in the position going to get out of that position? What does that person think or believe about his position, and what is going to cause him to get out? It is, then, the beliefs of the other person that matter to you in terms of profit. When everyone who is going to get in is in, and everyone who is going to get out is out, there is no price movement. The movement occurs when the loser decides to get out, because the winner can wait. This is the edge that people have when they let profits run.
I would like you to think about this over the coming week, because the concept may be somewhat new or even convoluted for you. You can put it into perspective with any trade you have made recently. The essence of this concept is that the superior trader is always looking for those edges where enough people change their beliefs and give up their positions. The top trader is asking continuously: What are those other people believing about this price? What has to happen to make these people change those beliefs? How long has the loser been losing and the winner been winning, and what will they each believe is enough?
Put yourself in the position of the loser and try to fathom what that person is believing or feeling about his position. See if you can do that over the coming week, and let me know how it feels. And if you are attracted to this concept and want to learn more, please let me know that, too. Constantly question your own belief systems until you know why you are doing something. Always ask yourself, “What do I believe that is not true? What do others believe that is not true?” That is a good place to start.
If you must tell me your opinions, tell me what you believe in. I have plenty of doubts of my own…Johann Wolfgang von Goethe
Until Next Time,
Good Trading and Brain On!
Janice Dorn, M.D., Ph.D.
janice@thetradingdoctor.com
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