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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The trouble with most people is that they think with their hopes or fears or wishes, rather than with their minds…Lady Nancy Astor
A critical mission for www.trending123.com is to teach each and every one of our subscribers to preserve and grow his or her financial capital. The reason that people enter the markets is to make money and to make it consistently—i.e., they want income from trading and investing. What is not often spoken about is that you have to have money to make money. This means that you do not want to do what so many losing traders do and "throw money" at anything and everything that comes along in the hopes that you will find something that works. Preserving capital is about keeping your monies safe for those periods where the risk-to-reward ratio on any given trade is in your favor.
The majority of traders end up losing money because they have not grasped this simple concept: Preservation of capital is Goal Number 1. Simply put, if you are out of money, you are out of the great game of trading until you can find more money to get back into the game.
One of the reasons that traders and investors fail is that they trade and invest on hope. What does this mean? This means that they are attached to outcome. In other words, they have in their heads this sole thought: "My position absolutely has to do this or that." It is similar to a relationship where you realize that things are not going well, but you hang on, holding and hoping. You think: "If I just wait another minute, hour, day, week, etc., this relationship is really going to get better. There is no doubt that the other person is going to change, and it will just be a matter of time until it happens. I will hang on one more night, and in the morning all the bad stuff will be gone, and a brand-new, wonderful person will emerge."
This is no different from clinging to a losing market position. Attachment to outcome is the greatest source of suffering, both in and out of the markets. If you think about this and all the times in your lives when you felt sad, angry, frustrated, disappointed or abandoned, you will see that it is because you were attached to some outcome that did not happen. Traders must remove themselves from attachment to outcome and let go of hope. In other words, if it works, wonderful! If it doesn't work, get out; don't hang in there hoping that something magical will happen to turn everything around. Losing positions and losing relationships have the eerie tendency to turn into bigger losing positions and losing relationships.
Abandon hope of outcome. What can you change? The market? No. Your stock, future or commodity? No. Other people? No. What you can change, and what gives you more power than you ever knew you had, is yourself. The first step in this direction is to look in the mirror. If you must have hope, then hope that you will do what it takes to get you to where you want to be and to be the person you wish to become. But remember, hope alone is not going to do it. It must be accompanied by actions—doing the right thing at the right time and continuing to put one foot in front of the other, even if it is baby steps. This is how we grow in integrity and without any self-deception or false hopes and dreams of a better place, a brighter future, a turn-around-tomorrow market position, a whole new life or a whole new world.
Here are some steps to get you on the pathway to preservation of capital and trading success:
- When you are wrong, admit you are wrong and get out quickly. Do not hold and hope, as this is a sure recipe for disaster.
- Keep a flexible mindset so that you are able to change your position quickly. The best traders are those who are nimble and approach the markets without bias.
- Let go of your ego and your need to be right. Ego has absolutely no place in trading.
- Learn to manage your expectations. The higher your expectations, the more you are setting yourself up for a fall. Trading is a marathon, not a sprint, and the best way to think about it is getting rich slowly and surely, not hitting the jackpot.
- Always manage your risk, because each time you put money into the markets, it is at risk. The best traders know how to do this, and this is what makes them great. The three critical components of managing risk are (1) cutting losses, (2) cutting losses and (3) cutting losses.
Every moment in the markets is unique. Every moment in the markets is the perfect moment for the trader who stays in the now and focuses on Goal Number 1: preservation of capital.
Wir werden zu bald alt und zu spät klug. (We get too soon old and too late smart.)….Old German Saying
Until Next Time,
Good Trading and Brain On!
Janice Dorn, M.D., Ph.D.
janice@thetradingdoctor.com
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