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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What the mind doesn't understand, it worships or fears…Alice Walker
Another year has come and almost gone, and this is the final Trading Wisdom of the “Counting Down” series and of 2007. As I write this, I realize that I have chosen a topic that is likely among the most hideous words a trader or investor wants to hear. That word is “uncertainty.”
We want to feel in control—some of us more than others. It gives us a sense of calm and comfort in our surroundings when there is “a place for everything and everything in its place.” We feel comforted and assured when we read well-written predictions about the future. We want to know what is going to happen and grasp on to something that appeals to our intellect or emotion.
We look to professors, politicians, parents, market-timers and others to provide a compass for what is coming. We have a need to know what is next. It is almost an existential anxiety that cries out to be comforted, and we find it in many people, places and things. We want to know what we don't know and can't know. We want certainty of our personal safety and our financial portfolios. We want assurance that everything is going to be fine, things will happen a certain way, we have nothing to worry about and we will survive.
The brutal assassination early Thursday morning of the former Prime Minister of Pakistan, Benazir Bhutto, is just one example of how the wilderness can appear in an instant. Every one of you reading this has faced the wilderness at one point or the other in your life. Unlike Ms. Bhutto, you have survived. Others, like Ms. Bhutto, did not make it through the wilderness. Her death and the deaths and suffering of those we love bring us to the reality that life, by its very nature, is fleeting and uncertain. We can never know what is going to happen a minute from now, let alone tomorrow or in six months.
In these matters the only certainty is that nothing is certain…Pliny the Elder (23 AD-79 AD)
Each and every day in the markets we are in the realm of risk and uncertainty. What can we do about it? If we choose to participate, we can do nothing about the uncertainty. We must admit to ourselves and everyone who asks that we simply do not know. Markets detest uncertainty because markets are made up of millions of people who are acting irrationally under conditions where they feel the wilderness of ruin coming upon them. Markets go down much more quickly than they go up because the root of uncertainty is fear, and fear is the most powerful of all emotions that emanate from the rat brain.
What can each of us do to hedge ourselves against the wilderness of financial ruin? We can’t control the markets. We don’t know what is going to happen in the next minute or what piece of “breaking news” will erupt and throw joy or terror into the brains and hearts of traders. We must become comfortable with uncertainty. We must understand that our responsibility is to protect ourselves from ruin. There is no other way to trade and invest successfully.
How do we accomplish this and keep our heads when all others around us are panicking? It is so simple, but clearly not easy. Stories of those who have survived seemingly impossible wilderness conditions show that they have certain qualities. Traders and investors are well-advised to emulate these:
- They look, see, believe and take personal responsibility. No matter how lost or injured they are, they find a way to get quickly through denial, anger, bargaining and depression into acceptance. They do this “going inside” very rapidly.
- They remain calm, often using the fear that they feel to focus. They are able to keep a sense of humor in the face of fear, rather than being held hostage or crippled by it.
- They think, analyze and plan. There is no better example here than the disciplined and practiced use of a trading strategy and plan with rigorous use of stops. Stops are the mechanism that survivors use to both protect profits and minimize losses.
- They truly, madly and deeply believe that they will succeed and survive.
- They learn from their mistakes rather than blaming others when something goes wrong.
- They do whatever is necessary to survive. They know their abilities and do not overestimate or underestimate themselves. As you will read so often in the Trading Wisdoms: Trader, know thyself! A good back-tested trading plan, the discipline of execution and stops, and complete and total knowledge of one’s inner psychology are the three keys to survival in the markets.
And now, we have counted down:
- Acceptance
- Discipline, Determination
- Intuition
- Emotion
- Uncertainty
When you combine the first letter of each of these “Counting Down” Trading Wisdoms, you spell one word: ADIEU. This is the French word for farewell.
I close the 2007 Trading Wisdoms with ADIEU to 2007 and wishes that I have given each of you something to enlighten, inspire, and put you on the path to becoming a true survivor—both in life and in the markets.
By `uncertain' knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty...The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence...About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know…John Maynard Keynes
Until Next Time,
Good Trading and Brain On!
Janice Dorn, M.D., Ph.D.
janice@thetradingdoctor.com
P.S. Every week, I send you a Trading Wisdom designed to make you better, smarter, more balanced traders. Today, I want to ask you, “How are you doing?” Please join me and your fellow traders at the message board and tell us which of my Trading Wisdoms have been most helpful in getting you on a path to profitable trading. How have you used my methods and insights to make big money or avoid huge pitfalls? Tell me what you think, and your favorite Trading Wisdom may be featured in my upcoming book! Stop by today!
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