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 longest journey begins with the first step…Lao Tzu
In the final Trading Wisdom of 2007, I stated that perhaps the most hideous word to a trader's ear is “uncertainty.” Now, it is 2008, and I am exercising my female prerogative to change my mind about this statement.
After years of coaching hundreds of traders, I am becoming increasingly convinced that right up there with the word “uncertainty” is the word “rules.” Traders know instinctively that they have to have some kind of rules, but they don’t know what these rules are. Moreover, once they develop a set of rules, or are given a set of rules, they do everything they can to set out proving that the rules do not work. Traders tinker with rules, and they tinker for a variety of reasons.
In many Trading Wisdoms over this year, I am going to focus on The Rules of Trading. The reason for this is that the only way a trader can be consistently successful is to make rules and keep them. At some level, this process is called: planning a trade and trading a plan. This is the essence of making and keeping rules, but the majority cannot do it with consistency and discipline.
Let us reflect for a moment why this might be happening. Traders come from all walks of life and from diverse professions. I will use myself as an example in the hope that you will be able to apply this to your own individual situation.
I am a trained and licensed M.D. In order to both get and keep my medical license, I have to follow very stringent rules surrounding the practice of medicine and the obtention of continuing medical education credits. I do not set these rules; rather, they are set by local and national governing bodies that are designed to protect the public from medical practices and procedures that might do harm.
If a doctor does anything to break the rules set by these governing bodies, or if a complaint is filed against the doctor, there is usually big trouble. The doctor is immediately called to account for his or her actions. Doctors in this situation may have to pay large amounts of money to an attorney to defend them. They may be censored, disciplined, put into special training programs, have their practice hours limited or even have their licenses revoked. There is no questioning of the rules. The rules are there, and the doctor either abides by them or is punished for the consequences of not doing so.
Now, let's assume that a doctor (or a lawyer, architect, engineer, clerk or common laborer) decides that he or she doesn’t want to work in an environment where the rules are becoming more and more strict, and where every action might be questioned as some sort of breach of the rules. That person makes a decision to leave and find what he or she believes is freedom. The great American dream is starting your own business where you are the boss and you make the rules. That is why so many people gravitate to trading. They don’t have to abide by any rules—they can make their own.
Here is where it starts to get tricky. They think in these terms: I can get up when I want to, walk into the next room to go to my office, set up with my own broker and trading platform, subscribe to a couple of newsletters, make tons of money and be my own boss. It just doesn’t get any better than that!
Unfortunately, it gets a lot worse. After years of working for someone else and following the rules of this or that business, the new trader begins to see that the situation is quite different.
The major difference is that, except for certain very general rules set by the SEC and the trading exchanges, there are no rules. New traders, looking for freedom, now find themselves adrift at sea without rules. Moreover, they are now functioning in an environment that is quite foreign to them since they have to start an entirely new learning curve. The structure of the markets is so much like life, yet so different from life.
That is where the enlightenment begins. The trader is now faced with the reality that he or she has to make his own rules. That is a powerful statement, and when you think about it, is one of the reasons that traders either fail or succeed. That brings us to…
Rule #1: There are no rules, so you have to make your own.
Throughout this year, I will be addressing questions that relate to these rules, starting with this: Do you understand the nature of the system in which you are working? In other words, how much do you actually know about the market or markets in which you are trading?
The first step to making rules is to understand what kind of game you intend to play. Remember: These are your rules and your game plan. The way you design and execute it is the key to ongoing and consistent profits.
I will delve deeper into the rules over the next few months, and I hope that this has set the stage for you to look very closely into the structure of the market you are trading as you begin the pathway to developing a trading plan. I assure you that this trading plan will be a work in progress. It is your road map to success, and a critical part of your journey to trading mastery.
If you don’t know where you are going, you will probably end up someplace else…Yogi Berra
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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