By Janice Dorn, M.D., Ph.D 7/22/06
It's time to open your eyes and ears. Get ready to listen and learn because the secrets to your trading and investing success are coming at you right now.
I have decided to give you THE TOP TEN BLUNDERS "one at a time" so you can read them, memorize them, teach them to your talking bird, tattoo them onto your body or do whatever it takes to learn them. By learning, I do not mean just parroting (bird pun intended) them back in some kind of mindless recitation. I mean to use your most powerful trading and investing platform ( your brain!) to receive, process, consolidate and entrain these as memory patterns which become so repetitive that they are second nature to you.
Once you have mastered this cerebral entrainment, you will not need to think about it. You will trade smoothly, seamlessly and know exactly what to do and when to do it.
Why can't most people achieve success as investors? Think about it for a minute? Some of the most highly educated professionals such as doctors, lawyers and engineers who are used to being first in their class...the best of breed in whatever they do... fail miserably as traders and investors. The reason is that the process of trading and investing is completely different from any activity, which we are taught growing up. As we grow and develop, we learn that, little by little, we acquire levels of control. We learn to control our bodies, movements, environments, who we chose as friends, lovers and mates, our educational goals, where we live and how we live. So, we get kind of cozy and comfortable in our little worlds where we make the rules, and live out our lives in accordance. Yes, there is a lot going on in the world, but it really doesn’t mean all that much unless it affects directly us or those we love. Then we take control, problem solve, and get done what needs to be done.
In the markets things are quite different. We have no control except over ourselves. We are faced every day with an entity, which is larger than life, and yet it is life. Millions of people from every part of the world are there making decisions which affect them and you in either a positive or a negative fashion. Millions of people are trying to take your money before you take theirs. What is more striking is that they are, for the most part, nameless and faceless. There is no situation in the life of most people that compares with this. That is why successful trading and investing requires one to adopt an entirely new mind-set, an entirely new brain-set and a new way of looking at everything that appears. The majority of people are simply not neurologically flexible enough to do this. They insist on adapting the markets to their own narrowly constructed and provincial rules and worldview, and they fail. In reality, most fail and many fail miserably.
Throughout this Top Ten Series, I will be speaking a lot to the concepts of personal responsibility and self-sabotage. It is challenging for many, especially highly educated and extremely intelligent people, to hear that they are programmed to lose or are sabotaging themselves. Well, get used to it, people, because the markets are going to expose every single aspect of your true personality, whether you like it or not. You will come to know and understand yourself as never before IF and only IF you open your brain and your heart to receive this information. If you remain rigid, stuck in linear or closed-minded thinking, then you better just keep your day job and stay out of the markets. If you are willing to be open, flexible and non-linear, you have a really good chance to be successful.
So- let us begin this Blunderama Top Ten Journey together. Now. This is a new beginning for many of you, so wipe clean the slate which has held you back, kept you stuck and mired you in losses. Your new beginning starts now with Blunder Number One:
FAILURE TO PRESERVE FINANCIAL AND NEUROPSYCHOLOGICAL CAPITAL
The greatest source of failure in trading and investing is loss of capital. After all, if you lose it, you are out of the game. If you lose your money, you have to go out and find more money to put into your account. If you lose your emotional stability, you have to go out and find ways to get it back. In either case, you will need to leave the markets for a while and get your financial and emotional act together. This takes a toll, gets you out of the flow and inflicts damage to you in ways, which may not be immediately obvious. Faced with large drawdowns or wipeouts, many people become both emotionally and physically ill, and this carries over to their families and loved ones. Yes, it is the financial burden that seems heaviest after a major drawdown, but, in actuality, it is the neurochemical brain changes that lead to emotional and then physical illness.
Granted, some of the best traders have gone through complete wipeouts, and come back stronger than ever. These are the legends that are few in number and who live to write books about it or become so-called market wizards. These are the true comeback kids. The rest of us are not so lucky, and we just go quietly ( or kicking and screaming, depending on personality style) into the night, tail between our legs, buried in shame and guilt never to return.
Small losses almost always become larger and larger losses, leading to every manner of emotional distress as you are holding and hoping, or in complete denial that the position could possibly turn against you. Holding and hoping leads to larger losses and more emotional carnage until you are a financial and neuropsychological basket case and you just want out at any cost. Desperation sets in and brings up for you every time in your life when you were told that you were not good enough, that you would never amount to anything or that you didn't deserve to win.
You are now in a state when both financial and psychological capital is depleted. All because you didn't take a small loss.
OK...you get the point now? How do you preserve your financial and psychological capital? You take small losses. You take small losses! You take small losses!! You let winning positions run and take profits as they are running. Memorize this and teach it to your bird: The single biggest reason for failure as a trader or investor is the inability to take small losses.
Janice Dorn, MD, PhD
Neuropsychological Trading Coach trending123.comDr. Janice Dorn is a graduate of the Albert Einstein College of Medicine, where she received her Ph.D. in Neuroanatomy. She did her postdoctoral work in Neurophysiology at the New York Medical College. She received her M.D. from La Universidad Autonoma de Ciudad Juarez, did one year of clinical clerkships in Phoenix, Arizona. and then completed a Neurology Internship at The University of New Mexico in Albuquerque.
She trained in Anesthesiology at UCLA, where she also did a Fellowship in Cancer Pain Management. She completed a Psychiatric Residency at the Maricopa Medical Center in Phoenix. She has been a faculty member to the rank of Associate Professor at the University of Texas Southwestern Medical Center in Dallas, The University of Missouri Medical Center at Columbia and the Chicago Medical School, where she won numerous awards for outstanding teaching. She also held the position of Director, International Clinical Research for a major pharmaceutical company, in which capacity she traveled internationally for nine years, and has visited almost every country in the world, including living in Scotland, Germany and South Africa. Dr. Dorn began a private boutique practice of Biological Psychiatry, Addiction Psychiatry and Psychoneuroendocrinolgy in Phoenix in 1987.
Dr. Dorn holds the following Board Certifications:
Diplomate, General Psychiatry, American Board of Psychiatry and Neurology
Diplomate, Addiction Psychiatry, American Board of Psychiatry and Neurology
Diplomate, American Society of Addiction Medicine
For the past twelve years, Dr. Dorn has focused her attention on trading, mentoring and commentary in the financial markets, with emphasis on Behavioral NeuroFinance, Mass Psychology and Trading Neuropsychology. A graduate of Coach University, she is an active trader, trading coach, and the author of 300 publications, relating to trading and investing neuropsychology, market mass psychology, psychoneuroeconomics, behavioral neurofinance and holistic wellness. Dr. Dorn is a sought-after media personality, lecturer and trading mentor who has provided real-time, web-based personal coaching for more than 600 traders and investors.
Disclaimer - I am not a commodity trading advisor. The information on this site is for trading education only. There are no trading recommendations for any one individual made on this site and this information is paper trades for trading education. All trades are extemely risky and only risk capital should be used when trading.
U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.