This is the third post of my series on why the best traders hide under a dunce cap.
Just call me stupid. My rules are written in ink and my opinions are written with chalk.
Traders who have no rules, only emotional inclinations, eventually write off trading as a fool’s game full of crooks, con-artists, insider trading, pump and dumpsters and chart reading hucksters. They do this because their emotions have led them astray and a scapegoat is needed, so the unsuccessful traders blame the market for what ails them. The real culprit, however, is found within. The real culprit is the trader who wants to be right and ends up on the wrong side of the trade over and over again. The trader who thinks he is smart (and right) is really stupid (and wrong).
KEEPING UP APPEARANCES
The trader’s goal should be to appear stupid (and wrong), yet really be smart (and right).
One of the oft repeated lines in the movie Forrest Gump is “stupid is as stupid does” which simply means we should judge people not by the way they look but by what they do. Look at Gump’s life: he really looked stupid, dressed stupid, talked stupid, was clinically classified as stupid, yet he became a star athlete, a decorated soldier, a successful fisherman, and a successful stock investor, among other things. Being stupid really paid off for Gump as he refused to listen to all the noise around him. He lived a simple life based on simple rules. We would benefit from doing the same, even though we may appear stupid.
RULES IN INK
As I have said here on numerous occasions, the very best traders are the ones who have built a trading strategy on the only two rules the market gives: KNOW WHEN AND WHY TO BUY. KNOW WHEN AND WHY TO SELL. Pure frustration is the result of the trader who does not follow the rules .
Based on our past, it is really natural for us to reject trading rules. We were raised with rules (and hated them), we were schooled with rules (and hated them), we were employed with rules (and hated them), then we step into trading where we have to have rules (and hate being told so). But this is where the similarity should end and our lesson in stupidity should begin. Whereas before we were the recipients of the rules, now we can be the creator! See the difference?
Write your rules in ink and follow them NO MATTER WHAT. The rules are based on knowing when and why to buy and when and why to sell. Others may say you are stupid, “didn’t you want to trade to get away from all the bureaucratic rules of your life and work” they say. “You are self-employed. There are no rules!” But you know better. You know the rules are there to help you and have nothing to do with your IQ. You are stupid and proud of it.
OPINIONS IN CHALK
Since the market has only two general rules, the trader has to make very specific and detailed ones based on a highly probable, historically tested pattern or edge. A highly probable edge means just that: highly probable.
The market could care less about your edge or my edge or anyone else’s for that matter; therefore, if your edge does not work this time then get out and wait on the next one. Rules are in ink and are to be followed no matter what. Once in a trade, however, rules become an opinion about where you believe the market (or stock) is headed. The opinion can (and will) be wrong from time to time. Simply earse your opinion and move on. This is where successful traders and unsuccessful ones part ways. The successful trader can admit his opinion is wrong even though his rules were followed; the unsuccessful trader changes the rules to fit his opinion.
Write your rules in ink and your opinion in chalk, not the other way around. It may look stupid but it works!
“Make sure you have a different opinion and people will talk about you.”
ARAB PROVERB
“Prejudice is a great time saver. You can form opinions without having to get the facts.”
E. B. WHITE
“A wide-spread belief is more likely to be foolish than sensible.”
BERTRAND RUSSELL
