Fear of heights or afraid to miss the action? Deal with your biggest enemy: YOU.
Most traders and investors are aware that fear is bad counsel. But between knowing and doing there is a world of difference. How many private traders are not guided (and goaded) by fear? Luckily fear can be overcome. If you manage to throw this and other emotions overboard, a world will open up to you: one of freedom and success.
The famous super investor Benjamin Graham concluded in 1930: “The investor’s chief problem – and even his worst enemy – is likely to be himself.” Another quote by Graham shows that he knew all too well what made private traders fall: “Individuals who cannot master their emotions are ill-suited to profit from the investment process.” Golden insights which have been available for the past 8 years, but seemingly have not reached many investors and traders.
Before its introduction Facebook’s ‘Earning potential’ was already being doubted strongly.
Fear has many faces. Take for example the Facebook shares which, shortly after its introduction lost half its market-value. Before its introduction the ‘Earning potential’ of Facebook was already being doubted strongly. Still, masses of investors were jumping at the opportunity of owning the shares: Afraid to miss out. When everything is going well on the markets, another fear pops up. After the statements by the European Central Bank about unlimited buying of Government bonds, the markets are rose-tinted. After a rally starting with the FED, the S&P500 even reached its highest point since January 2008. Everyone happy? Well no, because now a different fear crops up: a ‘fear of heights’. Market rallies cause people to fear it has reached its ‘highest point’. This fear then leads to people taking their profits which means the investor’s (who has stayed put filled with fear) fear becomes reality. The circle is complete.
Focus on the process, not the result
A start to conquering your fears is by focussing on the process, not the result. It doesn’t matter what the process is, as long as it is consistent and repeatable. The world’s biggest share trader, Warren Buffet, studies companies and makes decisions based on his studies. After purchase he keeps hold of the share for as long as possible. He has been consistently applying this buy and hold strategy for as long as he has been investing. Others base their decisions on technical analysis, act on news or let statistics do the work… As long as to process is repeatable and you stay consistent, you can choose whatever you want.
When we removed our emotions, the world looked completely different.
As mechanical traders we always focus on the process and do the same thing over and over, without diverting from it. We are not afraid to miss out and know no fear of heights. When gold and silver just kept rising we simply enjoyed our long positions: that a third bout of easing in the USA is the cause, has no effect on our trading. We have mastered our emotions and let our system (the process) do the work. That required a huge investment from us which didn’t show results straight away. But we accepted it. And when our emotions were removed, the world looked completely different. After years of losses, we are now yielding consistent profits.
From: The Power of Mindset Trading
