Learn to Focus when Investing

It is never the system or author that fails. It is YOU! It is your lack of focus.
Focus on yourself and then you can focus on trading successfully.

Trading is at least 98% psychological. It’s a mental state of mind based upon your beliefs of what may happen. Books, systems and technical indicators can only take you so far! You must submit and understand that the market is all in your head. It is you versus the other guy or gal. If you don’t understand yourself, how will you ever understand other traders; therefore taking advantage of market moves based on their mental state of mind and their underlying beliefs.

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Many investors, both novice and experienced, switch from book to book to book and system to system to system and never understand why they aren’t consistently profitable. They are confused, looking at too many things, complicating the entire process while ignoring the essentials to success.

Follow this statement: Keep it Simple Stupid.

Why complicate things when simplicity works; especially when it comes to trading? We know that trading may be the most difficult endeavor that any human may attempt to undertake.

Thousands of different systems work in the stock market; it’s the user that ultimately fails because of lack of concentration and motivation to stay the course. It is hard work to play in Wall Street and not many people can hang because they never sharpen their own mental skills while applying basic money management techniques

We all see people come and go every day: rags to riches to rags. They are motivated for weeks, months and sometimes years but most fizzle away after they fail and can’t figure out what they are doing wrong. Some investors copy a system from a so-called guru and may find success for a while but they don’t tailor it to their personality, integrate it with their investing style and focus on their mental state of mind, therefore, it will become obsolete and they will fail. Traders work, then they work hard and finally they work even harder to become successful in the market but understand that working smarter will always take you further.

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Our goal as traders is to understand the crowd and anticipate how they will act based on thoughts you used to have when you were just one of the sheep!

Focus on what is important and the success will follow.

Stop focusing on stochastics, Bollinger bands, MACD, ADX, earnings releases and bullshit news stories. Yes they can aid you to success but the main focus is on you!

Personally, I need specific fundamentals, price, volume and basic daily and weekly charts but they are secondary tools. They can help me make money as long as I am focusing on the overall picture which is my mental focus and my emotional balance.

I know I am getting all Dr. Perruna on you but it is true.

Once your conscious mind understands how the beliefs of the crowd work, your subconscious mind takes over and intuition kicks in and you start making some of the best decisions of your life by flawlessly following your system.

As Jesse Livermore said:

“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes”

Why? Because humans never change!

Once you understand this and learn to trade other humans, you will become successful. Yes, you will need some of the tools mentioned above but don’t focus your attention in this area. Focus when investing by mastering the beliefs of the crowd and you will always be one step ahead.

Comments

  1. always a good read!
    best.
    jeff

  2. Livermore also said:
    “After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting.”
    Perhaps the greatest speculator of all time, simply said, and what so few can do.

  3. Terry Zink says:

    > Trading is at least 98% psychological.

    I’m not sure I agree with this statement. Unless you are trading a system with an edge (ie, that can match or beat the market), all that will happen is you will slowly lose money while maintaining your mental composure.

  4. Terry,
    It’s only my belief. However, you can have the best system in the world with the greatest edge but if you can’t control your emotions, you will foul up and lose. The older I get, the more I realize the entire game is played in the mind.

    Matt,
    Livermore was great, one of my favorites but he lacked emotional control as he blew up at least 4 times and then blew himself away.

  5. Hey Doc,
    Where’d you get all those neat pictures? Like they say, a good pic is worth a thousand words. That psychology pic was funny and to the point. Where’d you find it?

  6. AZ,
    I snapped them myself. Just kidding. Flickr is the best place on the web for high quality pics.

  7. Chris, what are your thoughts on the recent decline in the market? Another dip, or do you think that there’s more downside?

Trackbacks

  1. […] Learn to Focus when Investing Why complicate things when simplicity works; especially when it comes trading? We know that trading may be the most difficult endeavor that any human may attempt to undertake. Thousands of different systems work in the stock market; … […]

  2. […] Chris Perruna tells his readers to Learn to Focus When Investing. […]

  3. […] I so often target, a run that I followed heavily for dozens of stocks on MSW over the years. I lost my focus on this stock and it cost me a lot of money (not in losses but in […]

  4. […] Learn To Focus When InvestingSome investors copy a system from a so-called guru & may find success for a while but they don?t tailor it to their personality, integrate it with their investing style & focus on their mental state of mind, therefore,… […]

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