Focus on You

It is never the system or author writing the trading book 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 accept and understand that the market is all in your head. It is you versus the other trader. If you don’t understand YOU, how will you ever understand other traders; thus 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, drift from book to book to book and system to system to system, never understanding why they produce inconsistent profits. They are confused, looking at too many things, complicating the entire process while ignoring the essentials to success.

Keep it simple.

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 so we can conclude that it is the user that ultimately fails because of lack of concentration and motivation to stay the course. Wall Street is not for drifters and most people can’t play the game profitably because they never sharpen their own mental skills while applying basic money management techniques. They focus on the wrong set of skills.

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. Working hard to become successful in the market is fine but understand that working smarter will always take you further.

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Our goal as traders and investors is to understand the crowd and anticipate how they will act and react based on the thoughts we had, prior to focusuing on the proper skills, when we were just one of the sheep (waiting to be slaughtered)!

Focus on what is important and the success will follow.

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

Personally speaking, I require specific fundamentals, price, volume and basic daily and weekly charts to succeed 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. well done Chris, great article

    Van K. Tharp: “you have to discover your personal trading style, a system that fits your personality and simulate it over and over again”

  2. Chris,

    As I’ve written you before, keep on telling it like it is. As a philosopher once said “Know thy self”. That is possibly one of the hardest things for any person to do, whether a trader/investor or anything else. Way too many people want to blame someone or something else for their problems or lack of achievement.

    I believe this begs the question then, once a person realizes they are responsible for their success, which is the first step of course, how do you discover your personality and what fits it?

  3. Can you be more specific? How does a person accomplish what you suggest here. Examples would be helpful.

  4. Sounds like some “Disciplined Trader” Wisdom, I’m currently reading this book, thanks to your book recommendations, it’s awesome stuff.

    I like the thought that since we as individual traders cannot control the markets, we have to control ourselves, like you said we must focus on us. Also we allow the market to take or give us riches, never the market by itself. Keep up the good work.

  5. Thomas,
    Maybe I will make a new post with examples but for now, start here: http://www.chrisperruna.com/category/psychology/

    It should help point you in the right direction. Also, read the two books by Mark Douglas:
    The Disciplined Trader & Trading in the Zone

    See my last book list:
    http://www.chrisperruna.com/2007/12/13/a-holiday-gift-list/

  6. Darin,
    Your question presents an opportunity for a great blog post. Let me see if I can write something up over the next couple of days (or weeks for that matter).

  7. You’re absolutely correct about psychology and “keeping it simple”. I just wrote a post in the last day or two addressing the exact same topic. I just discovered your blog recently (new to blogging, but trading well last 10 years, and it’s a regular stop for me each day.

  8. Hi,

    When you say “Once your conscious mind understands how the beliefs of the crowd work”, I actually find that most people listen to the daily news ; for example in Belgium or in France, most people trust the news at 8 PM. When those news channel mention Gold or Oil, you can be sure that the next day, clients are calling their bankers.

    By following the crowd, I agree with you ; in this case I follow the big headlines.

    Weekly patterns can prepare you for a buy/sell signal, but with a big news events, it always works better

  9. Mr. Perruna, I have been enjoying your blog for a few months now. Thanks for your time and input. I actually have a question of the photograph you used for this article. The “Focus” telescope. I think it is a great pic and want a print to hang in my office. Do you have a soure where it came from? Thanks, Avery

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