1. The four trading fears
95% of the trading errors you are likely to make will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table – the four trading fears
2. The proverbial empathy gap
You may already have some awareness of much of what you need to know to be a consistently successful trader. But being aware of something doesn’t automatically make it a functional part of who you are. Awareness is not necessarily a belief. You can’t assume that learning about something new and agreeing with it is the same as believing it at a level where you can act on it.
3. The market doesn’t generate happy or painful information
From the markets perspective, it’s all simply information. It may seem as if the market is causing you to feel the way you do at any given moment, but that’s not the case. It’s your own mental framework that determines how you perceive the information, how you feel, and, as a result, whether or not you are in the most conducive state of mind to spontaneously enter the flow and take advantage of whatever the market is offering.
4. The flaws of fundamental analysis
Fundamental analysis creates what I call a “reality gap” between “what should be” and “what is.” The reality gap makes it extremely difficult to make anything but very long-term predictions that can be difficult to exploit, even if they are correct.
5. A good trader is a confident trader
I’ve worked with countless traders who would spend hours doing market analysis and planning trades for the next day Then, instead of putting on the trades they planned, they did something else. The trades they did put on were usually ideas from friends or tips from brokers. I probably don’t have to tell you that the trades they originally planned, but didn’t act on, were usually the big winners of the day. This is a classic example of how we become susceptible to unstructured, random trading—because we want to avoid responsibility.
6. Anything could happen to any stock
The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict, that “anything can happen.” They don’t just suspect that anything can happen or give lip service to the idea. Their belief in uncertainty is so powerful that it actually prevents their minds from associating the “now moment” situation and circumstance with the outcomes of their most recent trades. They have learned, usually quite painfully, that they don’t know in advance which edges are going to work and which ones aren’t. They have stopped trying to predict outcomes. They have found that by taking every edge, they correspondingly increase their sample size of trades, which in turn gives whatever edge they use ample opportunity to play itself out in their favor, just like the casinos.