Affirmations to Help Improve Our State of Mind

Personally, I’ve had little trouble with the subject of affirmation for many years.  When I first began looking for ways to improve my trading outside of market-related factors in my college years, I initially found affirmations somewhat silly.  However, affirmations are a form of meditation and visualization and can help us to see our true potential.  Affirmations are vitally important to become successful in all areas of our lives.  I now believe that almost every successful person has some sort of affirmation tool that they use on a daily basis, even if they don’t call it “affirmation.”

Affirmations are a pep talk of self-esteem to help keep stress in check, allow us greater emotional intelligence and awareness, and ultimately result in a healthy ego.

This morning, on my way to the office, the radio station I like to listen to had on a little contest where they took random callers and they would ask them to give a “pep” talk to a team.  This isn’t just one of those, “Let’s be positive, go get ‘em Tigers chant.”  No, it’s more like, “Ray Lewis of the Baltimore Ravens is injured and he has been put on the bench the entire season,” and the caller is the person replacing Ray Lewis!  So in 15 seconds or less, say what you need to say to the Ravens, just as Ray Lewis would!

I’ve only gotten a chance to hear one caller, an elderly woman from Baltimore, and the call when something like this:

Radio DJ:  “You have 15 seconds to get the Ravens ready for the Pittsburgh Steelers!, Ready, Set Go"!”

Caller:  “Okay…team.  Let’s get ready, we have to win…um…”

And, before she could calmly produce the next word, a loud buzz came on followed by laughter in the background!

Radio DJ: “If that’s what Ray Lewis says to the Ravens, I’d move to Pittsburgh and be a Steelers fan!”

The woman only wanted to win the Ravens tickets they were giving away, and I doubt she did with that monotone pep talk.  But, all of us often give ourselves uninspiring, energy-less self-talk.  Or worse, negative self-talk.  So, like Ray Lewis of the Baltimore Ravens, put some oomph behind those words and follow it up with a massive hit to the upper body area!

Avoid Forecasting - Learn to Recognize What's Happening Around You

Many people will try to see what they want to see and not necessarily what is actually going on.  Don't fall into that trap.  Be aware of indicators that suggest things may change, but do not get into forecasting.  The greatest investor of them all, Warren Buffett, has saying, "Forecasting tells you how much about the forecaster and nothing about the future!"

If the year 2008 told you anything, it should have told you that there is no such thing as an ever-growing economy.  If you believed that real estate properties will continue to rise because "they're not making more Real Estate," then please read the book, Extraordinary Popular Delusions and the Madness of Crowds (Mackay, 1980), and you'll see that hype existed long before our current "economic recovery," all the previous economies before that and will continue to exist well into future economies!

Ultimately, company values will depend on their financial performance in the long term.  Sure, there are wild short-term swings and great opportunities in the immediate term.  Sure, there were some amazing opportunities during the early part of 2009 (bargain basement prices abound!).  CAM Trading participated in those crazy days too.  But, eventually when the market wakes up, guess what happens to those synthetic prices?  History repeats itself time and again, especially where the stock market is concerned.

Client Services and Financial Advisor Teams

Advisors who work in a team generally do better than those who work on their own.  Many financial services firms have over 50 percent of of their advisors in teams.  At CAM Trading, we too, work in a team environment as we feel that the only way to succeed for our clients is to work together at it.  The team structure works well in large part because of the productivity and client-service improvements they afford.

Advantages of Teams

Teams often specialize so that each team member can be an expert in something without needing to be an expert in everything.  This specialization can be in a particular practice area (trading, portfolio management, communications or some other element).

Clients can appreciate their advisor being part of a team because they feel that with a team, there is always someone there to take care of them who is familiar with their situation.  This gives clients a sense of community should something happen to their advisor.

Financial services can be a competitive business, and advisors can be very protective of their best practices and reluctant to share them with potential competitors, even within the same firm.  Sharing ideas among and getting input from all members of the team is invaluable.  As such CAM Trading and its team members are very careful with its proprietary trading models.

Improving Your Trading and Investing Mechanics

Paper trading (when you place buy, hold or sell orders without the use of real money), note taking, and back-testing are the strategies that I have found to be most helpful to the improvement of trader mechanics.

Novice traders (and at times, we all feel this way, regardless of experience), tend to think of trading merely as the acts of buying and selling.  They don't recognize the considerable role that mechanics play in success.  Reducing trading to buying and selling is like describing NASCAR racing as stopping and going.  Take a look at just a few of the mechanics of trading and the difference they make toward profitability.  Obviously, not all of these apply to all traders as we each have our own niches in the market.

Specific Skills that Comprise Trading Mechanics

• Idea Development:  Translating observations about the market into specific trade ideas on the Macro level.
• Assessment of Market Conditions:  Recognizing the current state of the market's trends.  Whether it is range-bound, volatile, or low volume.
• Order Division:  Scaling into positions to reduce risk exposure and obtain superior average entry prices (Dollar Cost Averaging).  Scaling out of positions to secure profits and possibly benefit from favorable movement.
• Position Sizing:  Risking enough on a trade to make a meaningful contribution to profitability while avoiding risk of ruin under adverse circumstances.  
• Exit Flexibility:  Moving stop-loss points to protect profits while retaining profit potential.

Clearly, trading is not a skill, but rather a complex, coordinated set of skills not unlike athletics or medical practice.  An inexperienced trader will look at a stock chart and say, "I think we're going higher."  He will then buy at the market with his maximum position size and see if the trade works out.  The trades are neither planned nor systematic in their execution.  The performance is not far different from that of a quarterback who calls for a passing play on 4th and 10.