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!

Trading and Investing Psychology Continued...

There are a number of behaviors that will almost guarantee losses in the markets.  These behaviors, the antithesis of the way successful traders operate, include:

• Lack of discipline:  It takes and accumulation of knowledge and sharp focus to trade successfully, and more importantly; with consistent results!  Many would rather listen to the advice of others than take the time to learn for themselves.  People are lazy when it comes to the education needed for trading.
• Impatience:  People have an insatiable need for action.  It may be the adrenaline rush they're after, their "gambler's high".  Trading is about patience and objective decision-making, with a long-term perspective on a desired outcome (profit), not action addiction.
• No objectivity:  We tend not to cut our losses fast enough.  It goes "against the grain" to sell.  At the same time, we often get out of winners too soon.  In both cases, we are unable to disengage emotionally from the market.  We marry our positions, and like marriage, we cut our losses when we're too deeply invested.
• Greed:  Traders (and let's face it, EVERYONE) try to pick tops or bottoms in hopes they'll be able to "time" their trades to maximize their profits.  A desire for quick profits can blind traders to the real hard work needed to win.
• Refusal to accept truth:  Traders do not want to believe the only truth is price action.  As a result, they act contrary to their trading plan, and set the stage for the losses that almost always arrive.
• Impulsive Behavior:  Traders often jump into a market based on a story in the morning paper.  And if you're a new brokerage account holder, it's likely that you bought your first stock on the day your funds cleared the account!  Markets discount news by the time it is publicized.  Thinking that if you act quickly, somehow you will beat everybody else in the great day-trading race is a grand recipe for failure. 
• Inability to stay in the present:  To be a successful trader, you can't spend your time thinking about how you're going to spend your profits.  Trading because you have to have money is not a wise state of mind in which to make decisions.  This was a hard lesson for us to learn (and I personally believe, this particular subject is ongoing).  
• Avoid false parallels:  Just because the market behaved one way in 1930, does not mean a similar pattern today will give the same result.

 If you try to bridge the gap between the present and the future with predictions about the market direction, you're guaranteed to be in a continual state of uncertainty whether you admit to it or not.    

Create Your Trading Plan or Investment Plan and Write it Down in Specific Precise Language Before You Trade

Don't confuse trading rules with a black-box system.  Your trading plan should be a set of Rules, which you follow implicitly time and again.  Sure, you can build in some flexibility, combinations and additions to these Rules, but write them down, understand them and implement them.  Also keep them handy, particularly when you're trading or making a trade decision.

A mind map is the best way to achieving this in a direct and visual way.  A mind map is simply an illustration, like if you imagine a series of branches off a central tree, where you're using different colors and symbols to depict the rules, as opposed to simply writing them down in a list.  Ideally, you should do both.

The Rules need to embrace when to enter, when to exit, when to use a specific options strategy (if options are in the plan) and when to activate your Stop Losses (which often change depending on the strategy you're trading).