RANT #7 - Einstein, Pandora#8217;s Box and Gordian#8217;s O
The conclusion of the previous RANT (post #82), in suggesting the plogical game is an important factor in becoming a better trader, opens up a veritable Pandora#8217;s box of plogical and emotional factors that we can take a fast peek inside of now.
Trading is not rocket science. You may only buy or sell to open a transaction, it may only go down or up from entry, then at a certain point the transaction is closed. That#8217;s it, however we can tie ourselves into a Gordian knot of plogical distress over it. Why, exactly?
Einstein famously said three great forces rule the planet: stupidity, fear and greed. He'd have been a comparatively good trader, I#8217;m convinced. We know trading fear is rooted in loss aversion and we#8217;ve looked at that at a preceding RANT so allow #8217;s focus on another two.
Greed is an even more effective force than fear for traders, otherwise we wouldn#8217;t open a position at the first place. It manifests itself mostly by trading too large for your account so even a short losing streak of transactions causes severe financial harm. If your account drawdown is 10 percent you only need 11% back from there to recover fully. If you are down 50% you want to double click the account from there to get back. That is quite tough indeed and even more so if you envision your emotional state when half of the money has vanished. Should you bet small and restrain your risk you won't easily get into this kind of mess, and maintaining emotional balance will be all the easier for you.
Stupidity may also be tamed if you are patient and willing enough. At the outset of your trading you need to trade in minimum size for a long time simply to accumulate experience and learn. Consider this as an apprenticeship during which you won#8217;t make any real money but you will develop the essential skills to prosper if you graduate. You#8217;ll understand when you are ready, don#8217;t hesitate to jump the gun. Get really good before you commit fantastic money to your venture. But if you don#8217;t understand as you move on you will never graduate and your stupidity is going to be your undoing. In case you have been trading for a while but not getting anywhere, I strongly suggest you go back to square one and start your apprenticeship afresh. You ought to be able to handle it faster second time around.
The concept of the brain games is to keep on a plogical and emotional level. Trade in size, have good risk control, cut losers short and take small losses all play a vital role in assisting you to achieve this. They'll help you overcome the unholy trinity of anxiety, greed and stupidity and, like Alexander, cut through the Gordian knot.