Dorn: Trading Lessons From A Talking Bird

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Knowing yourself is the beginning of all wisdom…Aristotle

Bobby was a lonely trader who bought a talking bird to keep him company. Little did he know what he was getting himself into, since the minute tried to put it into a cage, the bird began speaking rapidly:

“Don’t put me in a cage, please. Let me free and I will tell you the three secrets of successful trading? I will, I promise you. Just let me go!”

Bobby was tired, his resistance was low from not working out and eating junk food plus he was on a three-month losing streak. This combination made the bird’s offer irresistible.

“Tell me, bird, what are the secrets?”

“Promise me you’ll pay attention, Bobby?”

“Yep.”

“ OK. Here they are:”

Ignore the hype. If something seems too good to be true, it probably is!

Know yourself and what you are capable of doing. Know your strengths and your limitations

Always strive to do good things and don’t forget them. Kindness to others comes back to you, often in the most unexpected ways.

Bobby was not particularly impressed, especially with the “do good” part, but he let the bird go anyway. Flying quickly away, the bird rested on a tree branch and immediately started touting the trader.

“Hey, Trader guy—Guess what? Just before you bought me and brought me home to put me in some miserable cage—I swallowed an authentic alexandrite gemstone. If you had kept me, I might have told you about it but I might not have because you would want to kill me, find the precious stone, sell it and get rich. “

Bobbie was furious, and regretted the instant he let the bird fly away. He lunged toward the tree and tried to climb it to get at the bird. Sadly, he was so out of shape and enraged that he couldn’t make it half-way up without falling down to the ground.

The bird watched this and then started lecturing to Bobbie:

“You silly trader! You heard what I said but you didn’t listen one bit!

You did exactly what I told you not to do!

You believed the hype. What’s the chance that a bird would swallow a rare and precious gem and then tell you about it? Do you think I am such a stupid bird with a little brain that would risk being killed by you so you could get the stone out of my belly?”

Before Bobby could utter one word, the bird continued:

“You have no idea what your abilities are. You tried to climb the tree to capture me, and couldn’t even make it half-way up.

Finally, you forgot your good deed and did not keep your promise. You let me free then changed your mind and tried to get me back.

You failed in every respect. You did not keep your promises to me or to yourself.”

What lessons can you learn about trading and yourself from this story?

We are drowning in information overload. It’s especially bad because there is so much misinformation, disinformation and garbage competing for and assaulting our senses every day. As a trader, it is critical to filter out the signal from the noise. There is way too much hype and too many people trying to sell you something that is not real or true.

The second lesson from brainy bird tells you to know your abilities. Trading is about embracing and managing risk. You do this by position sizing and setting stops. Never bite off more than you can chew by taking too large a position size. When in doubt, start small and add to your position as it moves in your favor. Some may add on a breakout and others may do so on pullbacks. Know your trading style and always do more of what is working and less of what is not working. This is a cardinal rule of trading. Trader, know yourself and why you are doing what you do. Don’t over-reach, don’t flip around from one market to the other just because you think you are missing out or you read about some “juicy” opportunity.

Finally, learn to have confidence in your judgment. If you are not comfortable holding the position size, get smaller. If you have confidence that you are trading with the trend, pyramid into a position with your largest position at the “best” price and your smallest position at the “worst” price. Don’t regret this good deed that you do for yourself, as you will sleep better and live longer. Help other traders if they ask you for help and be careful of those “energy vultures” who want to pick your brain and then run away. Stay with the winners and model their successes. Be grateful for the gifts you receive from the markets and never take them for granted.

Think of the three trading lessons from Brainy Bird and let them guide you as you move forward on this journey…one step at a time.

The only journey is the journey within…Rainer Marie Rilke

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Dr. Janice Dorn is the only Ph.D. (Brain Anatomist) and M.D. (Board-Certified Psychiatrist and Addiction Psychiatrist) in the world who actively trades, writes commentary on the financial markets and manages a subscription-based website. Dr. Dorn has been trading the gold futures markets full time since 1993. She has written over 1000 articles on trader and investor psychology, and mentored over 600 traders and investors.She writes on all aspects of trading psychology and provides a real-time trading service on her website: TheTradingDoctor.com.