Dorn: The Upside Down of Trading

Upside down, Boy, you turn me, Inside out, And round and round ... Upside down, Boy, you turn me, Inside out, And round and round…From “Upside Down” sung by Diana Ross

A man had constant dizzy spells and searched everywhere to find a cure.

He told a close female friend about it, who advised, “Walk around the block four times on Sunday afternoon.”

The man followed the advice, and then complained to his friend, “I did what you said, but still feel dizzy.”

She replied. “Interesting. It didn’t help my dizziness either!”

Moral: Beware of foolish advice from those who do not know.

In trading and in life, it is critical to ask yourself: What sources of information are guiding my actions? Have I checked the facts, or am I simply relying on the word of this or that person? Have I applied common sense and my own study to this situation, or am I acting impulsively or instinctually? Is my primitive rat brain really out to get me this time, or am I taking the higher road and using my frontal brain areas to overcome fear and greed? This is a recurring theme at www.thetradingdoctor.com where we show you how your brain sees and reacts to trading signals and setups and what to do to put the odds of winning in your favor.

Among the most important questions for you to ask is: What do I believe that is not true? This must become a mantra for you if you are to succeed in trading because you are trading your beliefs against the beliefs of millions of other traders. Constantly question your own belief system. This leads you to question what others are saying. This forces you to turn down the noise and focus on the signal in the here and now.

Lazy thinking leads to lazy trading which leads to losses. The incessant drumbeat of internal deception is magnified by the endless amount of misinformation and disinformation that bombards your senses during the trading day. Be vigilant. Question everything and everyone, including me. There are no gurus except for you. You, more than anyone else in the world, know what is right for you. If a position is not working, it is not a good position. Get out. Cut losses. If you see another opportunity in the same stock, have the courage to get right back in. Don’t allow your rat brain to “dope-amine” you to the point where you deceive yourself by holding and hoping or are frozen in fear from taking a loss.

In our own trading we manage position size and wait for what we consider to be high reward/risk trade opportunities. We make mistakes, especially when we try to jump in and jump out during the day. Sometimes this works and sometimes it doesn’t. Our best money is made by taking positions (we have three open positions at this time—all are in the green) and waiting for the trade to play out.

The financial markets are saturated with hype and deception. Learn to see past the veils of deception and to become alert to anything that sounds just too good to be true. If it sounds too good to be true, it most likely is! The tragedy of trading is that that even the most alert and rational among us can be fooled. This is one reason why the search for trading truth is a lifetime journey, a journey that no one ever fully completes. In trading and in life, it is always about the journey.

I've been following the markets for 48 years. I have seen a lot of people come and go, a lot of lives destroyed by trading, a lot of lives made wealthy beyond anyone's imagination. The difference is that wealth is generated on a consistent basis, while hit and miss swashbuckler traders make it and lose it, and most just lose it without first making it. Break out of that mold; trade as though you are in a marathon, that what matters is the finish... not your current pace. Have perspective of the correct goal…Larry Williams

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Dr. Janice Dorn is a Ph.D. (Brain Anatomist) and M.D. (Board-Certified Psychiatrist and Addiction Psychiatrist) 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.