The story of The Richest Man In Babylon by George S. Clasonhas timeless lessons for each of you as conveyed through The Five Laws Of Gold. These laws were really a five-point philosophy given by Arkad (the richest man in Babylon) to those who would listen and heed his wisdom. I read this book many years ago and it had a great impact my life.
Let’s start with the First Law of Gold: Gold comes quickly to the person who does not hesitate to save one coin in ten.
In other words, put away a minimum of 10% of your income. This rule is so fundamental, yet very few people follow it. It’s also known as “paying yourself first." Put 10% of whatever you make into savings. I do this each month with my trading accounts and any other income I receive during the month. Some of you may wish to do it every quarter, but I find that each month works for me. Whatever your schedule is-be rigorous and disciplined about it. Do not fall into the trap of missing a payment thinking you will put twice as much aside the next time. Though it may not seem like much, it amounts to thousands within a short period of time. Pay yourself first-before your bills, before you buy any “stuff”, before your living expenses.
There is a larger more philosophical aspect to paying yourself. It has to do with non-attachment to your P&L. I have written extensively about non-attachment to individual trades and now wish to apply that in the larger dimension to non-attachment to your P&L. By regularly taking profits out of the markets and removing them from your trading account, you are not only paying yourself for doing the arduous work of trading. You are showing that you can detach from your P&L. Since attachment is the greatest source of suffering, you are removing a real source of unhappiness from your life and replacing it with the happiness of having a positive experience or saving for a special goal. This alone makes you stronger and gives you a better trading edge. Additionally, there is the issue of moving money as a source of energy, but I’ll save that for another time.More Executive Strategies on CNBC.com Including:
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One of my fellow traders knows the meaning of wipeout. He lost everything twice in his career, and the third time he made it. Nonetheless, the losses left an indelible impression on him. To this day, he withdraws monies from his trading account four times a year and puts it into CDs. These are not sexy but they are pretty safe and he has a goal. He is saving to put money down on several acres of land in Montana where he wants to move and build a small home. He always has that goal in mind and lives simply, below his means and doesn’t spend anything more than he absolutely has to on “stuff.” He often says “I don’t need no stinkin’ stuff to clutter up my life. That land in Montana is the payoff I am giving to myself for the hard work I do every day in the markets. Eye on the prize, baby!”
Trading is tough and intensive work. Like all labor, it is demanding, and traders need to take time to reward themselves. I want each of you—no matter how much you are struggling—to consider taking something out of your trading account or any other income that you have at least four times a year, put some it into savings for a special goal or new opportunity, and use some to have a wonderful experience. Take a long weekend vacation, go camping or hiking, take someone you care about with out to a great restaurant for a romantic dinner. If you want to stay home and hang out with your family then take a stay-cation and maybe throw a party for friends. Turn off TV, unplug your computer, pick up the phone and call someone you have been thinking about for a while. Spend quality face-to-face time with people. Rent some DVDs and have a movie holiday. Take a course at a community college in cooking, language, art or something that appeals to you. Work out, dance, move and feel yourself alive. Treat yourself to a pampering day at the spa. Do something really nice for yourself or those you love. Give to others who are needy. Help someone—even if it is a small random act of kindness. Give money to your church or your favorite charity. It feels wonderful, helps others, strengthens you and makes you a better person and a better trader with a much stronger presence—both in life and in the markets.
Set goals outside the markets and reward yourself with experiences. If you do this regularly, you will find that many aspects of your life and trading change in remarkable and surprising ways.
Life is short and precious.
Think about starting soon. If not now—then when?
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.