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The one thing I can think of that most affects both trading and investing has to be self-discipline.

Being disciplined is fully 50% of the job of trading or of investing. Getting out would mean you were wrong.

- Adding to a losing trade: You are making a massive effort to prove you were originally right.

- Grabbing a profit too soon: You want affirmation that you did the right thing.

- Missing an opportunity because you can't pull the trigger on a trade: You are still living with past mistakes.

In my 47 years of trading, I have seen great traders and investors come and go. The legendary Jess Livermore was flat broke when he committed suicide.

I have known dozens of traders who lost money because their egos got in the way.

I agree 100% with the following statement by Marty Schwartz, the great S&P 500 daytrader.

"I've said it before, and I'm going to say it again, because it cannot be overemphasized - the most important change in my trading career occurred when I learned to DIVORCE MY EGO FROM THE TRADE.

The one thing I can think of that most affects both trading and investing has to be self-discipline.

Being disciplined is fully 50% of the job of trading or of investing. I don't care how good your trading system is, without the discipline needed to follow the system you don't have much of a aptness for success in meeting your goals.

It doesn't matter how great a planner or organizer you are, without discipline your plans will most likely fail to bear fruit. Discipline involves self-control, and self-control involves your ego. If you want to succeed, you must learn to trade without your ego getting in the way.

Don't be fooled. A person's self image must be separated from his trading or his investing. When personal self-worth gets tangled up with your mimicry activities, it not only wrecks your best trading or investing intentions, but it also damages your self-esteem.

You hear and read great traders and investors who have done awesome things. They tell in regard to how great they are. They talk somewhere about "The Big" trades they made. They talk again "Big" numbers. It all derives from their oversized egos.

Don't be misled. Sooner or later, there are "Big Downfalls." It goes with the territory.

For a moment, let's look at the results of what a huge ego can do. Due to his oversized ego, Nick Leeson brought down the Barings Bank. Victor Niederhoffer ran his fund into deficit. John Merriweather was so sure his strategies would work that he ended up threatening the health of the entire fishtailing system by playing more than fifty times his underlying that he could forecast, without any scope of a loss, the direction of various bond markets.

As we study the examples of these three men, there seems to be a pattern of temporary real success followed by a conquering for themselves and for those spellbound up in blindly following them.

Here are the kinds of problems that see the light from putting your ego into the mix.

- Not putting in stops: You don't want to be proven wrong.

- Hesitation historically entry: You want reassurance before now you act.

- Overtrading: You want to prove how really big you are.

- Not getting out when you should: You have married your trade and just don't want to get a divorce. Getting out would mean you were wrong.

- to a losing trade: You are making a massive effort to prove you were originally right.

- Grabbing a profit too soon: You want postulate that you did the right thing.

- Missing an opportunity being you can't pull the trigger on a trade: You are still living with past mistakes.

In my 47 years of trading, I have seen great traders and investors come and go. All too many of them lost everything they had ever made. The great W.D. Gann died a pauper. The legendary Jess Livermore was flat poverty-stricken when he intended suicide.

I have known dozens of traders who lost money being as how their egos got in the way.

I nod 100% with the following statement by Marty Schwartz, the great S&P 500 daytrader.

"I've said it before, and I'm going to say it again, cause it cannot be overemphasized - the most important reversal in my trading onrush occurred when I learned to DIVORCE MY EGO FROM THE TRADE. Trading is a psychological game. Most people think that they're playing across the market, but the market doesn't care. You're really playing on route to yourself. You have to stop trying to will things to happen in order to prove that you're right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago. The sole objective of trading is not to prove you're right, but to hear the cash register ring."

To that I would add, "trade what you see, not what you think." You cannot deal to get your ego or your opinion involved in your trading activities. Because both trading and investing are uncertain businesses of probabilities filled with uncertain outcomes, a huge ego or a fragile ego can easily get smashed. Defending your ego saps you of energy, distorts your perception, and will eventually destroy your business.

If your self-esteem is connected to your trading and investing choices, if it goes up and down with the results of your activities, you and your buffoonery are in trouble. Your self-image needs to be strong, not at the mercy of the outcome of your trading or investment choices.

To succeed in the markets, you have to have confidence in what you are doing and confidence in yourself. But self-confidence must not run confused with self-image. Remember not to marry a market or a trade. If you see you are not right, be quick to get out. Run your trading or investing as a business. Practice self-discipline. You'll be glad you did.

All the best in your trading,

Joe Ross
Trading Educators Inc.
http://www.tradingeducators.com/?source=ezinearticles

Someone who reads my blog sent me this email:

Geoff,

I came from Japan to US for business school in 2001. I became extremely intrigued by Buffett's value investment philosophy. I wanted to read everything available about his philosophy and became more and more familiar with his investment philosophy. And I personally pick stocks too. 

Anyway, about investment in Japan, I read your "Japanese stocks: Now 34% of My Portfolio - Plan to hold Them For At Least 1 Year", I see one part in "Buy Japan", you are talking about "Japan is barely a capitalist country." I see that you see Japan pretty well. They care much less about generating profits to shareholders than people do here in US. I imagine, that US investors who invest in Japan would feel slighted. They should be the boss, but not in Japan actually. 

Here is the key point why I wrote. You say "It’s definitely the most investor unfriendly place on the planet – excluding a few countries that seize private property". In my view, Japan is a country that would seize private property away from you. Not by legitimate ways, but more subtle but practical ways. Who has the largest control over Japanese economy? The system of capitalism?  Absolutely no. Bureaucrats have. They have tremendous control over businesses with both explicit laws and implicit powers. 

They have ways to drag down companies performance that they don't like. If a business is strong enough and brave enough to openly fight against bureaucrats, like Softbank did in the past, there is chance to win. But most businesses are afraid of this structural, chronic bully that deprives Japan of economic flexibility over the years. But interesting thing to me is, this chronic inefficiency sometimes works well, but sometimes doesn't. Like it worked in our 70s to 80s. But not in the later decades. My father always tells me that this is just like fascism that drove Japan in WWII all the way to final disaster. When it works well, we are invincible, but once the ship turns to a wrong way, we are unstoppable. Being said that, I wonder how, like you mentioned, pre-war southern states unraveled their woven bonds and connections and became part of the rest of the capitalism world. Losing the war changed their way of business life completely? Then, maybe Japan also needs dramatic change like that. 

In my view, the Japanese have strong fear of sticking out. If you stay in a crowd, you are invisible and no one would say anything. But if you stick out too much, bureaucrats will get you. Rising stars in business are always the easiest to go after for bureaucrats who are influenced by competitors. In US capitalism holds the power. This is the rule of the game and it seems that even the government cannot defy this rule. In Japan, bureaucrats rule the market most definitely. 

And most obviously, this system is not working for our prosperity. 

So, I just wanted to point out your assumption that Japan is not a country who seizes private property may not hold.

Shin

Talk to Geoff about Japanese Stocks

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