EGO and TRADING

Shared by RAJ

Your ego will fight you and probably win in more ways than you can imagine. Youíll know the right thing to do, whether it is getting out of losers or adding to winners, yet you wonít be able to act. Often you will do the opposite of what you perceive is the right course of action. Such is the really unbelievable power our enemy within has over our behavior.

Half the battle is recognizing the grip ego can hold on us. It is truly hypnotic at times. The other half is undoing its powerful grip.

One of the cruelest ways ego can affect our profit potential is to help us cut our profits short. The rules say that we should let our profits run and cut our losses short. Most of us find that we do just the opposite. What happens is that our egos want to show off their brilliance by seeking profits. The ego is like a little child. It wants instant gratification. Taking profits early gives that quick reward.

Ego will avoid the pain associated with losing. Strange messages are sent to your brain on behalf of the egoís position. These little memos from your ego will encourage you to take profits quickly, double up on a bad position, let your losses run, and trade bigger than you should.

If you double up on a losing position, the message will be that it will only take a smaller reversal in the marketís direction to get you on the profit side. For sure your ego will not tell you that maybe the market wonít reverse its direction for a long, long time. It is very good at hiding the truth.

The market always punishes those people who lead the market with their ego-derived trading
strategies. You simply canít see through your own fog of self-deception when the ego decides what the future will bring. It slows the reaction time.

The ego generates opinions based on its own needs. You canít get a clear picture of whatís happening in the market if your mind is already made up. You have to trade with an empty mind.

Those who let their egos dominate their behavior are eventually punished. For sure, they are humbled in the long run, as the market requires obedience and will mete out its punishment to all those who wonít listen.

Really lucky persons will realize that they have been lucky and quit before the market catches up with them. Very few do until it is too late. Those who have learned to suppress their egos will stand a much greater chance of survival. The
person who has really mastered his egoís quirks will thrive. In the trading business we call it discipline.

If the ego is the enemy that I have described, then how do you reduce its influence? Wouldnít it be great if the bioengineers could find the gene that houses the ego?

They could just remove it and replace it with the discipline gene. Somehow I donít think that they ever will. So, what are we mere mortals to do?

A Zen approach would be to simply sit on it. Sit on what? Not your ego, although that is what eventually happens. Iím talking about getting rid of your ego through the process of meditating.

Your ability to go with the flow is directly proportional to the degree that you are operated by your ego. The more dominated you are by your ego, the more unlikely it is that you will be able to hear, feel, and respond to the marketís clear signals.

It is simply the willingness to let go of your ego and let the market guide you in your actions that will make the difference in your being a winner. One of the surest and hardest ways to help you conquer your ego is to meditate. It is not easy. Stay with it. Youíll be amazed at the results. Donít be spooked. This is powerful medicine.

Obviously, this is just one personís prescription. Experiment and see what works for you. Only then will you find out what the market really represents.