This book is one of the favourites for traders. I have heard enough stories about how this book has helped traders make the necessary mental shift to become profitable traders. Instead of believing in what others said, I read the book and judged it for myself. I will not say that it had such a fundamental impact to me but I cannot deny the book did helped me figure out certain things in trading. Not everyone can pick up the same amount of useful ideas from the same book. Different people have different background, experience and objectives, and are triggered by different thoughts. Although I may not have gotten a lot from it, it does not mean you would not. Nonetheless, I enjoyed the book and being able to get a few perspectives from it still makes it a good book. I shall share with you two things that I have learned.
More Knowledge Does Not Prevent Losses
I was guilty about a mistake that Mark pointed out in the book – I lose money because I lack market knowledge. To him, it is not true.
“This means that no matter how much you learn about the market’s behavior, no matter how brilliant an analyst you become, you will never learn enough to anticipate every possible way that the market can make you wrong or cause you to lose money.”
He said that losses are not a result of your reading of the market. No one can learn enough to score 100% wins in all his trades. Hence, it is never about being the super analyst who never make any mistake. This person does not exist.
“Why do you think unsuccessful traders are obsessed with market analysis. They crave the sense of certainty that analysis appears to give them. Although few would admit it, the truth is that the typical trader wants to be right on every single trade. He is desperately trying to create certainty where it just doesn’t exist.”
“The consistency you seek is in your mind, not in the markets. It’s attitudes and beliefs about being wrong, losing money, and the tendency to become reckless, when you’re feeling good, that cause most losses – not technique or market knowledge.”
Hence, do not expect your methods or the market to perform consistently. Do not be disappointed when you are wrong, or become overconfident when you are right. It is about implementing your method consistently regardless of wins and losses. Because wins and losses will stir your feelings and cause you to act irrationally, and result in self-sabotage.
“To be consistent, you have to learn to think about trading in such a way that you’re no longer susceptible to conscious or subconscious mental processes that cause you to obscure, block, or pick and choose information on the basis of what will make you happy, give you what you want, or avoid pain.”
I think the above quote is true – we see what we want to see. We filter information every second and we do that in trading too. We will filter out the information that will cause us pain and select information that gives us pleasure. And doing these seldom lead us to profits.
Why People Love Trading?
I love the way Mark explained why people love trading, and I think to some extent I felt it is true for me.
“Trading is an activity that offers the individual unlimited freedom of creative expression, a freedom of expression that has been denied most of us for most of our lives.”
However, he cautioned that many of us do not have the necessary psychological makeup to survive the market when we have no rules to govern our trading in the boundless market.
“The freedom is great. All of us seem to naturally want it, strive for it, even crave it. But that doesn’t mean that we have the appropriate psychological resources to operate effectively in an environment that has few, if any, boundaries and where the potential to do enormous damage to ourselves exists. Almost everyone needs to make some mental adjustments, regardless of their educational background, intelligence or how successful they’ve been in other endeavors.”
These are the two things that were most applicable to my situation. Have you read the book? What were the useful things you have gotten out of the book?