Everything is Psychological
The following comment was just added to my previous post, and although the author doesn't realize it, the comment proves my point as well. So here is the comment.
OK so if I have the world's most rock solid psychology how does that aid me on knowing where to buy and sell? Obviously you need a good method too right? Or what if I have terrible money management practices i.e. I take a dollar profit, but use 3 dollar stops? That won't work either. So all 3 are important. I disagree that psychology is 100%.
The only reason someone could post this comment is because they believe that all three areas are important. Whatever you believe, you are right. And that proves my point that everything is 100% psychological. One of the keys to everything, and it forms the basis for my consulting about systems, is that you can only trade your beliefs about the market. Those beliefs (whether you made them up or were indoctrinated in them or actually adopted them because they seem useful) are the basis for everything.
Here's an interesting quote from Harry Palmer, the founder of Avatar. "If you believe you create your life out of your beliefs, you are right, unless you don't believe that, it which case you won't, which means that you did."
Comments
"If you believe you create your life out of your beliefs, you are right, unless you don't believe that, it which case you won't, which means that you did."
Ahh, unfalsifiable claims, gotta love 'em :)
Maybe I can play the Devil's Advocate for a sec...
I had a discussion with a buddy about the Random Market Hypothesis, where the market movement could not be predicted in any form. It's not that hard to show a truly random market can't be profitable, especially once you remove comissions. You need to find places where you have an edge.
You may believe that you have an edge, but this doesn't mean you'll make money. Your belief could be wrong!
I think you need more than just a belief, you need a belief which reflects reality. You need knowledge or insight.
Perhaps the importance of belief is to serve as a motivator. If people believe that the market is random, they won't look deeper. If people believe they are failures, they won't find ways to achieve success. But if people believe that they can win, they'll work to achieve that goal.
What do you think?
Posted by: Tyro | November 30, 2006 06:31 PM
"you need a belief which reflects reality" - isn't it just a common belief about some objective and independent "reality"and that our beleifs can reflect it? They can, indeed, but what they reflect, and in what degree?
Posted by: Serge | December 3, 2006 11:59 AM
Two more cents about "independent market":
we know an another wide-spread beleif, namely that the "observed reality" depends on the observer and how observation is made. One practical result of this belief you see right before your eyes - your monitor was build using principles of quantum mechanics.
Please don't hurry to speak out another beleif that this has nothig to do with trading, at least before you read the Wilson's "Quantum Psychology".
Posted by: Serge | December 3, 2006 12:27 PM