Part 3: Rational Analysis And Stock Trading
By Ultimate Trading
What Technique do We Need to Learn for Stock Trading?
Obviously these are abstract concepts and certainly not something most
involved in stock trading are going to concern themselves with. Yet understanding
the relationship between beliefs, attitudes, and perception is as fundamental
to stock trading as learning how to serve is to tennis, or as learning
how to swing a club is to golf. Put another way, understanding and controlling
your perception of market information is important only to the extent
that you want to achieve consistent results in stock trading.
We say this because there is something else about stock trading that is
as true as the statement we just made: You don't have to know anything
about yourself or the markets to be successful in stock trading, just
as you don't have to know the proper way to swing a tennis racket or golf
club in order to hit a good shot occasionally. The first time you played
golf, for instance, you might have hit several good shots throughout your
round, even though you hadn't learned any particular technique; but your
score was still probably well over 100 for 18 holes. Obviously, to improve
your overall score, you needed to learn technique.
The same is true for stock trading. We need technique to achieve consistency.
But what technique do we need to learn for stock trading? If we aren't
aware of, or don't understand, how our beliefs and attitudes affect our
perception of market information, it will seem as if it is the market's
behavior that is causing the lack of consistency. As a result, it would
stand to reason that the best way to avoid losses and become consistent
in stock trading would be to learn more about the markets.
This bit of logic is a trap that almost all involved in stock trading
fall into at some point, and it seems to make perfect sense. But this
approach doesn't work. The market simply offers too many often conflicting
variables to consider.
Furthermore, there are no limits to the market's behavior. It can do anything
at any moment. As a matter of fact, because every person in stock trading
is a market variable, it can be said that any single trader can cause
virtually anything to happen.
That means 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 in stock trading. So if you are afraid of being
wrong or losing money in your stock trading endeavors, it means you will
never learn enough to compensate for the negative effects these fears
will have on your ability to be objective and your ability to act without
hesitation. In other words, you won't be confident in the face of constant
The hard, cold reality of stock trading is that every trade has an uncertain
outcome. Unless you learn to completely accept the possibility of an uncertain
outcome in stock trading, you will try either consciously or unconsciously
to avoid any possibility you define as painful. In the process, youll
subject yourself to any number of self generated and costly errors.
Now, were not suggesting that you don't need some form of market analysis
or methodology to define opportunities and allow you to recognize them
within stock trading; you certainly do. However, market analysis is not
the path to consistent results. It will not solve the stock trading problems
created by lack of confidence, lack of discipline, or improper focus.
When you operate from the assumption that more or better analysis will
create consistency, you will be driven to gather as many market variables
as possible into your arsenal of stock trading tools. But what happens
Youre still disappointed and betrayed by the markets because of something
you didn't see or give enough consideration to while stock trading. It
will feel like you can't trust the markets; but the reality is, you can't
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