Best of the Week
Most Popular
1.Dow Stock Market Trend Forecast 2015 by Nadeem Walayat - Nadeem_Walayat
2.Gold And Silver – Forget The News. Silver $12 – 14? Gold $1,000 – 1,100? 5 - Michael_Noonan
3.A TOP Formation In Apple Inc. - Crash Condition Signal Recorded - David Harris
4.Gold Gets Safe Haven Bids But COMEX Has Stopping Power - GoldSilverWorlds
5.The Swiss 10-Year Bond Illustrates Central Banks` Flawed Monetary Policy - EconMatters
6.Exponential Explosions in Debt, the S&P, Crude Oil, Silver and Consumer Prices - DeviantInvestor
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.Is Russia Planning a Gold-Based Currency? - Marcia Christoff-Kurapovna
9.Stock Market Trend Forecast 2015 Video - Nadeem_Walayat
10.Gold GDX ETF Technical Analysis - Austin_Galt
Last 5 days
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15
Wheat Commodity Price Technical Trend Forecast - 24th Feb 15
Bitcoin Price Might Stay below $250 - 24th Feb 15
Another Important Stock Market Inflection Point Approaching - 24th Feb 15
Gold: The Good, Bad, and Truly Ugly - 24th Feb 15
Eurozone Gold Holdings Increase to 10,792 Tonnes As “Reserve of Safety” Amidst Crisis - 24th Feb 15
Bird Doo; Yellen Goes to Congress - 24th Feb 15
Is Gold Investing Risk Free? - 24th Feb 15
The Bull Case For Gold Price 2015, and the Bear - 24th Feb 15
Europe - The Intersection of Three Crises - 24th Feb 15
Gold Price Just Needs More Time - 24th Feb 15
Gold Price Downtrend Looks Set to Continue - 23rd Feb
Silver Price Depressing Downtrend Will Eventually End - 23rd Feb 15
5 Reasons Why You Should Sell Amazon Stock - 23rd Feb 15
Global System Catastrophe Is Key Threat To Human Civilisation - 23rd Feb 15
Greece Crisis Yields Ideal Market Opportunities - 23rd Feb 15
Gold and Silver Stocks or General Stock Market Indices? - 23rd Feb 15
Swimming With Sharks: Goldman Sachs, Schools and Capital Appreciation Bonds - 23rd Feb 15
Stock Market - The Fed Still Has Your Back - 23rd Feb 15
Soybean Commodity Price Technical Outlook - 23rd Feb 15
Gold Weekly COTs and More - 23rd Feb 15
Stock Market New Highs With Weak Breadth - 23rd Feb 15
Greece Surrenders to Troika - 22nd Feb 15
This Greek Tragedy is a Global Farce - 22nd Feb 15
Copper Commodity Price Technical Outlook - 22nd Feb 15
U.S. Dollar and Investing in Gold Stocks - 22nd Feb 15
Is Putin's Russia Ready For Total Economic War With the West? - 22nd Feb 15
Stock Market New All Time Highs - 22nd Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

Trading Trap #6- Failure to Understand Your Relationship with Money

InvestorEducation / Learn to Trade Mar 21, 2009 - 02:33 PM GMT

By: Dr_Janice_Dorn

InvestorEducation Best Financial Markets Analysis ArticleRepeatedly...I have sold a stock while it was still rising---and that has been one reason why I have held onto my fortune. Many a time, I might have made a good deal more by holding a stock, but I would also have been caught in the fall when the price of the stock collapsed... Bernard Baruch


How you view and manage money is determined by your unique personality. Your psychic structure is grounded by the way in which your brain is hard-wired and colored by the soft-wiring which comes from years of being in the world. Your experiences, losses, wins, conditioning, hopes, fears, loves and dreams are all patterned in your brain and determine how you feel, think and act.

Among the most endlessly-fascinating aspects of any human being is his or her relationship to money. I have written extensively to my students and members of my website about these two specific topics: (1) Getting to know and understand your own specific Money Brain and (2) Harnessing the power of both sides of your brain to minimize losses and maximize profits from your work in the markets. In other words, "getting your brain on "and learning to think and act smartly about making and keeping money.

Beginning traders and investors are almost universally surprised to hear that trading and investing involves losses. Their view of the markets is skewed and distorted by the barrage of hype, commercials, advertisements and seminars offering instant riches. They see themselves quitting their day jobs and sitting in their pajamas watching red and green lights (or some virtual genie market guru looking over their shoulder) as they make buckets of money every day. After all, if Jane and Joe Q. Public (all happy and smiling with the new car and house and boat in the background of the TV commercial) can do it, so can you. Right?  Highly unlikely. Wrong? Very probably.

What you are not told in these ads and seminars is that the combination of emotions and money management must be harmonious in order for you to be profitable on a consistent basis and that nothing good comes easy. That's the bad news. The good news is that YOU have absolute control over how that works out, and the secret is in money management. Money management is about how and when you enter the markets and how much you risk at that moment in time. No matter what else is going on, you are in charge of this, the choice is yours and you take full and complete responsibility. It is your brain making that decision.

Trading is among the most challenging of any activities. It means swimming every day in water infested with money- hungry sharks, waiting to devour unprepared and unsuspecting victims. There are always (and I mean ALWAYS) going to be losses. New traders, and even those more seasoned, often fail to grasp this. Losses are personalized, and internalized, leading to a sense of failure, a decrease in self-esteem and an exacerbation of deep-seated shame and guilt. Inexperienced traders equate losses with being a bad person, a failure or just plain stupid.

Seasoned traders see losses as part of doing business, and view each trade as one in a series of probabilities. They set entries, exits and stops and adhere to them religiously. Inexperienced traders do not know how to manage money through managing risk. They do not understand that it is necessary to take calculated risks as part of doing business as a trader. There is always risk. Those who understand this, who embrace it and move with conviction in the face of it, are the ones who will succeed.

How does one do this? First of all, you determine your trading personality (your Money Brain) that then determines your risk tolerance. You decide the amount of money you are going to risk on any trade and the percentage of your capital you are risking. These are decisions you make, based on your analysis and your particular brain structure and function. You absolutely never ever allow the market to determine your risk.

Let me repeat that: YOU determine how much you will risk. You do not allow the markets to determine that for you. In approaching the markets, you realize that so many things are out of your control completely. The market doesn't know you, your rules or anything about you and doesn't care. Having grasped that concept, you do what you can to control what you can control.....YOUR OWN PERSONAL RISK. This is a fantastic opportunity for you to make your own rules and to keep them. If you break your rules you are, in essence, breaking a promise to yourself and being out of integrity with yourself. You are lying to yourself.

Once you master the ability to manage money and risk, you will begin to notice that both your psychological and financial capital is suffering fewer and fewer drawdowns. You stop second guessing yourself, and you stop holding, hoping, incanting to the trading gods or switching plans in mid-stream. You learn that you are very powerful in terms of what you can and cannot or will and will not do. You can never outthink or outsmart the markets, but you can be absolutely brilliant and bring in money consistently by making a plan and sticking with it. If it is working, you stick with it. If not, step away, regroup, rethink and make another plan until you are comfortable with one that resonates with your brain structure and is profitable on a consistent basis.

Making a plan is easy, but sticking with it requires continual self- assessment and taking inventory of your financial and psychological capital at the end of every day. It requires being rigorously honest with yourself about what you have done, how you have stayed with your plan and in what ways you sabotaged your plan. It is absolutely critical to be able to look with radical honesty at your thoughts and actions, and not be afraid to tell yourself the truth. Either you are in financial and psychological draw down or you are not. Numbers and feelings never lie to you. You lie to yourself. How do I know this? I have been there and done that over and over until I was sick and tired of being sick and tired. It didn't work and it didn't feel good.

The only way to manage your risk is to manage yourself and adopt an attitude of laser beam honesty with your trading results at the end of every day. To do anything less is not in the service of your self-esteem, your psychological state or your bottom line. In the end, it's all about the Benjamins. However, the number of Benjamins you win, lose or keep is all about you, your emotions, your attitude and your ability to take a cold, hard and rigorously honest look at yourself every trading day. In money management, perhaps more than in any other aspect of trading and investing, having the courage to face and accept that the truth will truly set you free. It has been said that the truth sets you free, but first it makes you miserable. I assure you that any suffering is worth the rewards. Get real and authentic with the way you manage money and risk, and you will see how quickly you get onto the path of profits.

Chase after the truth like all hell and you'll free yourself, even though you never touch its coat tails… Clarence Darrow

Until Next Time,
Good Trading and Brain On!

By Dr. Janice Dorn, MD, PhD
Prescriptions for Profits
www.thetradingdoctor.com

Signup for your risk-free subscription to the Trading Doctor Newsletter. If you are not completely satisfied that our newsletter is for you just let us know, via email, within 7 days of your subscription date and we'll immediatly refund your money.

© Copyright 2006-09 -- Janice Dorn, M.D., Ph.D. -- Ocean Ivory LLC

Dr. Janice Dorn is a graduate of the Albert Einstein College of Medicine, where she received her Ph.D. in Neuroanatomy. She did her postdoctoral work in Neurophysiology at the New York Medical College. She received her M.D. from La Universidad Autonoma de Ciudad Juarez, did one year of clinical clerkships in Phoenix, Arizona. and then completed a Neurology Internship at The University of New Mexico in Albuquerque. For the past twelve years, Dr. Dorn has focused her attention on trading, mentoring and commentary in the financial markets, with emphasis on Behavioral NeuroFinance, Mass NeuroPsychology, Trading NeuroPsychology, Futurism and Life Extension. A graduate of Coach University, she is a full time futures trader and trading coach.  Dr. Dorn is the author of over 300 publications, relating to Trading and Investing Neurouropsychology, Market Mass Neuropsychology, Behavioral Neurofinance, and Holistic Wellness and Longevity. 

Dr. Janice Dorn Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014