Douglas Della Toffalo, Investing Psychology Today Requires All Traders to Awaken Their Speculator Minds<br><br><p>Stock trading strategies are as rampant today, as they were during
the Great Bull Market. Yet, can you truly master the stock market like
so many investing books propose?</p><p>Consider this: When you can't
even trust the financial reports of analysts, and the company bean
counters that feed them with data, how can you? What's needed are
robust, stock trading strategies; the type that enables you to think
above the crowd, but not apart from them! The kind of strategies in
touch with your speculator mind response!</p><p>Witness the Enron
fiasco. It is a classic case of corporate character gone sour. The
accounting firm that assigned to do the books also got paid to advise.
Even the board members failed in their fiduciary responsibilities to
guard and plead the cause of the stock holders. Result: The crowd got
lied to and cheated!</p><p>That's what causes many to follow technical
analysis whereby the fundamentals are considered reflected in the
market action, and leads the investors to never have to trust anything
beyond the tape itself. So, what if you developed a dynamite system
that would track such reflections? Would that be sufficient?</p><p>I
personally do not believe it would for one, very simple reason: There
is no mastery of indeterminate arenas like markets; and they most
certainly qualify as being indeterminate. At best, in my opinion, you
may merely flow with them.</p><p>There is, however, a form of mastery
that you can learn. It is the mastery of the self, whereby you can
become a student of your own attitudes and behavior as much as a
student of market behavior. Relative to conditions with potential
uncertain outcomes as in the markets, this is probably the most
underestimated of all trading methods.</p><p>With all due respect to
your intelligence and financial background, that is a lot more
difficult to achieve than you might now imagine. First, simply arousing
your market senses is not a simple task. Pre-existing mindsets,
supported by memories and emotions, often hinder the process. It truly
takes an awakening that a new method of thinking far beyond what your
formal education has groomed you to think thus far may be necessary.</p><p>Second,
that awakening further requires an act of acceptance that is sufficient
to instill the discipline to change. The initiating belief for all of
this, in my judgment, is accepting the stark reality of cause and
effect; that speculative markets are not the true cause of you making
or losing money. You are! And many market psychologists teach their
clients that.</p><p>After all, the markets exist merely as trading
arenas with fixed rules of engagement, and neutral ones at that. They
may appear at times to operate like living, breathing organisms, but
they have no bias and no intimidating authority to issue you orders to
personally lose or gain money.</p><p>Markets cannot even force you to
trade in any particular way any more than they can coerce you to
interpret their conditions. Only you can do that through your own
mental framework; and therein lays the enigma that haunts traders as
they attempt to garner their share of the market's riches.</p><p>Discrediting
your mental framework with its emotional ties perhaps explains why
outperforming any market on a consistent basis is such a difficult
task, even for professional fund managers. It requires that
profit-making senses become honed and kept razor sharp at all times;
and that definitely requires full mental attention in league with self
discipline.</p><p>After all, the nature of speculation centers on a
collection of random events, and is by definition an uncertain
environment at every moment. The very act of dealing with markets,
especially on your own, exposes you to personal challenges not found in
any other endeavor.</p><p>My own research and personal market
experiences confirm this. So, I have defined at least four dominant
drivers just to achieve some semblance of parity: </p><div class="middle"><li>Personal conditioning that provides mental clarity and emotional stamina; </li><li>A process that supports goals through implementation of in-line strategies;
</li><li>Technology that accesses timely and useful information; </li><li>Research that avails probabilities.</li>
<p>The greatest, in my opinion, is often the most neglected: Personal conditioning.</p><p>So,
what is the status of your conditioning? Have you cultivated your own
profit-making senses? Or has the market actually re-conditioned you to
wonder and perhaps doubt your very own capabilities and market
intuition?</p><p>What about the next wave of market changes? Are you
truly prepared? Have you refined yourself into a dynamic,
forward-thinking market edge, one that is fully capable of extracting
and protecting profits from the market arena for years to come?</p><p>You see, some may interpret an edge as merely a system or a method of trading. I view it as the whole trader.</p><p>How
about simply viewing yourself as an investing professional? If not, why
not? After all, taking risks in any speculative arena is certainly not
an amateur's game. Each of us expects to get paid. The only difference
is that the average investor is on a 100% pay-for-performance basis,
not a salary or commission like brokers and fund managers.</p><p>Considering
that the public has been groomed over many years to attribute the term
"speculation" to gambling, few have ever defined themselves as
speculators. Investing, it appears, has been and is now still
considered more noble and worthy of honor than speculating or trading.</p><p>For
the record, the Commitment of Traders Report (CoT) already legitimizes
the special position that the speculator has. Speculators, especially
the large ones, are not hedgers like the large commercial traders such
as those in the food industry. Neither are they small, one-lot traders
like the average small investors. They range from large fund managers
to large-account individuals.</p><p>While the big-money fund managers
move markets like four-hundred pound gorillas, the large-account
individuals, more commonly tagged as speculators, are so astute that
they read those gorillas like a web page, and end up making millions
over their careers.</p><p>In my mind, though, there is little
difference between the words, "investor", "speculator" and "trader".
Those merely ascribe handles along a continuum of time, cycles,
expectations and needs; and the only real difference appears to be
trading styles. Speculation is, nevertheless, still the true name of
the market game; and, with every thesaurus I checked, never even
associated with gambling at all.</p><p>Now, I'm sure one of your goals
is to make money with as little risk as possible. In my judgment,
associating your mind and learning with the ideas of the famed
speculators is about the best way to establishing a path toward
reaching your goal.</p><p>Regardless of your own distinction, though,
the "long haul" of speculating is surely not an easy one. In all
likelihood, the challenge of keeping profits through cycles of high
volatility and bearish tests over time will verifiably increase for
everyone, professional and novice alike.</p><p>The fact that the
investment-selection process already encompasses so many combinations
of value, safety and time factors is a testament that even the criteria
itself will continue to morph just like the market. A daunting task for
seasoned professionals, the process will intensify even more unnerving
for the lesser-experienced, independent investors; that is, unless the
speculator within you is awakened and cultivated.</p><p>So, that leads
me now to ask the obvious: What have you done to awaken your inner
speculator? Are you even aware that one exists? How about the presence
of the power within the speculator mentality? Probably not, but it's
not entirely your fault either; for it is clear that our educational
system has seldom taught entrepreneurism, let alone any wisdom that the
speculator model and its mental framework might bring.</p><p>It is
still astonishing, though, considering the degree of education in
today's world, that the trading public is still so susceptible to the
conniving marketing ploys of the brokerage and mutual fund industries.
All of us may be encouraged to lead our own paths but through the
comforting arms of their professional advice and management. Our own
judgments, however, are politely encouraged to relinquish to a back
seat.</p><p>Caveats exist with financial outsourcing, contrary to these
many sales ploys. By every rational count, we are supposed to know
better and thereby in charge of our own wealth at all times. Misplacing
trust there can be as financially fatal, if not more than personal
misjudgments. Witness the holders of Enron stock who were lied to unto
the very end.</p><p>Even following the so-called, safe, undervalued
selections of the many acclaimed professionals, for example, does not
guarantee a profit let alone consistency over the long run. It's even
written in their fine print. Simply witness the record whereby 80-90%
of fund managers seldom beat the S&P 500.</p><p>It's no wonder,
then, that brokerage advice hasn't faired much better either. Touting
their own analysts' picks with the fervor of snake-oil salesmen, they
seldom give an actual sell direction to their clients until it's
usually too late. Another case in point is e-Toys. A sell direction
there was never given until its price dropped below $2 from over $70;
and, by the way, was later delisted.</p><p>The general market, on the
other hand, is no respecter of personal stock selections either. When
it acts with bearish tendencies despite good news, all bets can
especially be off. Regardless of fundamental value, the best of the
best stocks can go down literally with the rest. That explains why
purchasing pseudo right stocks at the wrong time can still erode
capital.</p><p>So, what should you do? Should you solely trust the
buy-and-hold mantra of the so-called professionals? Or should you go it
alone, trusting your own judgments? If so, how would you develop a
mindset and a method that avails the best of all there is to know in
this arena we call "the market"?</p><p><b>The Message of Years of Research</b></p><p>It's
one thing to recognize the difference between assets and liabilities.
It's quite another to be astute enough to know where and when to trade
them. There are factors beyond the strict asset-liability definition
that is just as important and further requires your full attention.</p><p>The
behavior of crowds and its effects is a case in point that confirms
economics and its markets as indeterminate issues. That explains why
all of us, esteemed professionals and novices alike, are still in some
state of constant search for some grail that will enable us to deal
with them sufficiently to make us rich.</p><p>Economics and finance, on
the other hand, are also adaptive systems by nature. That explains why
speculating their derivatives, the markets, is so difficult to predict.
There's so much adapting and morphing going on that it appears that the
only way to respond to them is to somehow become adaptive along with
them. After all, the only true constant is their element of uncertainty.</p><p>The
ability to recognize and adjust the self, though, just may be the key
to that grail, if not the grail itself, which allows us to engage that
uncertainty. Therefore,my goal here is to inspire a simple realization
that a market edge is possible within you. If you address the uncertain
nature of the markets, the importance of your internal character, and
the awakening of your speculative perspective, your edge will be sharp.</p><p>Your
own internal mental control must then be viewed as crucial to your
independent success. Learning the posture of thinking which facilitates
successful speculators in their quest for success is, according to my
research, a required element in developing your own. With character as
its ally, it is a powerful enabler to wealth being protected as well as
simply being accumulated.</p><p>I also confirm that awakening your
inner speculator is not a quick and easy process. It's a wrenching
procedure not much different than any other life-changing event. The
only difference is that this one must be totally self wrought, totally
self driven and totally self actualized.</p><p>Point: The process of
awakening the speculator within is between you and nobody else; and
only you can get in the way. By the way, you probably will!</p><p>It
may be easier for some to understand the premise of the speculative
mindset than others; likewise, when it comes to practicing it.
Nevertheless, egos and preset notions about markets and trading are
quick to run interferences, regardless of the personal ease or
difficulty. That explains how we lose winning positions.</p><p>Training
books need to focus more on paradigm shifting than just a bunch of
trading techniques and strategies. Without the priority of setting your
mental framework to humbly accept the market' reality, your success is
limited, in my opinion; and has a lesser probability of being achieved,
not by the market's obstacles, but by the greatest obstacle of all:
You, coerced through your own emotions.</p><p>Learning to think and
self manage like a clever speculator is far more important to your
market success than any other, because trading techniques and
strategies alone often fade as markets morph over time.Just be aware
that attaining the humble adaptability to achieve and maintain success
will forever be a major challenge. After all, as humans, we always seem
to get in our own way. I know I do!</p><p>You are not alone in this
battle either. Even the best of the best who have ever succeeded in the
markets have had their share of failures. They sweated their first
trade; they battled their own internal fears and greedy impulses; and
they will tell you outright that they experienced the losses to prove
their early ignorance! In other words, few succeeded in the beginning;
and all continue to battle themselves unto this very day.</p><p><b>There is hope for all of us</b></p><p>If the master traders learned from their mistakes to gain and maintain, then so can we!</p><p>Absolutes
are difficult to define. In this case, I believe these two are the
vital ones: market uncertainty and personal responsiblity. You have the
responsibility and the duty to deal with the market's nature of
uncertainty; otherwise, you put your wealth at even greater risk.</p><p>By
developing your inner speculator into a more dynamic one, you will
automatically take personal responsibility to the necessary higher
level; and, considering the morphing power of every era's market, there
is no time like the present to begin accepting the market's uncertain
nature; that is, since you want to make money and keep it, too.</p></div><br>