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"We usually make up our minds about important things far too soon and usually with poor information. But we then convince ourselves we haven’t done that because (a) we know it’s boneheaded, and no one wants to be accused of boneheaded-ness; (b) we’ve ignored our vital needs and don’t like to think about them; (C) deciding but believing we haven’t decided gives us a secret from ourselves that’s too delicious not to keep. In other words, it makes us happy to bullshit ourselves."
- Richard Ford, The Lay of the Land
STAGE ONE DENIAL (UNSTRUCTURED ABANDON):
Rules are worthless in a random environment such as the stock market; therefore, we do not need to make any rules. Rules make sense, the market does not, so why make rules? Rules are for boneheads, children, students, mathematicians, and sports pros but not for self-employed stock traders, we reason. But the market’s randomness and our freedom together can make for a disastrous combination. If there is any place that needs structure it is in our approach to an unstructured market. If there is any place where we can practice true freedom it is in the market…where we have the freedom to choose the rules we will follow. Structured freedom keeps unstructured abandon from rearing its ugly head and can help keep the trader from advancing to stage 2.
STAGE TWO DENIAL (PLANNED IGNORANCE):
Traders are hard pressed to plead ignorance but when given the option are likely to make plans to do so. The trade is not working because we forgot about support or resistance, a shorter or longer time frame, or Elliot wave, or the bollinger bands, or the retracement level, or earnings, or this or that, BLAH, BLAH, BLAH. We need to study more patterns and strategies and indicators; we need to sign up for more newsletters; we need to read more stock trading books, we need more monitors, etc. not realizing that the more we search the more ignorant we become. The market has no rules of its own so we impose cute little rules of our own asking the market not to break them. The rules are not for the market but for ourselves. They are designed to protect us against ourselves, not against the market. The market just is; we are. Since we began with no structure (STAGE ONE) we now plead ignorance when the market does not conform to our way of thinking. We convince ourselves that we did not take all the factors into consideration. How could we? We were ignorant! We deny the fact that there is more to the market than patterns; we deny that there are other traders taking opposite positions; we deny the random nature of markets; we deny our inability to ever know everything there is to know about market behavior. Unless we are able to read the collective minds of every one who is trading a particular market during a particular time frame we will never know everything there is to know about the market. We either accept this fact, plan for it, and manage it (planned awareness) or we deny it and micro-manage it. Micro management in stock trading is simply another word for over analyzing and over analyzing will lead to frustration and stage 3.
STAGE THREE DENIAL (FRUSTRATED BLINDNESS):
Have you ever been so frustrated about something that you were blind to your surroundings? You know, like losing your cool in a crowded room unaware that all eyes are on you as you make a fool of yourself? Or, your frustration at not being able to find your car keys is directed toward everyone in the house, including the dog, until you realize the keys were in your pocket the whole time? Frustration is a result of unrealized expectations while missing out on what might have been. We expect someone to understand what we are saying until they don’t. We expect to find our car keys where we last left them until we don’t. We are blind to the obvious when we deny the obvious. Traders expect each trade to work when it is expected to work, thus fooling or bulls**ing themselves. When it does not we can become frustrated and deny the fact that the trade is not working, while missing other higher probability opportunities, thus leading to greater frustration. Once a trader gets to this stage where missing opportunities is a result of unrealized expectations from a previous trade, frustrated blindness results. Let’s think about this for a minute. If a trader denies the obvious (that a trade is not working) and denies himself the opportunity to make money on another trade (because he is blind to it), not only is he losing money on a loser but he is missing obvious opportunities that could become big winners. If this continues for too long, this trader will either learn to manage his expectations or his frustrated blindness will lead to ultimate destruction. And a once promising trader succumbs to a trader’s death.
Denialism is a disease best treated, better yet prevented, with structured freedom, planned awareness, and managed expectations. If not, you may be asking, “Is there a doctor in the house?”
Source: http://www.thecrosshairstrader.com
- Richard Ford, The Lay of the Land
STAGE ONE DENIAL (UNSTRUCTURED ABANDON):
Rules are worthless in a random environment such as the stock market; therefore, we do not need to make any rules. Rules make sense, the market does not, so why make rules? Rules are for boneheads, children, students, mathematicians, and sports pros but not for self-employed stock traders, we reason. But the market’s randomness and our freedom together can make for a disastrous combination. If there is any place that needs structure it is in our approach to an unstructured market. If there is any place where we can practice true freedom it is in the market…where we have the freedom to choose the rules we will follow. Structured freedom keeps unstructured abandon from rearing its ugly head and can help keep the trader from advancing to stage 2.
STAGE TWO DENIAL (PLANNED IGNORANCE):
Traders are hard pressed to plead ignorance but when given the option are likely to make plans to do so. The trade is not working because we forgot about support or resistance, a shorter or longer time frame, or Elliot wave, or the bollinger bands, or the retracement level, or earnings, or this or that, BLAH, BLAH, BLAH. We need to study more patterns and strategies and indicators; we need to sign up for more newsletters; we need to read more stock trading books, we need more monitors, etc. not realizing that the more we search the more ignorant we become. The market has no rules of its own so we impose cute little rules of our own asking the market not to break them. The rules are not for the market but for ourselves. They are designed to protect us against ourselves, not against the market. The market just is; we are. Since we began with no structure (STAGE ONE) we now plead ignorance when the market does not conform to our way of thinking. We convince ourselves that we did not take all the factors into consideration. How could we? We were ignorant! We deny the fact that there is more to the market than patterns; we deny that there are other traders taking opposite positions; we deny the random nature of markets; we deny our inability to ever know everything there is to know about market behavior. Unless we are able to read the collective minds of every one who is trading a particular market during a particular time frame we will never know everything there is to know about the market. We either accept this fact, plan for it, and manage it (planned awareness) or we deny it and micro-manage it. Micro management in stock trading is simply another word for over analyzing and over analyzing will lead to frustration and stage 3.
STAGE THREE DENIAL (FRUSTRATED BLINDNESS):
Have you ever been so frustrated about something that you were blind to your surroundings? You know, like losing your cool in a crowded room unaware that all eyes are on you as you make a fool of yourself? Or, your frustration at not being able to find your car keys is directed toward everyone in the house, including the dog, until you realize the keys were in your pocket the whole time? Frustration is a result of unrealized expectations while missing out on what might have been. We expect someone to understand what we are saying until they don’t. We expect to find our car keys where we last left them until we don’t. We are blind to the obvious when we deny the obvious. Traders expect each trade to work when it is expected to work, thus fooling or bulls**ing themselves. When it does not we can become frustrated and deny the fact that the trade is not working, while missing other higher probability opportunities, thus leading to greater frustration. Once a trader gets to this stage where missing opportunities is a result of unrealized expectations from a previous trade, frustrated blindness results. Let’s think about this for a minute. If a trader denies the obvious (that a trade is not working) and denies himself the opportunity to make money on another trade (because he is blind to it), not only is he losing money on a loser but he is missing obvious opportunities that could become big winners. If this continues for too long, this trader will either learn to manage his expectations or his frustrated blindness will lead to ultimate destruction. And a once promising trader succumbs to a trader’s death.
Denialism is a disease best treated, better yet prevented, with structured freedom, planned awareness, and managed expectations. If not, you may be asking, “Is there a doctor in the house?”
Source: http://www.thecrosshairstrader.com
