The Game Of Psychology

Trading/investing is an extremely hard business. Otherwise everybody will become a millionare through investing. The reality is 90% of participants fail this game and lose money. So, how do we become the top 10% players and make money out of the market? The answer is simple - be a contrarian and do the opposite of what the rest 90% people are doing. This logic is extremely simple and powerful yet most people don’t understand it. Let’s forget about the market in a moment and take a real life example. Most people want to accumulate massize amount of wealth and achieve financial freedom. But it is exactly the same type of people who go to work and choose paychecks as their main sources of income. How will that play out? Most people work until they die. Do you think none of the working class understand this cruel truth? I guess they understand it clearly. The only thing is that they refuse to do the right thing. The working class know exactly how their bosses acquire wealth. Their bosses create/own assets and let the assets work for them. If you ask yourself now - can I achieve financial freedom through paychecks? I bet you’d say NO. Yet this is what 90% people do. And unfortunately one can NEVER achieve financial freedom this way.

The same thing happens on the market over and over again. 90% of people lose yet they keep playing until they are wiped out. Believe it or not, 90% of trading/investing is a psychological game. Please let me explain. The average investors let emotions take control and can’t make decisions logically. When stock goes up, they are dominated by greed. Then they chase the extended stock only to see it falls apart. When stock goes down, they are dominated by fear. Then they sell the stocks only to see it reverse back up. The story goes on and on… Does this sounds familiar? This happened to us too. Emotions are part of us and we can’t live without it. So… Is this the end of the story? We are destined to live an ordinary life? NO!!! I’m going to give a list of procedures that helps you mentally to be more successful and even in life.

Mental Procedures to Help You Beat The Market

You need to BELIEVE YOU CAN be better. You need to BELIEVE YOU CAN beat the market. That’s the starting point. There are so many great investors consistently outperforming the market like Warren Buffet and George Soros. Why can’t you do the same? Are you inferior to them? Of course NOT! Believing in yourself is the key to get you started.
Risk less. 90% of the emotions in the markets are a result of risking more than what you are comfortable with. Think about last time you felt deep pain because your precious stock fell a lot. Let’s say you were down $10k and you felt very upset. Usually this is where average investor panics and sold off. But have you tried to do the root cause analysis of this? Take a moment and think about it. PAUSE HERE. Do not keep reading until you have an answer. OK. Here’s the answer: your emotion kicks in implies you are NOT comfortable with losing $10k. Then why on earth do you start with risking it? You should cut your size down until you can think clearly. For example, if you only have $1 invested in the position and you lost it, will you be upset? Of course not. Your emotion can’t dominate you with $1 risk because it is within your pain threshold. Now, it is your responsibility to figure out what your pain threshold is. CL Capital can’t help you on this since everyone has a different pain threshold. Once you have figured out your TRUE pain threshold, then you can invest with that in mind. In short, don’t risk what you are willing to lose. Once you can make emotionless decisions and be successful, then you can step out of your comfort zone and increase your size gradually.
Be confident about your decision. I can’t stress enough about the importance of confidence. If you are confident then you won’t be controlled by emotions easily. If you are confident then you won’t be shaken by other people’s views easily. If you are confident then you won’t choke your positions off easily. The list goes on and on and on. But how to build confidence? Confidence comes from experience. Experience builds on successes and failures. Deeply memorize your successful investments so that you can put yourself in a winning position. Understand but don’t beat yourself on your failed investments. Acknowledge them as lessons and move on. Repeat the process over and over again. That’s how confidence gets built.