The single most important thing I can relate in this book is simple to understand, but difficult to define. It becomes the crux of the matter, the point-of-attack, in taking the path toward becoming a long-term success in the trading-investing arena.
You need to be comfortable in your methodology. You need to have confidence in it so that you can apply your methodology without hesitation, in the heat of the battle. It is important to have a methodology, no matter what it is, so that when the markets are at their most intense price change volatility, you can act without overthinking.
This is one reason I love to “scenario-ize,” whereby I discuss myriad possible scenarios that might play out in the macroeconomic or geopolitical spheres, or even in terms of sentiment, lop-sided speculative exposure, and technical vulnerabilities.
Armed with a confidence-inspiring methodology, and having visualized a wide range of potential changes to the trading environment or market circumstance, it becomes far easier to implement a strategy when the heat is turned up.
In this chapter, I discuss psychological factors I have encountered, and grappled with during my career. What makes the psychological risk dynamic so interesting is that even the most experienced traders and investors can make rookie mistakes, and can make them over and over and over.
I have had to learn many trading lessons the hard way. I have incurred plenty of losses to go along with my successes. ...