Module 12

Innerworth — Mind over markets

Chapters


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    1. Introducing ‘Innerworth – Mind over markets’

    Most people start trading the markets lured by the prospect of making easy money. But anyone with experience will agree that the stock markets are probably the toughest place to make easy money. You n ..

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    2. Accurate Perceptions of Loss and Risk Aversion

    Emotions often drive investment decisions. Trading lore is replete with examples of how fear and greed influence the masses to buy and sell at the wrong time. Similarly, behavioral economists have foc ..

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    3. Accepting Criticism

    Novice traders are infamous for needing to be right. This natural, human tendency is so powerful that novice traders engage in unproductive trading behaviors to avoid admitting that they are wrong. Th ..

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    4. Trading Capital: Size Matters

    How much capital does one need to start trading? Every person who is new to trading asks this question. It’s often the first question that pops up at trade shows and in trading-school classes. B ..

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    5. Action Oriented and Winning

    Trading isn’t easy. Indeed, the odds are against you. But if you succumb to hopelessness, you’ll never become a winning trader. You have two choices: You can wallow in self-pity or you can ..

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    6. Focus on the Action, Not the Prize

    It’s easy to falter while trading. Suddenly, you get distracted, panic, and make a trading error. When trading with an optimal mindset, in contrast, the winning trader is focused on his or her i ..

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    7. Detailed Action Plans: A Precursor For Trading Success

    In our everyday lives, we are used to doing things reflexively, on the spur of the moment. For example, we don’t consciously think about making a turn as we drive; we just do it automatically wi ..

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    8. A Trading Fable

    Did your parents read you fables as a child? Fables are often fanciful and improbable tales that have a lesson to teach. Here’s a thought-provoking trading fable. Once upon a time, there was a n ..

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    9. It’s Easier to Face Fear than Avoid It

    Jack fantasizes about becoming a profitable trader. He dreams of big wins and of amassing a great deal of wealth. In the back of his mind, he imagines that if he were wealthy, he could have a life ful ..

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    10. Regret: A Powerful Emotion You Must Face

    When trading the markets, one often faces actual harm: If you bet a lot of capital on a single trade, and it goes against you, you lose it. The harm isn’t imagined; the actual loss of money is p ..

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    11. The Unconscious Drive to Fail

    Ask traders about their reasons for trading, and most will tell you, “I want to make huge profits.” Although most traders get into the business to make a significant return on their money, ..

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    12. False Consensus Effects

    Suppose you decided to go long on Sears.  How many other investors would agree with your decision?  When people are asked such a question, they tend to over-estimate the number of people who will ma ..

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    13. Making Sense of it All

    Social psychologists are often fond of saying that people are “lay scientists.” Like formal scientists, they try to understand their world. They make hypotheses and test them. Rather than ..

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    14. Fear of a Sudden Turn of Events

    You have several positions open and things have been going well for the past few months. Suddenly, there is yet another interest rate hike right on the heels of a month of bad weather and natural disa ..

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    15. Refuting Core Beliefs: A Remedy for the Fear of Failure

    Our outlook and expectations dictate how we approach trading. For example, if we are extremely fearful, we will be reluctant to take risks, and at an extreme, we may even be afraid to even put on a tr ..

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    16. Paralyzed by a Fear of Failure

    Jack has just made five losing trades in a row. His confidence is shaken, and now he is reluctant to make another trade. He thinks, “Why should I try again. I’ll just lose again. If I lose ..

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    17. Getting Worked Up For Nothing

    Jack’s been trading for the past five years, and he has put in a heroic effort. He worked two jobs to build up enough capital to trade and have a realistic chance of success. He spent nights and ..

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    18. Loss is Feedback, Not Failure

    Like any challenging endeavor, trading requires a “thick skin.” One cannot be easily hurt by criticism. One must be completely open to criticism of any kind so that changes to one’s ..

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    19. First in Line and Ready for Action

    There’s security in numbers. Have you ever looked at a school of fish in an aquarium? They stay in a big clump because if a bigger fish is nearby and ready to eat one of them, a single fish is l ..

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    20. The Flexible Trader

    The winning trader is flexible. Flexible traders have a carefree attitude when it comes to executing a trade. They don’t over-think their strategy. They do their homework, develop a reasonable t ..

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    21. Flexible and Open to Possibilities

    Winning traders are flexible. They look at a trade from different angles and they are not afraid to explore every possibility. They know they may be wrong, but being wrong doesn’t bother them. I ..

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    22. The Flexible and Disciplined Trader

    Flexibility and discipline go hand and hand. In their book, “Electronic Day Traders’ Secrets,” Friedfertig, West, and Burton argue, “Discipline is saying ‘I’m wrong ..

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    23. Be Flexible Enough to Stand Aside

    It is vital for one’s survival to know when to stay out of the markets. There are times whey you should stand aside and wait for the right moment. Not only can market conditions change, but also ..

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    24. Peak Performance Trading

    Seasoned traders frequently describe moments when they trade in a peak performance state. There are various names for it: “trading in the zone” or “flowing with the markets.” B ..

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    25. The Fly and the Tree

    Flexibility is key when you’re a trader. One must be able to look at a trading problem from multiple perspectives in a calm, rational, and insightful way. Have you ever noticed that when you are und ..

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    26. Focused on the Trade

    When you have put on a trade, it’s essential to stay focused on monitoring it. You must be able to accurately perceive the signals that indicate the market is going against you, and you must act ..

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    27. Concentrate On the Trade

    When you’re trading the markets it’s necessary to concentrate on the trade. You cannot let your attention sway. You can’t impulsively make a mistake. We are often distracted, however ..

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    28. Focusing on the Positive

    When trying to meet the challenges of trading, it is often easy to obsess about what you are doing wrong until you start to feel that you’ll never master the markets. Rather than focus on what y ..

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    29. Knowing when to Fold

    The most challenging aspect of trading is finding a trading strategy that will work reliably. The possible strategies are endless. Some traders carefully backtest historical data and try to find a str ..

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    30. Following your Passion

    Successful people are passionate about what they do. They aren’t concerned with the outcome, but with the process of achieving the outcome. That said, it would be nice to avoid worrying about ou ..

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    31. Forward Thinking

    The famous psychotherapist Fritz Perls once noted that people feel anxious and fearful when they worry about, and mull over, their past mistakes or worry about the future. A peak performance mindset i ..

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    32. The Right Frame of Reference

    Many novice traders are frustrated when they start trading. It’s common to hear a novice trader complain, “I don’t know what’s going wrong. I study the markets every chance I g ..

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    33. Trading offers Freedom

    When trading the markets, there’s a constant need to make profits. You can easily start feeling that there’s too much to do and not enough time to do it. If you’re like most traders, ..

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    34. Free and Easy Trading

    Throughout the day you make everyday decisions that mean little to you. You drive your kids to school and along the way, you make a host of decisions about which route to take, where to turn, or when ..

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    35. Free Up Psychological Energy by Relieving Stress

    There are limits to the psychological energy you have available to devote to trading. And this limited energy is diminished when you let too many issues remain unresolved, lingering in the back of you ..

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    36. Organize your Workspace and Relieve Stress

    Trading the markets is a stressful occupation. The markets are unpredictable and chaotic. No outcome is a certainty, and many times, when it seems as if you know where the market is going, you discove ..

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    37. Market Frustration: Stay Calm; It’s not Personal

    Tom had been going long on a stock trade for two months. He expected a product announcement to boost the price a few points, but nothing happened. Despite rave reviews of the product and high demand, ..

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    38. Building Up Frustration Tolerance

    Setbacks are the rule rather than the exception when it comes to trading. Discovering reliable trading strategies is a challenge, and frequently, a promising strategy produces a loss. Losses and other ..

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    39. Fear of Success: Is it relevant for Traders?

    Psychologists studied “fear of success” in the 1970s and this topic received a great deal of attention in the popular media. Today, some trading websites have had discussions as to whether ..

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    40. Take Responsibility and Take Control

    The prominent psychologist Dr. Julian Rotter noted that there are basically two ways to understand and interpret events in one’s life: One can attribute the cause of events to internal forces, s ..

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    41. The Mindset of a Professional Gambler

    Many members of the “established” investment community are quick to point out that investing is not gambling. To the general public, gambling has many negative connotations. When professio ..

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    42. Closing the Gap

    Do you ever start the trading day feeling that there’s little chance of making a profit? You just stare at your screens, stuck and disappointed. It’s at times like these that an optimistic ..

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    43. Developing New Trading Ideas

    As any seasoned trader will tell you, the key to long-term profitability is a flair for devising innovative, new trading ideas. Winning strategies are hard to find. And after one goes through all the ..

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    44. Back On the Right Course

    Have you ever found yourself frustrated or angry, but didn’t know why? Perhaps you were innocently monitoring a position and the market suddenly turned, and when it did, you watched half of your ..

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    45. Take Credit for Your Efforts

    Winning traders make profits. In the end, the bottom line as a trader is the extent to which you are profitable. If your efforts don’t produce a profit, it is easy to feel as if you have accompl ..

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    46. Getting Ready to Trade

    Trading is challenging. It pushes your skills to the limits. And unless you manage your risk carefully, the consequences of a wrong move can be fatal. It’s vital for your survival that you make ..

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    47. Realistic Optimism Keeps You Grounded

    Jack and John have just started a small trading business. Jack says, “I can feel it. We’re going to make a fortune. By this time next year, we’ll be rolling in money.” John cou ..

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    48. Don’t Forget to Take a Break

    Reality is subjective. There are different states of reality in the same way that there are different states of mind or different states of emotion. After a series of setbacks, for example, the world ..

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    49. They Say it Couldn’t be Done

    Jim has been trading for six months. He started with $5,000, but he only has $1,500 left. He is starting to get worried. He’s frustrated and upset. He tells his friend Jason, “I think it i ..

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    50. Waiting for the Payoff

    Are you ready to work all day and make absolutely no money at all? If you ask most people that are accustomed to working a 9-to-5 job, they would say, “No way, are you kidding?” But if you ..

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    51. Modest and Realistic Goals

    Stan is disappointed with his life. He views his life as a consolation prize, a series of concessions that fail to meet his desires in the end. He wishes he had more money. He fantasizes, “If I can ..

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    52. Clear and Specific Goals

    Trading can be tedious at times. Day in and day out you have to look for market opportunities, and once you find them, you have to put your money and a little bit of ego on the line, and suffer the co ..

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    53. Setting Goals for the New Year

    With the New Year upon us, it’s time to make plans for the future, and set exciting new goals. Goals can be motivating. When we think of where we want to go next in our lives, and when we formul ..

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    54. Goal Setting Enhances Motivation

    The goals we set often dictate our motivation level. In his book, “The Mentally Tough Online Trader,” Robert Koppel (2000) argues, “Setting goals is imperative for the trader to enha ..

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    55. Go For It

    When your money is on the line, you can’t help but act cautiously. You don’t want to impulsively gamble with your account, dig yourself into a financial hole, and need to work twice as har ..

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    56. The Golden Mean: Real Trading Phenomenon or Just Wishful Thinking?

    If you’ve spent any time around trading, you’ve probably run into the Golden Mean. You may have seen it represented as Fibonacci lines on a price chart. The Fibonacci sequence is a string of numbe ..

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    57. Putting Up a Good Fight

    The outcome of a trade is never a sure thing. There’s always an element of chance. When going long, for example, all indicators may suggest a strong and solid trend, but it’s possible that ..

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    58. A Good Mood Is More Important Than You Think

    Have you felt under extreme pressure while putting on a trade, and found that you just couldn’t think straight? You questioned your trading plan, and suddenly, you hesitated at a critical moment dur ..

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    59. The Dynamics of Greed

    In the movie “Wall Street,” Gordon Geckko argues, “Greed is good.” Greed can motivate you to strive for perfection and keep you persisting in the face of adversity, but greed h ..

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    60. Don’t Be a Grinch: Relax and Seek Out Balance

    “How the Grinch Stole Christmas” by Dr. Seuss is a parable of modern life. The Grinch sneaked into town and tried to ruin everyone’s Christmas by stealing the presents and materialis ..

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    61. Grounded and Objective

    On Thursday, tech stocks took a dive. Mark lost $5000 on his AAPL position alone. It’s Friday morning, but he still feels guilty. He can’t get the losses out of his mind. He has been tryin ..

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    62. A Guidebook for Work Productivity

    Trading is a demanding profession. If you are a novice trader seeking consistent profitability, you have your work cut out for you. Many people are attracted to trading, but few actually become profit ..

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    63. Conquering Guilt and Moving Forward

    In the trading profession, profits are hardly a sure thing. Even the most seasoned trader makes a big mistake occasionally and pays the price. Professional traders at large financial institutions, for ..

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    64. Working Through Guilt and Moving On

    Last night, it all seemed so simple. You had a trading plan all worked out. The stock should dip to $50 around noon. You would patiently wait, buy it, and sell when it hit 52 later in the trading day. ..

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    65. Guilt: Protection Or Distraction

    Jack just abandoned his trading plan and ended up making a losing trade. He thinks, “Why did I do it again? Why can’t I stick with my plan?” He feels guilty. He’s kicking himse ..

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    66. Going With Your Gut

    Seasoned traders aren’t afraid to go with their gut instinct. After years of experience, an astute trader’s gut is the unconscious integration of all essential market information, the mini ..