Mark Douglas Trading Psychology 5/7 Emotional Response

Summary

The video script discusses the psychological aspects of trading, emphasizing the importance of adopting a probabilistic mindset to manage the emotional responses to wins and losses. It highlights the pitfalls of trading from a fear-based perspective, such as the tendency to focus on the positive outcomes (upticks) to avoid the pain of losses, which can lead to ignoring negative trends. The speaker advocates for a state of mind that is free from fear and overconfidence, suggesting that self-awareness through practices like meditation and journaling can help traders recognize and manage their emotional states to achieve consistent success in trading.

Takeaways

• 🎲 Understanding the concept of a weighted coin demonstrates the importance of analyzing the odds before making a decision.
• 💡 The Texas coin flip scenario illustrates the advantage of having a probabilistic edge in a situation where the outcome is not 50/50.
• 🚀 Maximizing the probabilistic edge involves making strategic decisions, such as consistently betting on the more likely outcome.
• 🎯 In trading, focusing on the long-term average rather than individual outcomes is crucial for success.
• 🧠 Emotional responses to individual trades can cloud judgment and lead to poor decision-making.
• 🧩 Developing a probabilistic mindset allows traders to execute trades without fear and aligns actions with their beliefs.
• 🔄 The cycle of trading is a powerful tool for personal development due to its direct feedback on actions and decisions.
• 📈 Market analysis is essential, but it cannot prevent the emotional pain associated with the fear of being wrong or losing money.
• 🤔 Traders often focus on the information that confirms their biases, such as upticks in a downtrend, due to fear.
• 🌀 Overconfidence or euphoria can be as detrimental as fear, as it can lead to a lack of risk perception and poor trading decisions.

Q & A

What is the main concept discussed in the transcript?

The main concept discussed in the transcript is the psychological aspect of trading, focusing on how fears and beliefs impact decision-making and the importance of adopting a probabilistic perspective to achieve consistent success in trading.

How does the speaker describe the coin flipping exercise with the unevenly weighted coin?

The speaker uses the unevenly weighted coin flipping exercise to illustrate the concept of having an edge in probability. The coin, when flipped 1000 times, lands on tails 70% of the time due to its uneven weight distribution. This edge is used to make informed decisions in a betting scenario.

What is the expected outcome of betting on the weighted coin?

The expected outcome of betting on the weighted coin, given the 70% tails occurrence, is to win on average 70% of the time, assuming the bettor consistently bets on tails and manages their money effectively.

How does the speaker relate the coin flipping exercise to trading?

The speaker relates the coin flipping exercise to trading by emphasizing the importance of understanding and utilizing probabilistic edges in the market. Just like with the weighted coin, traders should seek to identify and exploit patterns and trends that give them an advantage.

What is the significance of the 'higher agenda' mentioned in the transcript?

The 'higher agenda' refers to the long-term strategy or goal of the trader, which is to maximize profits over a series of trades. It means focusing on the overall success rate and expected value rather than being concerned about the outcome of each individual trade.

How does fear impact a trader's perception and behavior according to the transcript?

Fear can distort a trader's perception of market information and lead to irrational behavior. It can cause traders to focus too much on the potential negative outcomes (like losing money), which can prevent them from seeing opportunities or making sound decisions.

What is the importance of having a probabilistic belief system in trading?

Having a probabilistic belief system in trading is crucial because it allows traders to understand that outcomes are not about right or wrong, but about the likelihood of certain events occurring. This mindset helps traders to manage risk, make consistent decisions, and avoid being paralyzed by fear.

What does the speaker suggest as a solution to overcome the fear of losing in trading?

The speaker suggests that traders should redefine their approach to trading, removing the association of outcomes with being 'right' or 'wrong'. Instead, they should focus on the long-term probabilities and expected outcomes, managing their emotions, and developing a mindset that is unencumbered by fear.

How does the speaker describe the two fundamental types of market information?

The speaker describes the two fundamental types of market information as upticks (increases in price) and downticks (decreases in price). These are the basic movements that traders observe and interpret to make trading decisions.

What is the danger of euphoria in trading according to the transcript?

Euphoria is a dangerous state of mind for traders because it can lead to overconfidence and a lack of perception of risk. In such a state, traders may take excessive risks and make poor decisions, as they no longer see the potential for loss.

What are some strategies suggested in the transcript to improve a trader's psychological state?

The transcript suggests meditation and keeping a journal as strategies to improve a trader's psychological state. Meditation can help traders become objective observers of their own thoughts, while journaling can provide insights into their mental state and behavioral patterns.

Outlines

00:00

🎲 The Weighted Coin and Probabilistic Edge

This paragraph introduces a thought experiment involving a weighted coin that has a 70% chance of landing on tails and a 30% chance of landing on heads. The speaker uses this scenario to discuss the concept of probabilistic edge and how to leverage it in a betting situation. The key point is that even with an edge, individual outcomes are unpredictable, but over a series of events, the edge becomes apparent. The speaker emphasizes the importance of focusing on the long-term probabilities rather than getting caught up in the outcomes of individual flips.

05:04

💡 Emotional Response and Belief System

The second paragraph delves into the emotional responses traders have to market movements and how these are influenced by their beliefs. The speaker argues that understanding and aligning one's beliefs with a probabilistic perspective is crucial for managing emotions and responding appropriately to market events. The discussion includes the idea that fear can distort perception and lead to self-fulfilling prophecies of loss, and the speaker encourages traders to adopt a mindset that is unencumbered by fear.

10:05

📈 Market Information and Trend Recognition

This paragraph focuses on the fundamental types of market information—upticks and downturns—and how traders interpret these based on their understanding of market behavior. The speaker explains that before learning to recognize patterns, market movements appear as random information. As traders learn to distinguish between uptrends and downtrends, they can use this knowledge to make informed trading decisions. However, the speaker warns that fear of being wrong or losing money can blind traders to the actual market trends, leading to poor decision-making.

15:08

🌪️ The Impact of Fear on Trading Decisions

The fourth paragraph explores how fear can significantly impact a trader's perception and behavior. The speaker uses the example of a trader who, due to fear of loss and being wrong, focuses disproportionately on upticks (which alleviate pain) and overlooks the overall downtrend. This cognitive bias leads to ignoring critical market information and can result in holding onto losing trades or exiting winning trades too early. The speaker emphasizes the need to recognize and overcome these fears to become an effective trader.

20:08

🧘 Achieving a Carefree Confidence in Trading

In the final paragraph, the speaker discusses the importance of achieving a state of carefree confidence for successful trading. While acknowledging that positive emotions like excitement and joy are not to be neutralized, the speaker warns against the dangers of overconfidence and euphoria, which can lead to a lack of risk perception. The speaker suggests that self-awareness, possibly through practices like meditation and journaling, is crucial for recognizing one's emotional state and ensuring it aligns with one's trading goals. The paragraph concludes with the idea that trading is a vehicle for personal growth, as it requires the development of psychological skills and an understanding of one's own mindset.

Keywords

💡Exercise

In the context of the video, an 'exercise' refers to a hypothetical scenario or mental practice designed to illustrate a concept or test a strategy. The exercise involving the unevenly weighted coin is used to demonstrate the importance of understanding probabilities and leveraging them in decision-making.

💡Analyze

To 'analyze' in the video means to examine something methodically and in detail to better understand its nature or to identify its components. The process of analyzing the coin's weight is crucial to uncovering the advantage that can be used in the betting scenario.

💡Probabilistic Edge

A 'probabilistic edge' refers to a statistical advantage or higher likelihood of a particular outcome occurring based on available data or information. In the video, the speaker emphasizes the importance of recognizing and utilizing such an edge in trading and decision-making processes.

💡Money Management

Money management is the process of budgeting, allocating, and controlling the money in a trading account with the goal of preserving capital, maximizing returns, and managing risk. The video discusses how to apply money management principles in the context of the coin flip exercise to maximize profit while managing potential losses.

💡Emotional Response

An 'emotional response' is a psychological reaction to a stimulus or situation, often influencing behavior and decision-making. The video script highlights how emotional responses, such as fear of losing or joy of winning, can significantly impact a trader's performance and the need to manage these emotions effectively.

💡Belief System

A 'belief system' consists of the principles, values, or habits that guide an individual's actions and decisions. In the context of the video, developing a probabilistic belief system is crucial for traders to approach trading without fear and to execute trades flawlessly.

💡Fear

In the video, 'fear' refers to the emotional response that can hinder a trader's ability to make rational decisions, often leading to avoidance of risk or failure to capitalize on opportunities. It is portrayed as a significant obstacle to effective trading.

💡Market Behavior

Market behavior refers to the patterns, trends, and dynamics observed in the financial markets. Understanding and interpreting market behavior is essential for traders to make informed decisions and develop effective trading strategies.

💡Self-Awareness

Self-awareness is the ability to recognize and understand one's own emotions, thoughts, and behaviors, and how they influence actions. In trading, self-awareness is crucial for managing emotions and maintaining a balanced state of mind to avoid making impulsive or fear-driven decisions.

💡Euphoria

Euphoria is a state of intense excitement and elation, often associated with a loss of touch with reality or risk perception. In trading, euphoria can be dangerous as it may lead to overconfidence and a disregard for potential risks, resulting in reckless trading decisions.

Highlights

The concept of analyzing a coin to find it's unevenly weighted and using this knowledge to predict outcomes in a betting scenario.

The importance of understanding probabilities and having a probabilistic edge in decision-making processes.

The psychological aspect of trading, emphasizing that emotions and responses play a significant role in the success or failure of trades.

The idea that each individual trade should not be seen in isolation but as part of a larger series of trades where the overall outcome matters more.

The necessity of aligning one's beliefs with a probabilistic perspective to execute trades flawlessly and without fear.

The explanation of how fear can distort one's perception of market information and lead to irrational decision-making.

The example of how a trader's fear of being wrong and losing money can lead them to focus more on upticks, thus missing the overall downtrend.

The concept of operating as a trader from a carefree and confident state of mind, rather than from a place of fear.

The warning against overconfidence or euphoria in trading, as these states can lead to a lack of risk perception and poor decision-making.

The suggestion that meditation and self-awareness can improve a trader's ability to recognize and manage their emotional states during trading.

The importance of keeping a trading journal to track one's emotional state and ensure alignment with trading goals.

The notion that the market provides two fundamental types of information: upticks and downticks, and how a trader's emotional state can influence which they focus on.

The illustration of how fear can lead to focusing on the positive outcomes (upticks) in a trade to avoid the pain of loss, thus ignoring the actual trend.

The explanation that the relationship between analysis and the outcome of a trade is often an illusion, and true success comes from a psychological state, not just analysis.

The emphasis on the psychological aspects of trading being more important than technical skills once a trader has learned to read the market.

The idea that trading can be a vehicle for personal growth and development due to its ability to reveal one's true mental state and capabilities.

Transcripts

[Music]

thank you

if I set up an exercise

where uh well let's say let's say you

had a coin

and you thoroughly Analyze This coin

looks like a normal coin we thoroughly

analyzed it and found that it was

unevenly weighted

what yeah find a Coin okay I found a

coin yeah it was unleavidly waited on

the head side over the tail side and you

flipped it a thousand times and and

found that it it's going to come up

on a percentage basis Tails 70 of the

time now the Texas gonna flip down

because it's weighted It's Gonna Be

Tails 70 of the time and heads 30 of the

time

and you know you decided to get into a

situation where someone says to you you

know what

uh they let you flip that coin your coin

and they say you know because you can

you say to them well you know what I'm

really good at flipping coins and and uh

and I can do better than 50 50. and the

person says okay I'll give you a

thousand dollars

for every time you're right but you pay

me a thousand dollars for every time

you're wrong

now what you're going to is you're going

to a situation where let's say over over

10 flips we're gonna you're gonna flip

the coin ten times in a row now first of

all what is the likelihood and it was a

likelihood that you would be right all

10 times in a row

okay well in this case of the weighted

coin it's better but but under normal

coin it would be highly unlikely you'd

be able to you'd be able to correctly

predict 10 Clips in a row but you know

that you have an edge a probabilistic

edge

so to make to take maximum advantage of

the edge that is built into that coin

how are you going to bet

you what no no how are you going to bed

now what what are you going to call on

each flip you're going to call Tails ten

times in a row right

you're not even going to think about

doing anything but calling Tails 10

times in a row

what are you expecting on each

individual flip

no what do you expect on each individual

flip

ability you don't know right but but

here's what but here's what you're

really expecting one you don't know but

here's what you do know you do know

something it's either going to be head

or tails

you told that it's either going to be

head or tails okay and and you know that

that heads are going to come up and

Tails are going to come up so in essence

you are expecting both heads and tails

you are going to go into the 10 flips

expecting both heads and tails so if you

call tails

and heads come up are you wrong

yeah you called Tails why why are you

wrong

you call tail why aren't you on

CE

oh you're waiting for the average over

over the series of lips in other words

you're not wrong on each individual flip

because you have a because each

individual call is serving a higher

agenda

the agenda meaning I want the 70

percentage

meaning that I'm going to end up with

three thousand dollars most likely

on average

so every time I call tail I'm calling

Tails 10 times in a row

but every time I do and a heads come up

am I going to feel like a loser am I

going to think that I was wrong

no I'm serving a higher agenda I want

the 70 percent

when we test develop and test an edge

and find out that it comes up with a 70

win loss ratio and say that I'm going to

take the next 20 trades

three four five six seven eight nine 10

11 12 13 14 15 16 17 18 19 20.

am I gonna care about the sequence the

wins the losses

is it gonna matter what the outcome that

each individual trade is no all I'm

looking for is the bottom line at the

end of 20 trades

that's it this is what this is all about

when you can learn to think this way at

the very core of Who You Are

you will be able to execute your trades

flawlessly it wouldn't even occur to you

not to do exactly what you need to do in

each and every instance

to the degree to which you cannot do it

in each and every instance

is the degree to which you still don't

believe you don't have as a core part of

your identity a probabilistic or

functional belief system in front of

belief system and probabilities

and I will show you how to get it

installed

go ahead

all right

a little bit on one then on one

okay yeah

yes correct

um

no maybe I set the exercise up very

specifically

what can't work

different amounts

no I just said no no keep something in

mind you're taking out a context okay

you're applying you're applying a

principle to something I'm not talking

about all I'm all I want to do all I'm

doing I'm talking specifically about

about I how to play this how to play

this in a sensible money management

perspective I'm just doing it from the

perspective of

what our emotional responses this is

just all based on emotional response in

other words what's our perspective in

relationships we're operating on a

certain perspective it will dictate a

certain emotional response

if I'm operating out of a probabilistic

perspective then there's nothing to be

afraid of yeah this this all has to do

with our emotions

and our response in other words you know

in other words understanding that what

we believe is is going to is going to

determine how we see the world we see

the world for our beliefs

the decisions we make are based on what

we believe in relationship to the

information we're exposed to

what we experience that was how we feel

about the results or how we behave will

be consistent with what we believe

and how we experience our results

meaning what our state of mind is are we

happy are we regretful are we elated are

we joyful are we fearful

in other words how do we experience our

outcomes is also a function of whatever

beliefs we're operating out of

what we want to do is get to the point

where our beliefs are completely aligned

with a probabilistic perspective so that

we can do exactly what we need to do

when we need to do it unencumbered with

fear

because here's what happens when we're

operating on a fear I'm going to give

you a real quick example and I'm going

to go into the whole belief system in

more detail and then set up the exercise

okay

we got support we got resistance Market

comes back up nice trading range from

the backs up to uh resistance coming

down to support okay now I'm looking at

the start I'm saying okay the market uh

rallied off support here essentially

means what an imbalance between the buy

and sell orders why I don't know who who

put the buy orders in to absorb the sell

orders as it was coming down I have no

idea I don't care I don't need to know

it doesn't make any difference remember

the example yesterday where you know I I

had my customers buying support on

intraday basis buying support every day

basis and it fell apart the next time

because the guys who are supporting that

price in the bond pit weren't out to

lunch

and so as a result their orders did not

go in their buy orders weren't there to

go into the inventory and and there were

more sell orders than buy orders so

whoever was selling it each time in

other words whatever reason they had to

enter these cell owners they were not

met with with any any resistance I'm not

we're not resistance in the sense in

other words prices take the path of

least resistance and there weren't

enough buy or enough buy orders to to

absorb those sell orders and so and and

then and then more buyers came into the

market or whoever and the market came

down again they were out to lunch so it

fell apart now here in a situation where

now the Market's coming down to support

and I'm a typical Trader operating out

of the fear of being wrong the fear of

losing money the fear of missing out the

fear of leaving money on the table

okay and as a result of not have Not

Having learned how to think in

probabilities or having having realized

that that this is what this business is

all about

that analysis will not will not prevent

me and will not prevent the experience

of me tapping into the accumulative

emotional pain of what it means to be

wrong and lose money that a most

analysis cannot prevent that from

happening so what I have to do is I have

to take it out of a right or wrong win

or lose context

and this is what this is what we're

doing here we're taking your trading

we're redefining it so that you have no

reason to you have no reason to

associate the experience of an outcome

of a trade with what it means to be

wrong

that doesn't mean you're gonna that

doesn't mean it has anything to do with

whatever memories and beliefs you have

that Define what it needs to be wrong

for the rest of your life in any other

part of your life it just means that for

trading you're realizing this has

nothing to do with being wrong

this has nothing to do with losing you

are extent you you are occurring

expenses

George so you're not a loser

take it out of the right or wrong win or

lose context and and you're going to

experience freedom

and here's how because the way the way

these fears impact our perception of

information and our Behavior

remember I said yesterday that fear uh

causes us to uh focus on the object of

our fear so that we end up experiencing

the very thing we're trying to avoid

will actually create what we're trying

to avoid just based on what we're afraid

of

so the market gives us at the most

fundamental level the market gives us

two kinds of information to consider

there's a whole array of information

obviously but at the most very most

fundamental level you take it down right

to the core we have two types of

information two distinctly different

types of information to consider what

are those what what those two types of

information be

well sort of up tips and down tips

Optics and bound checks are that simple

right there's an uptick and an object an

upset and Foundation

okay now as as we learn about

Behavior patterns and trading patterns

we learn things we learn to make

distinctions in the collective Behavior

distinction of being like what do we

call this

and if I'm a technical perspective what

do we call this

an uptrend

and what do we call this we call this a

downtrend okay

so we actually learn

we learned to make these distinctions in

in the Market's behavior that have

meaning before we learn what the meaning

of these patterns are they are

essentially meaningless

meaning that we can before we learn the

distinctions we can look at a chart and

it's just literally random information

that has no meaning until we learn the

distinctions

so in essence we we build up these

distinctions so that we can recognize

what's already in our brain outside of

us

so when it when it when it appears we

can say yes I know what that is

you guys with me on this and so every

other distinction that is possible in

the Market's behavior that we haven't

learned about yet is essentially

invisible

you guys with me on this

and we haven't learned to recognize it

it's invisible

so there are there are always

opportunities available that are in

essence invisible simply because we

haven't learned to make the distinctions

so now I'm a typical Trader who has

learned to make this distinction and and

Define certain patterns as an uptrend in

the downtrend that it has meaning to me

because once an uptrend starts I'm

saying that you know it's like I'll

operate out of the principal don't don't

fight the trend the trend is your friend

until something happens to say otherwise

and what what's the real underlying

underlying meaning between the trend is

your friend you don't fight your friends

do you you were able to fight

so don't fight the trend because it'll

make the money

that doesn't mean you can't pick lows

and pick highs

but Trends are a good way to make money

and it's a distinction Market behavior

however I'm a typical Trader and I'm

operating out of the sphere of being

wrong and the fear of losing money

and so as as the Market's coming down to

support here I want to get into this

trade

and so I put a buy order in you know

somewhere here and get filled okay I put

a buyer in the Market's up a little bit

now as a typical Trader I probably will

not have defined predefined my risk

because as a typical Trader it's like

predefining the risk sets up an

irreconcilable counter irreconcilable

contradiction for me

okay it's like I'm not getting into this

trade list I think it's gonna work now

if I if I go through the if I go through

the exercise of telling me how far am I

going to let this Market move against my

position right here

to tell me that it's not going to work

in other words in essence it forces me

to gather information that would tell me

why or tell me that this trade might not

work and I might gather so much

information that I talk myself out of

the trade

has anybody ever not has anybody ever

talked themselves out of a winning trade

okay so you know and and talking

ourselves out of a winning trade that

that ends up working is most of the

times more painful than than getting

into a trade that just doesn't work

so if I've gone through this process of

having talked myself by by going through

the exercise of trying to define the

risk meaning the dollar value that I

have to assign this trade to find out if

it's going to work the dollar value of

the distance between where I get in and

structurally where I get out

and end up and I've talked myself out of

a trade in the past chances are all I'm

going to do is make sure that before I

put my buy order in I am really

convinced this is going to work

otherwise again why am I going to do it

so in essence there is no risk I'm not

expecting to lose I am not expecting to

lose

so the market starts to go in my favor

and you know then it starts to do this

you know yes

now remember I said the market gives us

two fundamental types of information to

consider upticks and down tips

I don't want to be in pain do I

I don't want an experience that Taps me

into what it means to be all the

accumulative emotional energy of what it

means to be wrong and my memories of

what it means to lose now the Market's

giving me two types of information to

consider is given me upticks and it's

giving me down text

if I don't want to tap into what it

means to be wrong and what it means to

lose what and what of these of the two

types of information that I'm being

offered what is going to create or have

what is going to have the most

significance in my mind

no you're not you're not you're not

following me you don't want to be in

pain people you don't want to be in pain

no no no no this is an example don't get

no that bad

this I kept I preface this but this is

the typical Trader this is not based on

your new awarenesses or probabilities

okay

okay

what of the information I'm being

offered I'm going to place more

significance on one type of information

than the other because because of what

it's going to mean to me emotionally

what information am I going to place the

most significance on

the upticks why because the upticks take

me out of pain

I'm expecting it and I was not expecting

to win and the upticks are taking me out

of pain so for example every every

series of down ticks I'm in pain every

series of upticks takes me out of pain

and gives me a sense of relief

down text Pain upticks Relief downtex

pain upticks relief oh it's finally all

over it's finally all over

but in the meantime I'm getting a

predominance of more downticks than

upticks in other words I'm placing an

inordinate amount of significance on the

value of the upticks in relationship to

the bound checks in essence distorting

what I'm actually seeing I'm not

actually seeing a downtrend

the downtrend has become invisible to me

I am capable of perceiving a downtrend

it exists in my mind as a distinction

but because of my unobjectiveness that

because of the because of the way my

fears are are uh impacting uh my

perception

I am actually not seeing a downtrend the

downtrend is invisible to me because all

I'm really seeing are these upticks

upticks upticks

and so here I'm afraid of being wrong

and I'm actually creating the experience

I am afraid of losing money and I'm

actually creating the experience it's

all going on inside my mind eventually

what will happen and I went over this

just a little bit yesterday eventually

what will happen is that this Market

will go down so far

that that because I'm just not operating

out of fear of being wrong here I'm also

operating fear of losing money that that

my fear of losing money will become

stronger than

my fear of admitting that I'm wrong

because once I admit that I'm wrong I

get tapped into the pain as soon as I

come to the threshold of admitting okay

I'm wrong I get tapped into the pain

and and what's shielding me from that

is the fact that so far my threshold for

losing money hasn't been hit yet

because when the fear of losing one more

dollar becomes greater

than my fear of admitting that I'm wrong

is when I'll get out of the trade

and then as soon as I get out of the

trade with nothing at stake any longer

I'll look at this downtrend and say

why did I just sell

I didn't sell because

this distinction was invisible to me

this happens in degrees like this is an

extreme case but this this this happens

in degrees in virtually every trade we

put on until we work through these fears

so let's say just the opposite happens

let's say you know instead of the market

doing this the market you know does this

[Music]

now who hasn't been in a trade in a

profitable trade now he's getting

exactly what he wants he's getting

exactly what he wants

how far do you think it's gonna how far

do you think he's gonna let that go in

his favor

what

in L.A

no way how many times have we been in a

winning trade where the market came back

and took our profits away and ended up

in losing trade

happening up where for example a place

starts placing an inordinate amount of

significance in this case

instead of the upticks okay okay it's

like oh oh the Market's taking my money

away oh the Market's taking my money

away oh well the Mark is taking my money

away

he'd never get to that level anyway he

probably he'll probably blow out of it

you know right in here

so afraid of leaving money on the table

that he that's exactly what he ends up

doing

we can't be effective Trader our Traders

operating out of these fears

we have we have to we have to find a way

to we have to find a way to operate out

of a Carefree confident State of Mind

now Johanna brought up something just

just after the break where uh

um where she thought I was saying oh

maybe implying that you know what we

have to give up both uh the idea that

that you know the negative and the

positive meaning that you know that

trading doesn't really have anything to

do with losing so we don't have anything

to be afraid of that trading doesn't

have anything to do with being long so

we don't have anything to be afraid of

that but on the other end you know that

we also have to neutralize our our

excitement or our happiness or our joy

from winning not the case not the case

at all

people who play craps they're spending

money to have fun they like being

surprised when the machine randomly pays

them off

[Music]

that's fun

so no we're not giving up the positive

but there is there is an issue that that

we have to address there is such a thing

as overconfidence We've Got Confidence

you know and this is confidence like

this is fear way over here and then

beyond fear is Terror these are states

of mind they're all in degrees and then

beyond confidence is Euphoria Euphoria

is a dangerous State of Mind to be in as

a traitor

[Music]

so what I am saying making the station

that yes you you do not want to be

trading in the state of euphoria

because in the state of euphoria

the risk doesn't exist

when we cross the threshold into a state

of mind of euphoria we have we don't

have the capability of perceiving risk

and then we'll end up doing all the

things we used to do when we believe the

risk didn't exist in the first place

and if I'm applying that you have to

develop some pretty sophisticated skills

of self-awareness to be able to

recognize when this happens yes I'm

applying that

there's a lot about this business that

you know there's there's no getting away

from the fact there's a lot of skills to

learn and they're all psychological

after you learn how to read the markets

everything is psychological everything

that's why you hear a lot of people talk

about you know the cycle of trading is

one of the best vehicles for for uh for

growth and and personal development that

there is

there really is because it's very

difficult to create Illusions about you

know the bottom line statement you know

you just hey if you lost 10 grand you

might be able to look at it and say you

know the minus sign isn't there put a

plus sign in your mind but otherwise

it's pretty difficult there's a lot of

ways that we can create Illusions about

what's going on in our everyday lives

it's real toughest Traders you hear

Traders talk about you know meditating

this is the reason why because

meditative meditation gives us a sense

of gives us a hype and sense of

self-awareness meaning that what you're

doing when you meditate is you're

becoming you can learn to become an

objective Observer to your own stream of

thoughts

because the thoughts all those thoughts

have significance

and they'll they'll give you indications

as to what kind of state of mind you're

in and what you're about to do that may

or may not facilitate your goals or be

appropriate

you talk about traders who keep journals

traders who you know used to be losers

went through the threshold got to the

threshold consistency and one of the

reasons why is because now they're

copious Journal Journal people this is

the reason why

because keeping journals will give you

will give you Clues and you know give

your plums as to where you are what your

state of mind is and what what other

agendas might be you know asserting

themselves on your ability to see the

market if I'm an objective perspective

so so we have to you know

so is everybody I mean I just want to

get sent is everybody really clear about

about you know the fact that we we have

to acquire a particular state of mind

that allows us to trade without fear and

and that and that analysis is not going

to accomplish that it seems like it can

every time we we do analysis and we put

on a winning trade or we put on a trade

and the market goes in our favor it

seems like analysis has done what it's

supposed to do and it's not that that

can't happen it's just that there isn't

the kind of relationship between between

the outcome and the reasons why you put

the trade on in the first place where

where you can you can make that

connection it isn't real it's an

illusion

we're getting in here we're getting into

that right now

I'm just I just want to make sure that

we're all we're all together on where

we're going here