Regardless of one’s level of education or achievement, every individual is subject to his/her unique, well, you name it, experiences, ego, biology, cultural scripting, prejudices, proclivities, etc. I often think about the geniuses who made a killing while lots of folks got killed during the great recession of 2008. Their amazing awareness and forethought (and, well, not to take anything away, luck) made them wealthy to the point where they can be wrong (unlucky) on virtually every next trade for the rest of their lives and never worry about how they’ll fill the gas tanks in any of their yachts or pay the staff at any of their chalets (now I’m assuming that they impose loss limits on their speculations).
The reason I often think about these blokes is because some of them simply can’t allow themselves to leave the limelight. Thus, they pop up every now and again with some prognostication that the world as we know it is about to change and that they’re positioned perfectly to exploit it to the fullest. Problem is, the world is a lot bigger than they are (but their egos?), and getting it right once does not a true Nostradamus make.
Sincerely, I have no desire to pick on any of these individuals; I take nothing away from them, they truly did their homework and took full advantage of their conclusions when the mortgage market imploded. That said, I think it is instructive to pay attention to what they’ve accomplished, as traders/investors, since. Rather than me chronicling some of their ensuing mediocrity/poor results, you can start with the linked profile above and Google around other names if you’re so inclined.
Even though on behalf of our clients we view the market as a place to invest for the long-run, as opposed to trade for the short-run, I find many pearls of wisdom in much of the literature on trading. Mark Douglas, in his outstanding book Trading in the Zone, describes beautifully how, ironically, our unique minds tend not to grasp the uniqueness of each moment. And of how “trying to be right” (for being right’s sake) in the market seldom, if ever, serves one well (per the stories of some of recent history’s brightest):
Take a moment and think about the concept of uniqueness. “Unique” means not like anything else that exists or has ever existed. As much as we may understand the concept of uniqueness, our minds don’t deal with it very well on a practical level. As we have already discussed, our minds are hardwired to automatically associate (without conscious awareness) anything in the exterior environment that is similar to anything that is already inside of us in the form of a memory, belief, or attitude. This creates an inherent contradiction between the way we naturally think about the world and the way the world exists. No two moments in the external environment will ever exactly duplicate themselves. To do so, every atom or every molecule would have to be in the exact same position they were in some previous moment. Not a very likely possibility. Yet, based on the way our minds are designed to process information, we will experience the “now moment” in the environment as being exactly the same as some previous moment as it exists inside our minds.
If each moment is like no other, then there’s nothing at the level of your rational experience that can tell you for sure that you “know” what will happen next. So I will say again, why bother trying to know?! When you try to know, you are, in essence, trying to be right. I am not implying here that you can’t predict what the market will do next and be right, because you most certainly can. It’s in the trying that you run into all of the problems. If you believe that you correctly predicted the market once, you will naturally try to do it again. As a result, your mind will automatically start scanning the market for the same pattern, circumstance, or situation that existed the last time you correctly predicted its movement. When you find it, your state of mind will make it seem as if everything is exactly as it was the last time. The problem is that, from the market’s perspective, it is not the same. As a result, you are setting yourself up for disappointment.
What separates the best traders from all the rest is that they have trained their minds to believe in the uniqueness of each moment (although this training usually takes the form of losing several fortunes before they “really” believe in the concept of uniqueness). This belief acts as a counteracting force, neutralizing the automatic association mechanism. When you truly believe that each moment is unique, then by definition there isn’t anything in your mind for the association mechanism to link that moment to. This belief acts as an internal force causing you to disassociate the “now” moment in the market from any previous moment filed away in your mental environment. The stronger your belief in the uniqueness of each moment, the lower your potential to associate. The lower your potential to associate, the more open your mind will be to perceive what the market is offering you from its perspective.