Wall Street Craps – 2012 Global Ebook Finance Award-Winner

COME TO GRIPS WITH YOUR LOSSES: Figure out precisely what you did wrong, as well as what you did right after each losing trade. Always forgive yourself for your mistakes and realize that opportunities for improvement often come disguised as misfortune or temporary defeat.

A wise individual realizes that there is absolutely no value in beating themselves up for something they have done wrong in the past. After all, you cannot change the results you get in the stock market anymore than changing what you had for breakfast the previous day. Remember to be kind to yourself and choose instead to accept the lesson of your mistakes, uncover any bad habits, improve your system, regain your emotional balance, and move on to your next opportunity.

Recognize that your path to fortune will always have some bumps along the way. The sooner you get over these bumps, the sooner you will be ready and willing to trade successfully the next time around.

Comment: The stock market teaches you valuable lessons about investing and life more through defeat and pain than victory and joy. The purpose of pain is not for you to suffer. The purpose of pain is to heal yourself and then help other to heal from the same thing.

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“Every investor should be prepared financially and psychologically for the possibility of poor short-term results.”

Benjamin Graham ~ Legendary professional investor (1896-1976)

DON’T JUSTIFY YOUR BIG LOSSES: Your goal is to become a savvy player who plays the game correctly. It’s not about outperforming the averages. In a down market, don’t take satisfaction in knowing that you only lost 25% of your entire capital when the S&P 500 Index (one of the most widely followed stock market measurements) lost over 30%.

Professional money managers normally gauge their performance against the general market as measured by the S&P 500 Index in the effort to attract and keep clients. But individual investors are not in that same business and, therefore, should not use this measure as an excuse for losing money.

Individual investors must realize that the only way to lose large sums of money is by holding sizable positions during the wrong period of time. The individual investor always has the flexibility to leave the market and move to a 100% cash position at any moment.

On the other hand, most professional money managers are required to invest a certain portion of their fund’s assets in equities at all times. The professional money manager plays a competitive game that is measured against the performance of other professionals; in contrast, the individual investor is only concerned about making money-management decisions that fit their own objectives and level of risk.

Comment: Big losses are the result of poor decision-making. When it comes to market trading tactics, big losses usually stem from the inability to cut losses short and admit that you’re wrong. When it comes to money management, big losses are causes by concentrated bets that aren’t diversified or involved too much risk.

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“When you sell in desperation, you always sell cheap.”

Peter Lynch ~ Author of One Up On Wall Street (2000)

CELEBRATE YOUR VICTORIES: Make sure that you celebrate all of your winning trades in the stock market with an immediate gift to yourself. That way, you will reinforce the disciplined actions of playing the game correctly.

In addition to showing deep gratitude for your success, it’s also just plain fun to reward yourself with a small indulgence. Think like the lucky gambler on a trip to Las Vegas who, after making a small killing, treats himself to a steak dinner that is essentially “on the house.” While trading stocks is a serious business, it doesn’t mean that you can’t have some fun along the way.

Remember to use positive reinforcement in the form of special gifts to yourself as a means to insure that you keep yourself on the right track of trading the stock market correctly while enjoying the process of becoming a savvy player.

Comment: Celebrating victories has a natural way of stirring up and maintaining your future desire for success. Desire is largely a good thing. It is the seed within yourself that wants to manifest itself through you.

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“The will to win, the desire to succeed, the urge to reach your full potential… these are the keys that will unlock the door to personal excellence.”

Confusious ~ Ancient Chinese philosopher

WALK AWAY FROM THE CRAP TABLE: Move to the sidelines so you can refresh your spirit and refine your investing system while waiting for your next good buying opportunity.

Once you cash out on your stock market positions, be sure to immediately remove yourself from the game; as a result, you’ll be less inclined to second-guess your recent selling decisions. Realize that selling stocks early into market strength will often have you watching them continue to go up without you being along for the ride.

The easiest way to handle this anguish is to get away from the stock market and not monitor its performance for a healthy period of time. Don’t return to the stock market game until your emotional attachment to previously held positions has been significantly diminished and your mind is clear enough to play again from a well-balanced perspective.

Comment: Always respect how powerful the fear of missing out exists in gambling and the stock market. When you watch either activity continue upwards on the path to easy money, it’s hard not to get sucked into the action. As any savvy gamblers can attest, the smartest thing to do when you come to a decision to cash out (or sell in case of the stock market) is to get the heck out of the casino as quickly as possible.

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“Investments are like trains, and if you miss one, don’t worry because another one will come down the line.”

Charles Munger ~ Vice-Chairman of Warren Buffett’s Berkshire Hathaway

ALWAYS LEAVE A GOOD TIP: With an enlightened sense of gratitude, take part of your winnings and give it away to a worthy cause, treat your family, fund your retirement accounts, pay down your debts, increase your insurance coverage, or invest in your own self-education.

This simple habit is a way of giving immediate thanks for the good fortune you receive in a constructive manner. The naïve temptation may be to give yourself all of the credit for your successes in life; however, more enlightened individuals will sense that there are higher forces at work in the Universe to help them achieve their most noble dreams.

Be aware that all of your activities in life present opportunities to help yourself grow, assist others, and become a better person. If stock trading or investing makes you worse as a person, then you’re going about it all in the wrong manner.

Comment: A purely self-centered approach to life will more than likely lead to failure and misery. When you are blessed with good fortune, be sure to share in that abundance. It’s the deep understanding about how life really works that will allow you to enjoy success, happiness, and abundance in your future. Not to think would be naïve.

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“The grateful mind is constantly fixed upon the best. Therefore it tends to become the best. It takes the form or character of the best, and will receive the best”

Wallace D. Wattles ~ Author of The Science of Getting Rich

GREED IS NOT GOOD!: Gratitude is the spiritual energy that attracts abundance to you. Never allow your stock market success to feed your ego. Rather, let success add to your generosity and gratitude in order to revitalize your financial future.

This advice comes from applying spiritual or natural laws of the Universe to your personal investment philosophy. When an investor is properly guided by an empowering philosophy towards money, investing, people, and life, it will automatically add to his or her chances for long-term financial success.

Always remember the universal wisdom behind the philosophy of “more life to all and less to none,” so that you do not get swayed into doing underhanded things that intentionally help yourself at the expense of others. That way, you can avoid getting sucked into destructive strategies (i.e., the infamous Bernie Madoff Ponzi scheme or the shady financial dealings of the fictional Gordon Gekko character portrayed by actor Michael Douglas in the 1987 movie Wall Street who uttered the now-famous signature phrase “Greed, for lack of a better word, is good.”) which are based more on personal greed than on the age-old universal philosophy of “more life to all and less to none.” (Note: The phrase “more life” means more increase in things of value. What all people essentially want is a better life with more freedom and abundance.)

Comment: This advice may come as a surprise or meet with heavy skepticism from several people. That’s because each of us has an inherent bias in our attitude about money. But a careful study in this area will reveal that true wealth and abundance over a person’s lifetime will be largely controlled by our deepest beliefs about how we earn , share, spend, invest, and enjoy money.

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“Fools and greed usually go hand in hand, which creates a field of opportunity for the rational man.”

Mary Buffet and David Clark ~ Authors of Buffetology (1999)

sidelines:

1. a space where participants of a competitive sport remain apart from the field of play.
2. a location outside the limits of a playing field or court which is occupied by spectators and/or inactive players.
3. a neutral position where investors choose to observe rather than participate in the current action of the stock market.

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“It’s important to distinguish between respect for the market and fear of the market. While it’s essential to respect the market to assure preservation of capital, you can’t win if you’re fearful of losing. Fear will keep you from making correct decisions.”

Howard Seidler ~ Professional trader and money manager

Many people treat the stock market more like a hobby than a business. This is perfectly OK as long as they’re playing with small amounts of money and don’t expect much in return. However, there are others who trade with serious money for consistent returns at calculated risks. The wiser approach for this latter group of investors would be to treat their stock market activities more like a business and less on the basis of fun and games.

It’s often said that “patience is a virtue” and this is certainly true when it comes to trading the stock market. That’s because the market moves in a certain rhythm, where it ebbs and flows, chews up time, and sets itself up for the next important move. Patient investors fully understand that they must pick their spots wisely and avoid the mistake of trading aggressively at unnecessary high risk. At the same time, investors must not succumb to excessive or persistent fear that causes them to miss out on good trading opportunities.

Savvy investors don’t try to force the stock market to make money for them with the inner craving for “action.” Those who do give into this craving fail to recognize that the market operates on its own time table – oscillating from undervalued to overvalued in erratic movements. Therefore, the need for action actually serves as a distraction, which causes a person to play their hand incorrectly. The stock market doesn’t really care about your personal situation, even though you may need money to make house payments, pay off debts, or meet the special demands of your family,

The reality is that if you’re impatient, crave action, and trade all of the time, you’re destined to lose. It’s true that it may be appropriate to stay in the market for a majority of the time with a part of your assets in investment grade, blue chip, dividend-paying, low volatility securities. Yet, it’s not wise to be fully invested at all times in the more speculative trading vehicles, those that comprise the play money portion of your asset allocation strategy.

But overall, a wise stock-market investor should treat their time away from the action in large cash positions as a constructive period. This is a time to reinvigorate your spirit, reassess past actions, refine your trading system, and reposition your asset allocation plan, as needed. Without a healthy break on the sidelines, an investor simply may not be ready to play the stock market at a high level when it’s time to get back into the game.

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“A successful trader is rational, analytical, able to control emotions, practical, and profit oriented.”

Monroe Trout

DON’T JINX YOURSELF: Don’t brag about your gains, and don’t cry about your losses or missed opportunities. Instead, maintain your mental and emotional edge by wisely choosing to be grateful for your successes and responsible for your failures.

For many investors, the real culprit that undermines their long-term success is the absence of key positive character traits. One such trait is that of modesty, which equates to shutting off the temptation to boast about your winnings when good fortune comes your way. Boasting or bragging about your accomplishments is simply misdirecting your emotions, and it’s a behavior that can come back to haunt you in a different time or context.

Beyond modesty, another equally important character trait is that of high self-esteem; in this context, I’m referring to not abusing yourself for making occasional mistakes in this error-prone game. Learn to say only good things about yourself and the way that you’re going about your business in the stock market. The key to your long-term investing success is in developing an enlightened mindset; this will support you in becoming a consistent winner in your overall approach to trading, investing, money management, and life.

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Comment: In the game of Craps, the concept of jinxing yourself is a very real element to playing the game. For instance, you’ll never hear a player say, “Please don’t roll a seven right now!” So does the same thing happen in stock investing? I guess it does because you’ll hear of investors who swear that a stock goes up until they buy it. Whether you believe that jinxing or karma is real, I think it is wise to play on the safe and classy side of things and refrain from bragging about your successes and crying about your failures.

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“Emotions are your worst enemy in the stock market.”

Don Hays ~ Stock Market Strategist

A Savvy Investing Take: For many investors, trading the stock market can be a stressful activity. It’s one where you’re going to make mistakes and rarely, if ever, achieve perfection. Therefore, it’s necessary for you to take occasional breaks from the action in order to keep your mind fresh and to recharge your spirit.

But there may be tactical reasons for getting out of the stock market, as well. Perhaps the market has gone up too much for too long; as a result, it has become grossly overvalued and much too popular with the public. Or on a personal basis, maybe you have too much money at risk, and the anxiety of holding such large positions is preventing you from getting a good night’s sleep. Another personal reason may be that you’ve been on a long losing streak and need a break to figure out what you’re doing wrong. Or perhaps your thinking is clouded by stressful personal issues that need your immediate attention.

In any of these cases, it makes perfect sense to spend some time on the sidelines away from the action of the market. That way, you’ll be ready and willing to go back in the game and perform at your best when the next opportunity arrives.

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Being fully invested in the stock market at all times is a strategy for losers. It’s far wiser to spend some time on the sidelines to clear your mind, rebalance your emotions, and prepare yourself for the next big trading opportunity. Always remember that your ability to make high-quality decisions is more easily achieved with a calm state of mind, which stems from a wise philosophy on investing and life.

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“Any person who tries to be in the market at all times is almost certain to lose money, for there are many periods when even the most skilled trader is in doubt as to what will happen. A wise man lets the market alone when the averages disagree.”

Robert Rhea ~ Author of The Story of the Averages (1932)