Feb 10: That Hot Stock? Do You Have These Symptoms of Not Trusting the Market?

by David Jenyns on February 9, 2006

Many traders feel like they can`t trust the markets; but really, what they can`t trust is themselves. These traders often assume that more and better analysis will lead them to hot stocks and consistent profits. When you operate by that idea, you are driven to gather as many market variables as possible into your arsenal of trading tools. But what happens then? You find you`re still disappointed and betrayed by the markets because of something you didn`t see or give enough consideration to, and you lose your confidence.

Confidence and fear are states of mind that stem from your beliefs and attitudes. To be confident in finding hot stocks, while you`re functioning in an environment where you can easily lose more than you intend to risk requires absolute trust in yourself. Without this trust, you will be functioning in a fog caused by fear. But it`s difficult to be confident in the market.

To become self-assured in finding hot stocks, you need to relearn some of your basic assumptions about cause and effect. Most trader`s natural inclination is to think in ways that are counterproductive to being consistently successful in the markets. Simply learning how to analyze the market`s behavior is not the only skill you need. You also need to deal with the uncertainty of the market. You have two ways of approaching this: You can try to eliminate risk by learning about as many market variables as possible. Or, you can learn how to redefine your trading activities so that you truly accept the risk you are encountering and you`re no longer afraid.

When you`ve achieved a state of mind where you truly accept the risk of trading, you won`t define and interpret market information in demoralizing ways. This is the true key in being able to uncover hot stocks. When you eliminate these kinds of interpretations, you also eliminate the tendency to rationalize, hesitate, or jump the gun; to hope that the market will give you money, or to hope that the market will save you from your inability to cut your losses.

As long as you are susceptible to rationalizing, justifying, hesitating, and jumping the gun, you will not be able to trust yourself. If you can`t trust yourself to be objective and to always act in your own best interests, achieving consistent results will be next to impossible. Trying to do something like trading, that looks so simple, may well be the most frustrating thing you ever attempt. The irony is that when you have acquired a trader`s mind-set and can remain confident in the face of constant uncertainty, trading will be as easy and simple as you probably thought it was when you first started out.

So, what`s the solution? You`ll need to learn how to adjust your attitudes and beliefs about trading so you can trade without fear… but at the same time keep a framework in place that keeps you from becoming reckless. The successful trader that you want to be is something you have to grow into. Growth implies expansion, learning, and creating a new way of expressing yourself.

In order to become a better trader and find hot stocks, you`ll have to change. This is true even if you`re already a successful trader and are reading this article to become more successful. Many of the new ways in which you will learn to express yourself will be in direct conflict with ideas and beliefs you presently hold about the nature of trading. You may or may not be aware of some of these beliefs. In any case, what you currently hold to be true about the nature of trading will argue to keep things just the way they are, in spite of your frustrations and unsatisfying results. These internal arguments are natural. Being willing to consider other possibilities will make the learning process faster and easier.

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comes to designing profitable stock trading systems.

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