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Trading and the Illusion of Control of Total Control

Aug 27, 2008
Risks are calculated. All risk is a process of calculation and decision. When you are dabbling in the market, hauling the market as your only source of income, or coming into your glory, all your risks are assessed and then you make the final leap when you determine the appropriateness of that assessment. However, we are still human beings at the end of the day, with emotional fears, desires, wants, dreams, and needs. We all need to feel as though we are in control of our environment, our decisions, and the outcomes related to such.

When we can not cause an outcome, it is not uncommon to give ourselves the illusion of control. When we can convince ourselves we are in control, then we feels as though somehow we can affect the outcome and be more accepting of negative outcomes. However, there are pitfalls with this illusion. So much so that psychologists have studied the connection between the illusion of control and being in control.

There is only one thing that we are in control of, especially when it comes to something as volatile as the market. We can only control our own actions or reactions. We can determine our outlook, our tolerance level, and our responses. The stronger we can control our desire to control the outcome of any trade the more likely we are to devise a strategy for developing strong trades and winning, and sticking with those strategies. Our want, or need, to come out ahead can often be strong enough to allow our own minds to "trick" us into believing the outcome is still going to be positive, which can lead to significant losses.

To pull a quote from one of the gurus of day trading, Dr. Ari Kiev, "It is important to distinguish between the tape and your interpretations of the tape." This sentence alone can shed light on why so many day trading gurus end up their own hero and why beginners often fail. The mind often sees what it wants to see, and we can do that just as easily with the ticker tape as anything else. We want a positive outcome, so we interpret the tape with our own desire leading our judgment. He goes on to state, "View as neutral both the events and your inclination to impose your interpretations on them. Enter the market without expectations, surrendering to it rather than struggling with it for personal gain."

Learning to remove the element of control comes with a dedicated effort to interpret the situation as information, removing the need or desire to come out ahead. Once this is accomplished, the decisions which follow are made with a clear head that is actually in control of the situation rather than a foggy mind that is suffering from the illusion of control.

One of the most surefire methods of learning and maintaining control over the situation is trading with money that doesn't hurt to lose. This can be hard for those who are into the market pretty heavily, but if you are chronically pulling out profits and getting yourself back to square one, then you are actually trading with money that you didn't have in the first place. When people start using the market to gamble they lose objectivity completely and often find that the losses are devastating.

Rule number two for learning and maintaining control involves you and your ego or worse, your self esteem. You are not part of the trade, and the earlier you learn to remove yourself from the trade the better you will do. When you enter into several short term trades, even with the best of intentions and notions and education, some will ultimately flop.

Others will soar. Some of this is your own sense of what works while some of it is merely luck. The harder you lay your ego on the line, the more likely you are to find yourself tricking your mind into believing it is in control. Giving yourself permission to stay objective, to rely on a mix of education and luck, and to remove your own sense of self from the process brings about more intelligent trades, trades that aren't banked on, and trades that are just part of the pack, not your future.
About the Author
If you would like to immensely improve your trading and investing results, check out www.secrets2trading.com
AND for a Limited Time, you will also receive a FREE copy of a limited number of the amazing book "Trading In The Zone" which is jam-packed with daily trading ideas and psychological preparations to instantly improve your trading and investing performance.
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