The most profane four-letter word to avoid in a trader’s vocabulary is “hope.” A mental warning alarm should sound when the inner monologue contains “hope” in it. “Can’t” is one to beware of too and certainly omit. It creates impossibility. Our language can disempower us if we’re not careful, so it’s important to monitor it closely. Once a trader says, “I hope my position will get better” they are doomed. When we hope for something, doubt is instilled in our mind. In addition, “I think it’ll get there,” is a phrase traders should use with caution. Thinking is questioning and questioning is to doubt it.
Trusting your instinct or heart doesn’t require thinking. Listen to it, because it doesn’t “think,” it usually “knows.” Every year I know I will make money trading and I do not question it. Early on I only hoped I would.
Over the course of my trading career I have found myself “hoping” I get out of a trade profitably. “Hope” is my cue to close it out—a psychological indicator. It foreshadows an investment catastrophe. Instinct tells me I’ve made a mistake and should exit the trade, but I think I still might have a chance, so I don’t.
Whenever I begin to doubt an active trade, I know I should probably exit it. I have the words, “GET SMALLER” across the top of my computer’s monitor. It simply is there as a reminder to take off part of my position when I feel especially uncomfortable in it. It’s my way of compromising and reasoning with my mind under the influence of a trade.
Trading must be based on probabilities, not a “chance” or it becomes a gamble. This is what separates Wall Street traders from the gamblers on the Las Vegas Strip—the odds. If they aren’t in the trader’s favor then he or she will not profit in the long run. An experienced trader doesn’t rely on Lady Luck.