12/22/10 The Crying Game> Human Nature and The Taoist Trader

For those of you who prefer reading to watching a clip, the pertinent story is linked here:

http://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog

With homo sapiens, the stumbling blocks in life are always mental.  We have trouble staying out of our own way (sounds more than vaguely familiar, no?).  Human nature predisposes us to make the wrong moves when trading.  To paraphrase something my youngest son likes to say when he's caroming the Sea Devil up river banks and over cliffs at the video arcade, 'I am way not a good trader-' caroming my entries and exits up and down price gyrations in response to predictable emotional swings:

(a)  I opened several positions the past few days against my better judgment.  I was fully aware the trades were ill-advised.  But I entered the trades anyway.  Why?  Hubris.

(b) Of course, there's an element of hubris in any post- otherwise, why post at all?  But more so should the post contain statements regarding specific entries and exits.  And most of all when positions are opened countertrend using leveraged ETFs.  So every trade the past week was opened on hubris, then (appropriately) quickly closed as each position moved against me.

(c)  In an effort to 'analyze' why I overrode my own judgment, I started drafting some crap about human nature and 'subliminal sabotage.' Too funny.  The fact is, we're not really competing with other traders.  The real battle is with our own nature.  That helps to explain why we often describe successful entries/exits as counterintuitive.  'Counterintuitive' is just another way of saying pulling in the reins on the 'Id.'

Anxieties about external market events start to fade when the focus is on controlling internal states of mind.