Journey of the mind

[KateMoloney]

On this thread I’ll share my journey as I work on my mind and create winning habits as a trader.

For the last 10 years I have studied human behaviour and psychology through Dr John Demartini. I’ll talk a fair bit about the Demartini Method – which is essentially a set of quality questions that help form new neuro pathways in the brain (and therefore can create new habits/patterns).

[KateMoloney]

I am currently doing the Demartini Method on Jordan Belfort.

Whilst he is not a trading man, his hedonistic ways became his biggest downfall. The human mind is wired to “seek pleasure and avoid pain” and it is something we have to over come as traders. The market can give us instant feedback in terms of price. If we focus on the short term, we forget the long term and don’t show up consistently enough to succeed.

In studying Jordan Belfort, I have been confronted with my own “avoiding pain seeking pleasure” habits which have showed up in the form of “seeking the next shiny object”. I can have a very active mind and love complexity and strategy. It can serve me but it can also be a disservice because I get bored easily.

The last few months I’ve been looking at regular habits/rituals and routines in relation to my trading business. And ways that I can stay focused on the long game without the short term distractions putting me off path.

In terms of my mindset around sticking consistently to the same thing, I have a session with my mindset coach next week and we’ll be looking at some of my patterns around “seeking the next shiny thing”. Until then, I am writing a list of all the benefits to sticking to trading long term (and consistently showing up) and a list of all the drawbacks of seeking the next shiny thing.

[OmarAouane]

Very interesting topic Kate.
Looking forward to read it along the way.
Does your method mention the absence of fear and/or acceptance of failure?
I remember an interview of Elon Musk explaining one needs to try even if he is very likely to fail.
Cheers

[KateMoloney]

Great question Omar.

There is a process within the Demartini Method where you can clear your fears. I try to do this process every quarter.

For example, if you had a fear of losing, say, 30% of your trading account, you would write down a list of 20 – 30 benefits to you if this were to occur. You would look at the benefits to you in all 7 areas of life – mental, vocational, financial, family, social, physical, spiritual (life purpose). You look at benefits and then secondary and tertiary benefits of the original benefit.

For example, mentally the benefit may be learning to deal with the fluctuating market. And the benefit of that is you have a longer term vision/focus with your trading. Benefit of that is you stay in the game long enough to eventually realise profits and then compound them (this is where the real wealth is…).

In relation to accepting failure, it is similar to clearing fear, in that you define what failure means to you. It might be wise to look at a past failure that challenged you. Then you write a list of all the benefits to you (that that failure occurred) and then write a list of all the drawbacks if you got what you wanted (essentially the fantasy of how you wished things were…)

[KateMoloney]

In relation to Elon, he has a high risk tolerance and is very dedicated to his mission of inter planetary habitation.

Not everyone has such a high tolerance to risk or wants to pursue such a challenging business.

[KateMoloney]

An update.

After last mentioning the pursuit of pleasure, I’ve started looking at my own personal habits and how they will impact on trading performance (and overall life fulfilment).

About 8 weeks ago I started going to the gym regularly. Previously I would go for 45 minute walks every day, but have found the gym to assist with my mental function, especially when it comes to learning coding!

I’ve also been looking at some of my eating habits. I don’t drink coffee or alcohol, but I do love chocolate and it was an addiction …. so I’ve cut that back to 30% of what it was and am feeling much better for it. No mid afternoon slump and my focus has been much greater.

With trading, I am taking a holistic approach and rather than ONLY looking at systems, back testing metrics and coding, I want to look at other factors that will contribute directly/indirectly to performance over the medium to long term.

[KateMoloney]

Demartini Method update – Traits of the Greats

I am currently doing the method on owning the traits of Warren Buffett. Whilst he is technically not a trader (unless you count him as a MR trader) I do admire his long term focus and how he compounded his wealth over decades. He stuck to investing even when he had losing years or when the media was saying he was ‘out of touch’.

As part of owning the traits, you research the individual extensively, making a note of traits you admire and despise.

First admired trait “Focus (without distraction)”. I then look for moments throughout my life where I have demonstrated that trait and who has perceived me to have demonstrated that trait. Ideally I want to find 20-30 moments in my life where I have demonstrated “Focus (without distraction)” to the same degree that I perceive it in Warren Buffett.

Interestingly, after going through this process I noticed that my own focus increased extensively and one of my default habits “next shiny thing syndrome” diminished significantly.

[ChrisThong]

Hi Kate, have you studied the mind of those that perform meditation? If so, please share your experience and research. I meditate, on and off, for five years now. Although, I must admit I fall asleep more than I meditate.

[KateMoloney]

Great question Chris.

I have a friend who started a meditation app business. She swears by it.

I haven’t specifically studied people who meditate because I do believe that meditation is different things to different people. For example, looking at charts or gardening or walking could be a form of meditation.

[KateMoloney]

This could be worth a watch

[KateMoloney]

Thursday and Friday last week two of the portfolios held a share that dropped circa 17% – 19% in one trading session.

Thanks to MRNA, Friday night session saw a loss of circa $17kUS. The day before, two of the portfolios dropped in value a combined circa $15k.

In December will have been trading for 12 months and have seen profits go from $90k to a loss of $10k.

I am very lucky to have a life partner who understands the bigger picture and doesn’t get rattled by the day to day swings of the market, although I imagine for some people their partner may not be able to handle the swings of the market “what are you doing – go and get a job”.

In terms of mindset, the initial losses didn’t bother me so much at the time, but then a couple of days later it did start to bother me. Some of this might be because I’m recovering from a minor ear surgery and the wound dressings have blocked my ear up, which has impacted my mental function/balance. Simple things like walking, talking and thinking are more difficult than usual.

I can’t control my balance/mental issues until the dressing comes off in 10 days time, but I can control my thoughts.
So I’ve started writing down a list of ….

The benefits of financial losses,
the benefits of trading for a year and breaking even,
the drawbacks to me if I made a $100k profit in the first year of trading.

What I keep realising is that despite the recent challenges, I still want to keep trading and understanding the game. I am certain that I will be trading in years to come.

I also realise more and more the importance of time IN the market and having multiple systems. In the future, the issue I am facing at the moment won’t be as much of an issue when I have my target 6-8 systems running. Additionally, we won’t get cocky when we encounter the big wins, because we know the ups and downs you have to go through to get to the big wins.

As Nick says, trading is simple, but it is not easy.

[GlenPeake]

Yeah… it’s a tricky one, watching months of solid gains slip away rapidly Kate…. I think most of us are in the same $MRNA boat atm…. so it ain’t a ‘broken system’ it’s just the swings and roundabouts of systematic trading that we accept.

The ASX100 Momo performance this year, has been a bit of a surprise (the market has a habit of surprising us ), but it’s generally in times like this, that an amateur would ‘tap out’ and walk away from the system, only to then see the performance turn around in the future (and then they kick themselves for not hanging around just that little bit longer). So playing the “Long Game” is the only way forward for ‘us professionals’

Hope you make a speedy recovery from surgery!!

[JulianCohen]

The way I look at Trend Following in particular, is that you can not pick the top and the bottom, but if you take a nice fat chunk out of the middle, that’s fine. If you were in MRNA from the start then you will still be taking out a fat profit…sure last Wednesday it would have been a lot more, but that’s the way. Often at the end of a run, the stock really has a good drop…TSLA did the same last year…so when you see that sort of drop you know that the end is nigh for that particular little number and you will be off looking for the next new thing.

[KateMoloney]

You make such a good point Julian.

When I started trading I looked at the account balances daily … beginners cycle … now I check in weekly (depending on the system and frequency of signals).

I keep linking trading back to dairy farming. Some years my parents made no money despite long hours in all kinds of weather …… other years they made incredible profits and were able to pay down the debt, invest off farm, expand etc.

Its why I love having multiple streams of income … you are less reliant on one thing working out, which ultimately gives it room to succeed.

[KateMoloney]

Hey Glenn, oh yes the market is certainly full of surprises. Keeps the game interesting.

I certainly won’t get cocky when the profits come along, which they will in time.

People who glamourize trading (or any kind of business) forget that the profits are earned during times like these.

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