Tuesday, June 09, 2009

FEAR: When There is No Safety, Only Traders Are Safe

Guest Blogger: Smiddywesson


In the movie, First Knight, Richard Gere, who played Lancelot, is asked if he wasn't afraid that he would be killed when he fought. His answer was that he didn't fear death. In fact, in order to fight, you have to draw your opponent's blade to you. He said, "You have to learn to love the blade." There is a lot of talk on the blogosphere about the danger in today's markets, and there is a lot of fear of what is to come. I see it in this very blog, which is frequented by some very astute people. I hear a lot of desperate traders asking the same question, "What do I do next?" I don't speak for Allan, but I'm not really sure that is what this blog is all about. Sure, there are a lot of good potential plays given to us, but the majority of the content deals with teaching us something about how to find our own trades. When Allan highlights a potential trade, I pay more attention to what he sees and why he sees it, than to the end result. The reason is that I'm not looking for tips, I'm looking for knowledge, and especially wisdom. The greatest traders in history didn't put too much faith in their conclusions if they didn't look like they were going to work out, because they were real traders. It's the process that makes you successful, not the result.

So, where can one find safety in this market? How do we deal with the fear? Tips won't keep you safe, only you can keep you safe. You must know who you are. If you are following this blog, you must be interested in trading. Who are you? Are you a trader or is this just another hobby? Do you spend the majority of your waking day thinking about the markets? If you had all the money in the world would you give up trading? The answers will tell you who you are. Make up your mind now before you trade this market. Lancelot was a soldier. His craft necessarily involved mastering his fear. If you would trade these markets, if you would call yourself a trader, then you must recognize that your craft also involves the mastery of fear. You do so armed with knowledge and wisdom, trusting in the process to make you successful. Stop asking Allan for tips. Stop asking what to do next. Study the process and face your fear with full knowledge of the risks. On the other hand, you can cower in the bushes with the non-trader public. In that case, you will probably tell war stories in your old age about how you sat out the greatest maelstrom of trading in human history, only to see your account get eaten up by supposedly safe "investments", inflation, or the depreciation of the dollar.

There is no safety in today's markets. Stocks, commodities, bonds, currency, even metals are all dangerous plays now. Risk is everywhere, so you have to act. Inaction has become the most risky trade. Fortunately, if you are a trader, you can move away from the danger as it develops. You are in the very smallest percentage of the population that can survive and prosper in these dangerous times, but only if you can face the risks without being mastered by your fear. You have to learn to love the blade.

Smiddywesson

16 comments:

Anonymous said...

Smiddywesson's outstanding narrative captures the essence of the Samurai philosophy of discipline, strategy and courage as it applies to trading. “Study strategy over the years and achieve the spirit of the warrior. Today is victory over yourself of yesterday; tomorrow is your victory over lesser men.” - Miyamoto Musashi.

Anonymous said...

An excellent point made in few words. I like the soldier analogy so let me run with it.

I think that rather than trying to be super human and ignore our emotions, we should consider that the ability of the trader to face his fears comes more out of habit and preparation than some inate ability to rise above the herd. This is one of the reasons why it takes years to become successful.

For example, the backbone of the US Army are the non-commissioned officers. These nasty old geezers know everything about being a soldier and they are the ones who really run the Army and the battlefield. Their ability to move about the action, seemingly oblivious to danger while everyone else cowers, comes from the years of preparation and experience. You know they must feel feer, so how do they do it? It comes from knowing that they have done everything they could do, so that they have a fatalistic view of the danger they face and can say, well I guess my number just came up.
The bottom line is this ability makes them the most effective soldiers on the battlefield.

Like the non-commisioned officers, professionalism underlies all the master trader's actions, even his failures. Knowing that you have done everything you could do to prepare for the risks of trading strengthens your mind to deal with the fear of loss. Just as the master sergeant walks in the line of fire to guide his troops, the master trader who has done all that he can do acquires a fatalistic view that when his number's up, it's up. If you lose 5% of your account one day, or whatever your risk management wagered, you march on to the next trading day knowing that your training is the best, and that in the trading world, you are a stone cold killer.

Smiddywesson

Anonymous said...

Get yourself a metal toothpick. Your gonna need it to get all that gooey poop you sucked outta Allan's a**.

Anonymous said...

Anon 11:29, Thanks for your wonderful contribution to this blog. Doug in ATL

Anonymous said...

Anon 11:29 - Help us out here! How about laying your head on a railroad track somewhere and wait for a train to pass by.

Respectfully, Mr. "P"

Mike said...

Jack...
Be nimble.

Jack...
Be quick.

Jack...
Keep your eye on that candlestick!

-Mike

Anonymous said...

LOL. What? You all know what I meant. Just adding some humor to the blog.

Anonymous said...

I like the flames, it keeps things interesting. You want some humor?

The executive compensation package is being debated on the Hill. The stated purpose of the bill is to devise a system to measure performance and reward success in corporate America. Let me put it another way. The GOVERNMENT, that champion of managerial efficiency, is going to share what a good job it has done in leading its millions of employees. You know, success stories like the Post Office, FEMA, and the IRS? Most of these Congressmen never led more than a handful of people at one time. They can't even balance their expense accouts or control their spending. Now that is funny.

Smiddywesson

joseph said...

The warrior, with nostrils flared as the acrid smell of gun powder fills the air, slashing his bayonet fearlessly through enemies of counter-opposing algorithms of market convulsions is the war battlefield metaphor that Smiddywesson offers.....While I on the other hand, conjure up the image of our collective quest to secure financial security through trading..... the gambler.
The impulse that drives the pure gambler, as opposed to those that pursue gambling out of desperation, the true spirit of the gambler is to merge and become one with the same cosmic force that moves the tides and aligns the planetary orbits.
A gambler when exercising the power of observation and logistics of patterns - makes his bet, and wins, the feeling is a rush that is usually reserved for immortals only.
While the soldier employs technologically advanced guns and cannons on his battlefield - the gambler stands proudly naked armed with his intuition, engaging in hand to hand combat with lady luck.
If the market fails the true gambler, he would move on to other activities, possibly even shovel ready work to feel the cosmic forces moving through his mortal frame. I notice that with the chosen handle of Mr. Smiddywesson that his hand will be on cold iron if the market fails him and society.

Anonymous said...

The military thing was just an analogy. I definitely don't want to do battle with the market. Actually Smiddywesson is the name I used to use when I played World of Warcraft. I have used it so long, I just kept using it for everything. (but my trading account). The market has long since supplanted all other games.

As for the market and society, if they fail us all, the only cold metal I plan to hold is a 100 cases of ravioli in my basement bunker. LOL

Smiddywesson

Anonymous said...

"The GOVERNMENT, that champion of managerial efficiency, is going to share what a good job it has done in leading its millions of employees. You know, success stories like the Post Office, FEMA, and the IRSThe GOVERNMENT, that champion of managerial efficiency, is going to share what a good job it has done in leading its millions of employees. You know, success stories like the Post Office, FEMA, and the IRS"

Don't forget the SEC!

Anonymous said...

WRONG, WRONG, WRONG.

There is ABSOLUTE safety in today's markets- Allan's hedge fund, in which I have been an investor for years- no losses.

Invest in anything else at your own peril.

Hal

Anonymous said...

Hal:

You got a point there. I could sit here trying to decipher wild graphs and charts and waves or just invest into Allan's fund, sit back and collect big cheques.

I'm in, I'll contact Allan privately for details.

No work, low risk, high returns, now THAT is my "brand of Vodka."

I'm getting in.

Adam in Manchester in the UK

Anonymous said...

beginning to sound like a ponzi scheme. Isn't this king of promotion against hedge fund regulations?

ROB G said...

allan
world health organization raised the swine flu to a level 6 pandemic. bought more nnvc today on the news.

rob g

Anonymous said...

Just picked up 100,000 shares of NNVC.

Paul H.