Perception is Reality
To be accountable is the only true path to freedom, both financially and personally.
I need to warn you up-front that this article may 'trigger' some people. It could call into question much of what you are taught in school or college. Perhaps it could displace many of your beliefs about the stock market and your own perceived reality.
Simply put, what we perceive is what we believe. This can be about our lives, trading, relationships and how we relate to the world in general.
Perception is shaped on a daily basis by multiple inputs such as:
Objective or Quantitative Data
- Raw market data
- Facts and statistics
- Macro economic factors (supply and demand etc.)
- Social conditioning
- Heuristics and parental conditioning
- Social media and other echo chambers
Reality seems far more fluid in recent times and it's easy to revert to autopilot. The problem with living on autopilot is - we feel that our life is not our own. Taking personal accountability has become near impossible. It's easier than ever to blame outside factors for what is happening in our lives.
The thing I want the most - creating my own authentic life, seems to be forever lost in the external battle for my time and attention. The true battle is being accountable about what I let in and how much content I consume (also what kind). This should be up to me right? Why do I feel out of control?
Two Realities - What Drives my Attitude Towards Accountability?
I strongly believe we are confronted with two core realities when dealing with the market (and personal change or development):
- We have our own personal life which consists of our hopes, dreams desires and heuristics (autopilot) - tied to our ego and self-image. This is learned behavior of which we have adopted since birth. It can be cultural, genealogical, circumstantial and driven by the deep subconscious mind.
- Objective rules, measures and metrics - the place very few of us live because reflection can be painful. Amygdala activated!
We avoid the objective measure because it compromises our sense of self (ego). So the very action which will make us the success we want, is the thing we avoid.
When Ego and Reality Collide
The problem I find with many people (myself included) who are learning to trade or improve their personal life in general, is that they tie themselves and their ego into the market or outcome.
Essentially people embroil their ego with results in trading. Although it makes little sense, we blame ourselves for how stocks move instead of focusing on what can be controlled (how much we buy, when we buy and choose to sell). We rely on a perceived reality that is built on shaky foundations.
Paradoxically, our ego creates massive internal conflict. The very thing driving us to perform, becomes the weapon of our own demise.
- We trade too much
- Our trading plan is history
- It becomes the market's fault
- Accountability is passed externally
It's no surprise though as our entire upbringing we have been taught that failure is bad, this results in:
- Conditioning ourselves to avoid pain and objective measurements - think of the time you knew you were getting crushed in the market and simply didn't open your account.
- Avoiding reflection - making things other people's problem or projecting our misaligned views onto inanimate objects
- Rewarding ourselves for bad behavior - oh well, It's so bad now that I may as well double down. This will corrode good neural pathways and undo all your hard work in the quest to be accountable to yourself.
- Creating protections against feedback - we avoid people who tell us the truth because they are 'mean' and confide in people weaker than us. This is usually to cater to our ego and protect us... from ourselves.
The ego acts as a shell and creates habits, behaviors and beliefs that serve one function - protect us from an invasion into our mental life to save us from emotional pain. This void between ego and reality that we call protection is where billions of dollars have been made or lost. Hiding from the truth and avoiding the pain required for growth is something you may get away with in regular life. Your friends and family will validate your ego "It's okay sweetie, there will be more." etc.
We surround ourselves with false supports to avoid pain and reinforce our personal bubble. There is no neural switch that kills ego and gives us Spock - like accountability. The only switch that exists is accountability.
Trading does not have time, capacity or consciousness to care about this internal struggle. It simply is what it is. To be accountable lies in the same vein, you either are, or aren't. Like many habits that drive success, it can be learned but takes time, patience and a rock solid plan.
What's Real? - To be Accountable is to open your Eyes
The truth is the market does not care about you being right. The distribution of results can be quite random and objectively, how we 'feel' about the stock price doesn't matter.
The price will still go up or down. We have intermingled two worlds that do not belong together - our heuristic approach to life and the truth.
I feel the cycle is almost that of a recovering alcoholic:
- We lose money and don't take the trades we planned (lose control)
- Feelings of helplessness kick in - so we now need to cope with loss, driving less accountability
- Losing positions are held or we re-buy stocks - to avoid pain and procrastinate
- Stocks we sold rocket up 900% one week after we sell (thanks Tilray) - true story and a missed $900k trade!
- The cycle ensues and seems relentless - we keep losing money and blaming Mr.Market
When I felt this cycle for months, I stopped trading totally and decided it was time to make a plan. I was down to blaming my internet connection at one point and being angry at everyone and everything.
As put by one of my favorite traders:
Traders have two modes of operation - They move between indecision and regret.
It's Always Someone's Fault
We proceed to blame Trump, the banks, China, Brexit etc but take little responsibility for the trade itself or our decision to follow the rules (that we created). Upon further analysis, we may see that the setup wasn't there, we jumped in too early or we went overboard with position sizing - time for ego to kick in and 'protect us from ourselves'.
This article should be what your best friend tells you, what your family always wanted to say to your face and what society has basically held as the ultimate taboo. That being - everything that happens to you in this life is down to you and nobody else! If you aren't accountable for each and every action you take, you will never become "successful."
Caveat: Success is just another construct - finding out what success means to you is far more important than a lambo/bimbo combo, it's how you feel on a daily basis not a destination.
To become great, or aligned within, you need to realise that your circumstance, your life and all the trimmings that go with it are your responsibility and belong to no one else. There are hundreds of systems that can make money in the markets. If however you can't be fully accountable for following the rules, how can you ever expect to make real money in an objective game?
Follow the rules - win/Don't follow the rules - lose: Simple right?
Realizing It's Up to You is Scary
I would anticipate at this point you would like to reject what I am saying and have caught 'excucitis' (a contagious reaction of pitiful excuses for your behavior and circumstance, likened to a chronic disease). Let me ask if some of the following rebuttals sound familiar.
- If the market wasn't acting so wrong I would be up at least 30%
- Man, if only I sold bitcoin when it hit $19k, I really wish I did, I would be so rich
- If only I had more money
- My parents really messed me up when I was young, if it wasn't for them....
- Stop losses only work sometimes and I then lose, I'm going to leave it run just this once
- Boy, some people sure are lucky
- But I am accountable! *When I want to be, or when its convenient*
- I won't move my stop up this time
- Yeah but it's easy for (insert name) because he or she (insert some other bullshit reason)
- Time to average down! - Please argue this point with me
The long and short of it:
- Most of the time, we blame others for our circumstance - that we created if we think hard enough
- Situations that you have no control over influence decision making and it becomes 'the economy', 'the government' and anything else you can't control
- Learning from adversity is out the window and ego is in full control
- We project our biggest weaknesses onto the world and people close to us to distance ourselves... from ourselves (crazy right!)
- We have lost the ultimate game of pure accountability and ownership which is something we need to make for ourselves - it can't be bought.
So What Works?
The below is a snippet of my own personal philosophy. I openly admit that I slip on these
Having an Iron Clad Plan
Having a plan is great but it needs to be a plan that you can follow. I've had so many plans that I could fill a small library. Planning itself is not a successful endeavor unless it can be followed. My plan for trades is simple and process driven, here's a peak:
- Read my personal notes on why I win and lose and make sure to focus on the wins (positive re-reinforcement)
- Assessing my risk - can I take a trade or cut a position
- Searching through my TC2000 stock screener and creating a list of stocks that conform to predefined criteria (technical and fundamental)
- Shortlisting one or two trade ideas if they fill the criteria
- Sizing up my position
- Pulling the trigger according to plan
Now, that sounds sexy, but what really happens (and happened much more when I started):
- Open trading account as quickly as humanly possible - Trump just went on Twitter
- Take whatever trade was hot on the news or twitter
- Loading up on shares
- Panic sets in
- Sell at a loss
- Watch it go up
I want to be as honest as possible. This still happens, it also costs me money - but it's a very seldom event these days.
Looking at Past Decisions on Trades
The next phase on my development was creating a very in-depth look at what I was doing wrong through a trading journal. If you don't keep a detailed journal of your trades, you are not trading. Some of the key things I tag:
The obvious stuff:
- Profit and loss per trade
- Number of trades
- My win/loss ratio
- My R ratio (risk vs reward per trade)
- Avg gain size in %
- Avg loss size in %
Some of my more complex data sets include:
- How many trades I took according to plan
- Number of FOMO trades - this is my stickler
- How long in days were my winners or losers
- My overall system quality or expectancy
- Market types during each respective period and volatility
Once I crunch the numbers I typically spend an hour in denial about how I have FOMO traded over 33% of all of my positions, not exercised patience and the likes. There is however no point in being negative when looking at these numbers. The insights I've pulled from my detailed journal force me to be fully accountable for my decisions and face them head on. Importantly, it also shows me what I am good at and I can leverage positive re-enforcement going into new trades with high confidence.
- I am very good at cutting losses which is an area where others might struggle
- Seldom do I ever use leverage or put on positions too large for my account
- I let my winners run and manage winning trades very well
- Profit taking is done at the appropriate time
Overall, I am very happy with how I manage trades. And trade management is super important - so I have that going which is nice!
The bad (useful):
- I lack patience and FOMO trade the living hell out of it - this one of my biggest issues. Really, my diary is actually pretty scary to read sometimes.
- Sometimes I drag my feet and miss good trades and question myself too frequently
- Buying stocks because they look cheap. Something I have really eliminated over the past while.
After a review of my 2018 results (I was up 19%), I would have been up around 57% had I killed off these impulse and FOMO trades. The data was eye opening and I decided to get back in the drivers seat because of it.
Pulling it All Together - Be Accountable by Simplifying your Information Flow
Being accountable is literally the key to fulfilling your own life and creating a reality that is your own. Driving yourself mad with self-help books and trading strategies will only get you so far but can become an unhealthy obsession. Letting ego and autopilot drive trading decisions is not good enough - it's time to wake the fuck up.
The key to being successful in both trading and life, is to take full ownership and accountability for your actions, there are few ways to do this outside of objective measures and balances. Measuring things itself is not the goal but more so not repeating the same mistakes time and time again.
If a ship changes it's course only one degree - it can end up on the opposite side of the world, the same incremental changes applied to trading will be the difference between good or great.
Over time, owning your own emotions, decision making ability and results will put you back in the driver seat. You create a formula that you know will win out over time, stick to it and keep reinforcing the good habits. You want to be be accountable? Then start here today, one small step at a time.
Perhaps it's not that easy and sounds over-simplified in this blog, if however I could give any trader advice starting out, it would be this:
The only person responsibility for your success as a trader is you. You are your own best asset or worst enemy. The market does not owe you shit, you owe it to yourself to find and execute a plan that creates personal wealth, enabling a meaningful and free existence. There is no other way to be free than to be accountable to yourself.
Liked this article and want to get started on your journey? Check out my blog post on choosing the right online broker to understand where most beginners lose their cash - on fees! Choosing The Right Online Broker.
Or perhaps you are new to trading and would like to check out our free Udemy course?