The Marks Of A Rational Person
"These are the characteristics of the rational soul: self-awareness, self-examination, and self-determination. It reaps its own harvest. . . . It succeeds in its own purpose . . ."
— Marcus Aurelius, Meditations
Today's meditation is an interesting one and it immediately reminds me of a quote that I saved a few years ago, which had the title of "Mindset Is Key" and this is the quote; "How can you expect to manage risk skilfully, when you're not even thinking rationally?"
It is all about having the correct trading mindset and this is where the phrase "peaceful mind, peaceful life" plays a big part for me.
The meditation states that we have to do just three things to be rational; So let's look at them from a trading aspect.
1) First we must look inward: Are we calm, focused and prepared for what the markets will throw at us during our trading session? Maybe you have gone for a pre-trading walk to clear your mind and focus on what you intend to achieve. Maybe you've done some meditation to prepare? Maybe you have trading notes that you read before you trade?
2) We must examine ourselves critically: Did we trade as well as we could have done last time? What mistakes (if any) did we make? How can we learn from those mistakes next time? Did we follow the rules/criteria for our strategies 100% of the time? Did we enter a trade on impulse or out of boredom? Trading to set rules and criteria, can mean that there may be a some down time during a trading session where nothing meets your criteria. This can become boring for some. This is something you need to overcome if you are to become a profitable trader. If you want excitement go to a casino!
Finally we must make our own decisions--uninhibited by biases or popular notions: By making our own decisions based on the stats/data that we have available to us, we are taking ownership of our own trades. These decisions are not based on biases or popular notions; they are based on facts from the stats/data that we use, so we are being totally unbiased. We must stick to our own rules and not follow the popular notions of others blindly. We must also do our own due diligence and make our own decisions and hold ourselves accountable for each and every trade that we make. On occasion we will have a trade that is going against us, so it is imperative that we manage every trade to it's conclusion to protect our bank. Voluntarily taking a controlled loss, is one of the hardest things to do when you start trading; especially if you see the trade would've gone back in your favour after you've taken the loss, if you had let it run! You must not let this affect you or it will cause hesitation the next time that a trade is going against you and you could end up with a much bigger unmanageable loss! Always cut potential losses at your pre-agreed exit point in a heartbeat, so that they don't become unmanageable!
These are "the marks of a rational person" trading rationally.