Market Manifesto

The top­ic here is tak­ing full respon­si­bil­i­ty for all of our actions.

And we speak of anger towards oth­ers and towards our­selves.

First, about respon­si­bil­i­ty. Why do we need to dis­cuss this here? Are we not all ful­ly respon­si­ble adults, as we go about earn­ing our liv­ing and pay­ing our bills and meet­ing our oblig­a­tions?

Well, yes, pre­sum­ably so. But as we saw when we spoke about lying and how there is a spe­cial kind of lying that we often engage in with­out real­iz­ing that we are doing so … there are sim­i­lar dis­tinc­tions to be made about respon­si­bil­i­ty when trad­ing.

Traders are not just respon­si­ble peo­ple in the ordi­nary sense of the word. In their own minds the best traders car­ry this idea of per­son­al respon­si­bil­i­ty to the extreme, far beyond what ordi­nary peo­ple think and believe about the role of respon­si­bil­i­ty in their lives.

In the world of trad­ing, you make the deci­sions. There is noth­ing about any of your actions that is due to any­thing except you. You are com­plete­ly, total­ly, 100 per­cent respon­si­ble for every­thing you do. Nobody shares that respon­si­bil­i­ty, nobody dimin­ish­es it in any way. There is no action you take that can be attrib­uted to any­one or any­thing except your­self.

How can this be? Sup­pose you have a trade that goes bad­ly for you. First there is a lot of slip­page on the fill, and you are imme­di­ate­ly in a loss. Then you find that unex­pect­ed news is announced sud­den­ly and you lose on account of that as well. And fur­ther­more your office mate is on your case and on your nerves, you are fight­ing with your spouse on an issue in which you are in the right, and these con­flicts dis­ori­ent you. Final­ly, the traf­fic is hor­ri­ble, your car breaks, your child has the flu, it’s rain­ing out­side, and in short, you are sur­round­ed with prob­lems. Every­where you look you can find anoth­er rea­son why things are not going your way. Most of these things are out­side of your con­trol and so how can you be the respon­si­ble par­ty in this sit­u­a­tion?

Most peo­ple and most traders find that anger abounds in this sit­u­a­tion. The inner dia­log goes like this…”If only the traf­fic was better,… if I had a more agree­able spouse…, if I had a bet­ter mar­ket conditions…, if the fed­er­al reserve had not acted,…. if my bro­ker were not so busy…, then I would be in prof­it instead of loss here today.” You can fill in the blanks; it makes no dif­fer­ence what the cul­prit is called. The point is you are find­ing some­one or some­thing else to blame.

In real­i­ty there is no one and no thing to blame for these sit­u­a­tions and by seek­ing such in your thoughts or words you are look­ing to shift respon­si­bil­i­ty away from your­self, not to accept it. The respon­si­bil­i­ty lies with you alone, com­plete­ly and with­out lim­i­ta­tion.

You are respon­si­ble because you can chose to act, or not to act.
It is that sim­ple.

If you choose to be in the mar­ket, and some­thing goes awry and you lose mon­ey, you accept respon­si­bil­i­ty for that, because it was you who chose to enter the mar­ket, know­ing that the pos­si­bil­i­ty of loss is always there.

If you get advice from a finan­cial guru and that advice proves to be wrong and you lose mon­ey fol­low­ing it, then the respon­si­bil­i­ty does not flow to the guru but to you, since you are the one who took the advice.

If the weath­er makes you late, if there is an earth­quake and the phone lines are knocked out, if your com­put­er is defec­tive and a virus turns your hard dri­ve to mush – it makes no mat­ter, you are the one who is respon­si­ble, since you live in the world and know that unex­pect­ed occur­rences can hap­pen, and yet you chose to trade.

Once you accept this prin­ci­ple to the fullest extent and under­stand the lev­el of respon­si­bil­i­ty that is required of you as a trad­er, then your atti­tude towards events in the world may change quite dra­mat­i­cal­ly.

In the first place, care­ful reflec­tion will tell you that since you are the one that is respon­si­ble, you are the one who must assess all pos­si­ble out­comes to any giv­en trade before enter­ing it. There is less temp­ta­tion to engage in self-delu­sion based on “making a case” for one side or the oth­er. “Making a case” is fre­quent­ly char­ac­ter­ized by seek­ing opin­ions and read­ing the analy­sis of oth­ers, lis­ten­ing to gurus, and in gen­er­al whor­ing after author­i­ties of all kinds. These actions are noth­ing more than shift­ing respon­si­bil­i­ty hid­den under the guise of edu­ca­tion.

Many traders engage in a nev­er-ceas­ing search for the per­fect set-up. They wish for a trade sig­nal or set-up that is unfail­ing, infal­li­ble, and imme­di­ate­ly prof­itable. They want the myth­i­cal Holy Grail. The under­ly­ing thought is, “if I find the per­fect trade, I will nev­er have to be wrong. The per­fect sig­nal will let me always be right.” The roots of this desire lie in the wish to shift respon­si­bil­i­ty for deci­sion-mak­ing from the self to the oth­er.

The loss of inde­pen­dence involved in such desires is the antithe­sis of accept­ing per­son­al respon­si­bil­i­ty for our actions. Depen­den­cy is not the road to suc­cess in trad­ing. Learn to think for your­self. Learn to take action under all cir­cum­stances, even the unex­pect­ed and the dif­fi­cult. Learn to think for your­self, and then take respon­si­bil­i­ty for your thoughts as well as your actions.

Tak­ing full respon­si­bil­i­ty means let­ting go of author­i­ty, and embrac­ing the deep psy­chol­o­gy of inde­pen­dence. Learn about those things which depend on you and those things which don’t depend on you. Dis­tin­guish care­ful­ly between those things which you can influ­ence by your actions, and those things which you can­not influ­ence. Pay the most care­ful atten­tion to those which you can deter­mine by your­self. These include, most impor­tant­ly, your thoughts and actions.

It is of utmost impor­tance for you to accept respon­si­bil­i­ty for your own men­tal state, for your thoughts and deci­sions, and for the actions which result from them. The con­di­tions of your life result pri­mar­i­ly from the long string of deci­sions you make and the deci­sions you make are con­se­quent of the thoughts you have. Your men­tal state is at the heart of your con­di­tion in life, and the qual­i­ty of that men­tal state is your respon­si­bil­i­ty, not that of any oth­er.

One curi­ous sign of our resis­tance to accept­ing respon­si­bil­i­ty is anger.

Why anger? Anger is an emo­tion that reflects our strong wish that some­thing were oth­er than it is.

In the world of trad­ing, all actions that you take (includ­ing the action of inac­tion, if you fol­low me) are your com­plete respon­si­bil­i­ty. Every­thing else is not your respon­si­bil­i­ty, and can be regard­ed with equa­nim­i­ty and calm­ness.

Anger is a pas­sion which deflects your insight into this truth and makes you think that some unfair­ness is being direct­ed towards you. In real­i­ty, in the world of trad­ing, such is not pos­si­ble. There is no unfair­ness, it does not exist.

So there is no unfair­ness in trad­ing. Can you believe that? When­ev­er you feel anger there is some­thing wrong with your approach to trad­ing; like­ly you have not pro­vid­ed for some con­tin­gency that affect­ed you adverse­ly. You are angry, but who is it that is respon­si­ble for your loss­es and your wins? Sure­ly not the mar­ket, which cares not a whit for you. It is you your­self that is respon­si­ble.

If you have a loss and you blame your­self, you are being destruc­tive, and using shame, blame, anger and reproach to pun­ish your­self. Take it easy on your­self and say instead, “Oh, I see, I made an error here. Well, next time I must think of that and remem­ber to do things right.”

You may feel sheep­ish. You may feel cha­grined. But if you direct your anger at your­self you are doing dam­age to world head­quar­ters and this inhibits progress.

It is desir­able to drain anger and oth­er strong emo­tions from your men­tal life while trad­ing so that you can oper­ate in an emo­tion-free envi­ron­ment. (Of course we say that in a rel­a­tive man­ner, since we are human and emo­tions are part of our human­i­ty, and we will nev­er be entire­ly free of them, though we strive to min­i­mize their influ­ence in trad­ing, pri­mar­i­ly by rely­ing on our mechan­i­cal exe­cu­tion of pre­de­ter­mined pat­terns.)

There is lit­tle to gain in being harsh with your­self. Dis­ci­pline comes from reg­u­lar prac­tice; harsh­ness applied to you either from with­in (your inter­nal crit­ic) or from with­out (through a scold­ing friend, men­tor, acquain­tance, col­league, or part­ner), will only make things hard­er to learn in the future.

Talk­ing full respon­si­bil­i­ty means there is no one else who has any­thing to say about your suc­cess or your fail­ure. Either you do it, or it is not done. There is no one to blame because there is no one else in the pic­ture, or if there is, you are the only one who let him or her in, and so it is your deci­sion to have them influ­ence you, hence you are the respon­si­ble par­ty.

So when we learn full respon­si­bil­i­ty we have also learned to mod­u­late or elim­i­nate anger from our actions. The two are close­ly relat­ed.

Anger is of two sorts – that direct­ed towards the self, and that which reflects a frus­trat­ed desire to shift respon­si­bil­i­ty else­where. Both are sins, and both will dimin­ish your trad­ing results if you chose to indulge them.

Thus in the world of trad­ing, anger is entire­ly unwar­rant­ed and use­less.

You get angry when you sup­posed the guru would pro­tect you, but he did not. Or the weath­er would not cause you to get cold or wet, but it did. Or your spouse or lover would antic­i­pate your needs, but instead they frus­trat­ed you. Or your bro­ker would serve you at a high­er lev­el of pro­fes­sion­al­ism, but such was sore­ly lack­ing. If you have not tak­en full respon­si­bil­i­ty for these occur­rences, then you may become angry. If you have tak­en full respon­si­bil­i­ty for your par­tic­i­pa­tion in the world, and under­stand com­plete­ly the dif­fer­ence between what you are able to influ­ence and what you can­not change, then there is lit­tle or noth­ing to be angry about, and you will accept things in the world as they are, with­out regret.

And accept­ing things the way they are is a huge step towards suc­cess­ful trad­ing.