Fear leads to worries. Worries lead to miseries. Miseries lead to loss of sleep, loss of appetite and eventually to illness.
Medical science agrees that worries and anxieties aggravate high-blood pressures, diabetes, ulcers and many other chronic diseases.
Fear of poverty is the worst kind of fear. Man is by nature, avaricious. And because of his insatiable greed for riches, man finds satisfaction in preying upon man, not to eat his fresh and blood, but to rob him of this wealth. Thus man also creates fear for man. People can cause you trouble but if you know how to guard yourself, others cannot create worries in your mind.
Each type of fear needs a different approach to subjugate it. For example, if you fear illness, you must adopt a healthy lifestyle; do your exercise regularly and also control your diet. If you don’t want others to take advantage of you, you need to upgrade your skill and enhance your knowledge.
Fortunately man is endowed with the faculty of thought which is controllable. Every human being has the ability to control his own mind. By intelligence, we can mitigate fear. Negative thought creates fear and demoralization. Positive thought brings forth hopes and ideals. By refusing to think negatively, much fear if not all, is eliminated.
A newborn calf has no fear for a tiger because the calf does not know that the tiger can eat him up for lunch. A hunter with his men and guns has no fear for the tiger because he knows that he can kill the tiger before the tiger can cause him any harm.
A professional trader or investor has no fear in the stock market because he knows that he is skilful enough to win. A beginner in the stock market has no fear because he is as naïve as the calf.
Know who you are before you attempt to ‘play’ the market.
Lately, another kind of fear has emerged in the stock market. This is accounting fraud or accounting irregularities. How can anyone protect himself against such fear? (All comments and opinions are welcome.)
6 comments:
The only way I know of is to heed the charts. As in the case of Transmile, sell signals emerged many times.
Though to be fair, the sell signals did not emphasize on the severity of the selldown. Or perhaps, my charting skills aren't sufficient to see that as yet.
Another way - a simpler one, is to just blindly follow a system. Stop loss in the system would have taken care of things.
2 cents.
Fear is when someone not confident of his doings, know wrongdoing after the purchase, or just don't know anything about the market but still joining the bandwagon.
Rules are set and mentioned about principles of stock investing but as mentioned in Van Tharp's books, THE MAIN PROBLEM IS FOR THE TRADERS TO FOLLOW THE RULES.
As for Transmile, guess most of the investors are for long term. So in term of valuation, the most lethal weapon that may call for a windfall will be the Accounting fraud. As mentioned as one of the reason to dispose the stock by Pat Dorsey in her fundamental analysis book, I will not look at the chart even but , just RUNNNNNNNNNNNNNNNNNNNNN!
;-).....!
Another perspective is offered by Mark Douglas
Very few people who go into trading start out with appropriate beliefs and attitudes about responsibility and risk. There are some who do, but it's rare. Everyone else go through the same cycle I described in the example of a novice trader: We start out carefree, then become scared, and our fears continually dimish our potential. The traders who break through this cycle and ultimately make it are the ones who eventually learn to stop avoiding and start embracing the responsibility and the risk.
Most of those who successfully break the cycle don't make the shift in thinking until they have experienced so much pain from large losses that it has the positive effect of stripping away their illusions about the nature of trading. With respect to your development, the how of their transformation is not that important, because in most cases it happened inadvertantly. In other words, they weren't completely aware of the shifts that were taking place inside their mental environment until they experienced the positive effects their new perspective had on ways in which they interacted with the market. This is why very few top traders can really explain what accounts for their success, except to speak in axioms like "cut your losses" and "go with the flow"
If there is such a thing as a secret to the nature of trading, this is it: At the very core of one's ability
1) to trade without fear or overconfidence
2) perceive what the market is offering from its perspective
3) stay completely focused in the "now moment opportunity flow"; and
4) spontaneously enter the "zone", it is a strong virtually unshakeable belief in an uncertain outcome with an edge in your favor.
The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict, that "anything can happen"
Several years ago, a trader came to me for help. He was an excellent market analyst; in fact, he was one of the best I ve ever met. But after years of frusfration during which he lost all his money and a lot of other people's money, he was finally ready to admit that, as a trader, he left a lot to be desired. After talking to him for a while, I determine that a number of serious psychological obstacles were preventing him from being successful.
One of the most troublesome obstacles was that he was a know-it-all and extremely arrogant, making it impossible for him to achieve the degree of flexibility required to trade effectively. It didn't matter how good an analyst he was.
Unquote. My personal comment as below:
Maybe this is why people often say, "Great traders react rather than predict"
Flexibility, yes, that's right. You have to evolve with the market. Change accordingly with the circumstance, and opportunity.
In Chinese it is:
"Sui ji Ying Bian".
Diversity.
Meaning, do not put all eggs in one basket.
I used to go for alpha strikes - dump everything on one or two high beta counters at perceived lowest points. But now, after much seasoning, my portfolio is spread around several counters at any one time. Therefore, if accounting regularities (or any other negative stuffs) do occur, it only breaks an egg or two instead of the whole basket.
Fear, or lack of fear, only determines the amount of courage you have to take action. It does not determine success or failure.
Following the example, a naive calf would walk in the tiger's path and will be eaten up soon enough. Irrational decisions caused by a lack of fear, led by insufficient knowledge and experience, leading to disastrous results.
Fearing accounting irregularities is a good thing. It makes you wary of your decisions. Fear makes us read this week's The Edge article about the many counters that have been reporting high Receivables. Fear makes us avoid counters that are not transparent even when rumours are abound.
Will that stop the metaphoric tiger from eating us? Probably not all the time, but in time we learn to recognize the sheep from the wolves.
Embrace your fear and learn from it! It may save you soon enough!
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