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Don’t Be Impressed with Yourself

May 4, 2009

While reading “Better Than Good” by Zig Ziglar, I came across this quote “Don’t be impressed with yourself”. I thought those were quite meaningful words of wisdom, particularly for those who deal with stock markets. It’s very easy to be “impressed with ourselves” when we have a winning streak, just to realize profits being taken away by Mr Market in a jiffy. This is not to say that we ignore “past performance” but rather “Don’t be complacent” and that one should “Treat every move by Mr Market as a new move”.

The author refers to “Don’t be impressed with yourself”  with regards to not let the success rule your head. Be humble and yourself. While it is easier said than done, there is lot of truth in it. When we start to let success rule our head, it’s the success that drives our future actions and not the earlier traits which drove success. And stocks market is such a interesting place that has humbled many, time and again. No one, no matter how successful, is really spared who hasn’t been shown “door” by Mr Market over the last century and of course, even as recent as last year.

So, it requires one to be level headed, learn to deal with uncertainty and be prepared to be “humbled”. Expecting for best but preparing for worst, even if you are impressed with yourself. Treat every single move of Mr Market as a “new move”, and therefore don’t have an impressions that past performance will drive future performance. I mentioned this earlier (not my words) “Charts don’t shape the markets, the markets shape the charts” else every stock chartist would have been billionaire romancing on the moon every weekend.

Here is an interesting peice from John Hussman on uncertainty-

In his book On Being Certain, neurologist Robert A. Burton quotes F. Scott Fitzgerald – “The test of a first rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function.” Buddhist teacher Pema Chodron calls it “being comfortable with uncertainty” – being willing to take every aspect of reality as the starting point, without wasting energy wishing things were different, without denying reality as it is (even if your next step is to work toward changing things), and without needing to know what will happen in the future. “The truth you believe and cling to makes you unavailable to hear anything new. The best thing we can do for ourselves is to be open to an unknown future.”

Burton offers the same advice. Tolerating the unpleasantness of uncertainty, he writes, “is the only practical alternative to cognitive dissonance, where one set of values overrides otherwise convincing contrary evidence. Each position has its own risks and rewards; both need to be considered and balanced within the overarching mandate: Above all, do no harm. Science has given us the language and tools of probabilities. We have methods for analyzing and ranking opinion according to their likelihood of correctness. That is enough. We do not need and cannot afford the catastrophes born out of a belief in certainty.”

That’s what precisely I am inferring from “Don’t be impressed with yourself”. If we are impressed with our results, we are probably impressed with our strategies, past performance and tools we used which might not be applicable in the new world that is about to appear. If however, strategies are driven to deal with uncertainty without being pumped up by “past performance”, there is good chance that one is well grounded.

Markets have gone-up, and have gone-up very nicely. I feel as if I missed the rally. It’s an irritating thought in the “present moment”, but when it is thought in retrospect, it probably was a good decision under a set of circumstances which I considered that time and still consider as bearish. Dealing with uncertainty was what kept us grounded at  OPNewsletter and thus allowing us to generate over 8% returns (last week’s closing) in spite of being bearish. But again, that is “past” as of “this moment”.

Have fun and profitable trading, trade cautiously,

OP

One Comment

  • David Castello says:

    A very good article… this is the essence of learning to be a good trader… (and other things in life also)

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