Every January, investors throughout the world pledge to improve themselves and their financial management efforts. Only a select few truly succeed in these eager commitments. Let this be your nudge to join the ranks of those select few.
In past years, I’ve often fallen into the trap of making long lists of New Year’s Resolutions. I’ve taken on towering tasks to weed out negative beliefs or unhealthy emotions, to become more personally accountable and action-oriented, or to seek answers from within rather than trying to place responsibility elsewhere. While some of these resolutions have fallen short, many others have fortunately stuck to varying degrees and have grown into permanent staples of my routines. The most prominent example is my personal Trading Journal, which began as a goal to document my behaviors, emotions and thoughts throughout each trade. Most significantly, my journal has come to shape my definition of success by changing the way I classify winning and losing trades.
To me, success is measured by consistency and execution rather than profits. Thanks to the lessons learned from my Trading Journal, I define a winning trade as one in which I follow my routines and stick to my investment methodology. I do not define success based solely on whether or not I make money, because I have faith that proper execution of my methodology will produce greater profits in the long run. If I fail to follow my routines, a trade is deemed a loser due to my inconsistencies, even if it is profitable. As an investor, I regularly remind myself that I am playing the probability game. Even when I achieve perfection in my execution, a small percentage of trades will yield losses, as such is simply the nature of the market and I accept that.
So what is my New Years resolution for 2015? Well, unlike previous years, I have settled on only one, which stems from a quote that I recently heard while watching Netflix’s ’House of Cards’. Frank Underwood turns to the camera and says, “The heart can choke the mind when all its blood flows back unto itself.” Upon hearing this line, the trader in me instantly perked up, for its relevance to investing is clear. Too often we are tempted to trade with our hearts by allowing our own personal desires for the market to move in a particular direction to influence our investment decisions. When we allow these desires to creep into the picture, they impede our ability to place rationale ahead of greed and logic ahead of emotion. Put another way, investing with the heart chokes out our use of the mind and threatens the success of our investment efforts. As we move forward into the New Year, I encourage you to think about this quote from time to time and ask yourself, are you foolishly investing more with your heart, or are you wisely investing with your mind? My personal resolution for the coming year is to commit to the latter, and I hope that you will follow suit!
Trade well; trade with discipline!
-- Gatis Roze