The market is a reflection of the collective human psyche. To be a successful trader, you need to understand yourself and your emotions, as well as the emotions of others in the market.
This quote by Linda Raschke highlights an important aspect of trading: one must understand the human element of the market and how emotions drive market behavior. And this starts with being aware of one's own emotions as well as the emotions of others. Those two must be worked on side by side. If you do the work of only understanding one and not the other, you can't make good decisions and achieve success in trading.
Reflections
Meditation On Uncertainty
I’m sure you’ve heard the news by now: Silicon Valley bank (the #16 largest U.S. bank with $212B in assets) has collapsed. This bank has been a major player in servicing startups for decades, and its collapse has put the entire startup/tech industry at risk. There is also a risk of contagion, which could have far-reaching consequences.
I don’t mean to be an alarmist, we have enough of that at the moment. What I’m asking you, though, is to pay close attention to how things evolve. The talking heads, the influencers… everyone is talking about the dire consequences, and rightly so–this is really concerning! But it’s not a moment to panic. As traders, our job is to step back from the noise and assess things objectively and strategically, rather than emotionally.
As always, probabilistic thinking is your best friend. We’re all dealing with known and unknown variables here. Always issue caveats and acknowledge uncertainty through your reasoning and behavior as a trader. Such humility suggests understanding and thoughtfulness. Be cautious of those who speak in absolutes because everything has caveats, exceptions, and edge cases along a spectrum of possibilities.
Coming back to this SVB news, this is going to be an eventful week in the market. If you plan on trading, do it dispassionately, keep emotions out of it, and always manage your risk. Place sensible stop-losses that account for the ramp-up in volatility, and stay focused on your plan and process.
In times of increased uncertainty, it is helpful to turn to practices such as mindfulness and meditation to help ground ourselves and find inner peace amidst the outer chaos. To that end, I want to share with you a meditation on uncertainty that I recorded for the ChatwithTraders community. I shared it on my Patreon page, but today I’m making it available for free for everyone. I hope this is helpful.