Thursday, January 24, 2013

Freedom and Responsibility in Trading

Creating freedom for myself and others is part of my mission statement and for whatever reason (more awareness?), this concept has been showing up more frequently from a number of different directions. If the following various ideas aren’t too disparate, let’s see if they can prompt some thinking about freedom as it applies to traders.

Freedom and Freedoms

For the overall idea of this article, let’s describe freedom as the ability to choose. You will find that you seem to have more freedom—more choices— in some areas of your life where in others, you appear to have few or no choices. (I’ll leave it up to Van for now the discussion of how it’s all an illusion. He writes about that in his next book.)

Freedom is a naturally recurring topic in trading. Generally, the markets offer anyone with enough money to open an account, the voluntary and speculative participation in the capital process of modern economies. Trading offers the promise of prosperity to be as potentially close as a mere few trades away. As attractive as that sounds to some, the financial industry fails to mention the amount of proper preparation that market participants truly require so they don’t lose their shirts in the long run.

A number of people trade so they can choose to work at a job—or not—at some future point. The process of pursuing this goal can have an ironic effect. Several years back, Melita Hunt, former CEO of the Van Tharp Institute, challenged this newsletter’s readers to ask themselves if they had become a slave to monetary freedom. I wondered if I had become captive to this too but wondered more about a particular couple I recall form various Van Tharp workshops at that time. Both people worked demanding professional jobs but spent every spare moment working on their businesses. Their goal was to retire within ten years, but from my perspective, they seemed burned-out rather than free, especially in a psychological sense.

As it turns out, psychological freedom may be the most important form of freedom. In one of her lectures, Marianne Williamson discussed various forms of freedom—political, religious, financial, etc. She stated clearly, however, that psychological freedom is the most valuable form of freedom. With it, other forms of freedom are desirable but not required because psychological freedom provides one with many choices regardless of his or her external circumstances. Psychological freedom is the ability to frame a situation within context of what it offers in possibilities, from a deeper human or spiritual level. For an “unpleasant” situation, you could choose to mentally fight it, surrender to it, manage it constructively, or try to ignore it. All those are choices— choices for which you are responsible.

Flip Side of Freedom

Responsibility is one of two not-so-often-mentioned, fundamentally required components, of freedom. If Van teaches one core principle for trading, it is you are fully responsible for your results. You have the responsibility to choose to trade or not, to prepare yourself by understanding a myriad of topics or not, to understand yourself or not, etc. English vocabulary did not offer what he wanted people to understand so he developed a new term to help describe his concept. He uses the term respond-ability as a better way to describe how you posses the complete ability to respond to life’s circumstances with your choices, and how you even generate those circumstances.

The Other Work

There’s another kind of work required for freedom. Effort may be a better word here, as physically, you may not do anything more strenuous than perhaps turning off the TV or radio and becoming more quiet. Freedom’s other component is awareness. Awareness of what thoughts you are thinking and believing, of what you are creating, of your true Self, and of all the choices you genuinely have at your disposal.

Awareness can help traders in numerous ways small and large. Most basically, awareness of your current mental state can help you determine if you should even be trading today. Trading in an angry or depressed state can be as dangerous to your equity as trading in an ecstatic state. Do you evaluate your mental state prior to executing trades? That is one of Van’s daily steps in his Top Tasks of trading. On a whole other level of awareness, Van has one Super Trader graduate he calls his star graduate. She had little trading experience before the program but can now trade from a very aware state and make more than 100R a month trading just an hour or two a day. Clearly, she has developed her awareness to a very high level and applies it to the markets with breathtaking results.

At the other end of the spectrum, a low level or lack of awareness means a lack of choices. If that’s the case and it seems like there are no choices, how do you become more aware? That’s a challenge for anyone, though, there are numerous ways. It can be as simple as spending quiet time alone, or as simple as feeling your feelings or making an effort to be present in the moment.

Van developed one method with one of the Super Traders that takes a little discipline and technology to execute, which I use. I set up an automatic alert to pop up on my computer screen every twenty minutes during the day with a few simple questions like “What is my mental state? What thought am I thinking? What does thinking this thought get me into? What would be the opposite of this thought?” In an Access database, I recorded all my answers for conscientiousness in the moment and also for review later.

Although this exercise was based on awareness, it struck me that it actually helped me be more free. Every twenty minutes, I was asked to be aware of and accountable for my thoughts and actions. Many times, the questions “loosened up” reality a little by reminding me of possibilities for thinking other than the way I was, or to actually do something different. The simplified process might look something like this:

Awareness -> Responsibility -> Freedom

In full disclosure, sometimes these computer screen alerts felt like a disruptive pain in the butt. In looking over all my answers in the database, however, the process clearly generated alternatives to whatever single thought I had at the time (many times without a choice) and allowed me the ability to consciously choose to continue in one direction or make a change.

Are you up for an exercise like that? If you want more freedom, more choices, you might start with awareness and accountability. Here are some questions you might consider:

Do you have a sense of your personal level of awareness and accountability?

Where are you free in your life and where are you not?

Where do you think you have no or very few choices?

Why is that?

Awareness, responsibility, and freedom can all help your trading, sure. They can also help you live a better life. Eventually and ultimately, we each have the freedom offered by infinity and eternity. But what does that have to do with markets or trading?


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