“Every day I assume every position I have is wrong.” — Paul Tudor Jones
When the market is strong, everyone is a genius. Since 4 out of 5 stocks move with the general direction of the market, pretty much any stock you pick will move higher during an uptrend. I have always said that “strong markets tend to forgive your mistakes.” In other words, you can buy extended stocks or not be as strict with your loss-cutting policy and the market tends to be forgiving when it is healthy. Here’s the problem: If you get conditioned to this behavior and become complacent, eventually the market will punish you.
Some people have sent me tweets calling me “cocky” and “arrogant.” The truth is FAR FROM THAT. I might be confident and have conviction in my ideas, but I am scared shitless of the market. I would rather face Mike Tyson in his prime than face the market. Why? Because the market doesn’t care about you. It doesn’t care if you have kids to put through college or a family to feed…the market will chew you up and spit you out with NO HESITATION. The second you get cocky and think you are good, the market has a unique way of humbling you. Trust me, I’ve been there before and it’s not fun.
In his great book Pit Bull: Lessons from Wall Street’s Champion Day Trader, Marty Schwartz says the most important change in his trading career occurred when he learned to divorce his ego from his trading. He goes on to say: “Trading is a psychological game. Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself. You have to stop trying to will things to happen in order to prove that you’re right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago. The sole objective of trading is not to prove you’re right, but to hear the cash register ring.”
While we are currently in a strong uptrend, this blog post is a friendly reminder to keep your ego in check and to stay humble. There is nothing wrong with riding a strong trend and making money, but don’t start thinking you’re a genius. I’m certainly not trying to preach because I tell this to myself EVERY DAY and POUND it into my head. I constantly remind myself to stay focused, trade with confidence, play great defense, but most importantly…stay humble.