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thinking in such a way that you can bend your mind around the problem and arrive at a new solution without losing sight of your goal, or your values. Although flexibility is not a belief as much as the ability to think in a certain way, it is affected by your beliefs. In order to increase your level of mental flexibility, you need to determine which of your beliefs could empower or disempower your ability to be flexible. |
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Typically when rigid traders are asked to describe their beliefs (rules) about what it takes before they can experience something they value, they will use a lot of "ands" to link all their beliefs together. Consequently they have a very rigid system of beliefs that must occur before they experience an emotional feeling that they value. For example, if you were to ask rigid traders how they know when they are successful, they might say: "When seven trades out often are profitable, and of those seven five of the underlying contracts move at least 5 percent, and my broker tells me that I am the best trader she is working with, and none of my trading buddies comes even close to my profitability, and the trades work out exactly like my methodology predicted." Another example is asking such traders to describe the methodology for going long. They might say: "I go long only when the 9-period moving average crosses above the 45-period moving average, and in the preceding 20 days there was a double bottom, and the volume is increasing.'' In almost all cases the rules (or beliefs) are linked together with "and." The more rules a trader has that are linked together by the word "and," the more rigid the trader becomes. Consequently the more difficult it becomes to accomplish what the trader seeks. The problem with rigidity is that it leads to emotional, physical, or fiscal death. The most rigid people in the world are those who are six feet underground. |
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I once met a trader who had 59 rules before he would go long. He had done extensive back-testing that verified that in "almost" every case when those 59 rules had been metit resulted in a profit. Unfortunately the trader blew up his account before he could prove the validity of those rules. Why? Because his rules were so exact that long periods went by before he got a signal; consequently he would lose his discipline, ignore his rules, and go long when he had a gut feel that the market was about to go up. In addition, he had an inherent problem with his 59 rules. In effect, what he had done was to optimize his methodology to such a degree that it almost guaranteed that the next actual signal would be a loser (I know that sounds bizarre). In a later chapter we will examine optimization and why it usually fails. The point right now is that because this trader had 59 rigid rules, he was guaranteeing that he would lose all his money. If he had researched a methodology that perhaps had 9 rules (or beliefs) about the market that were linked together using some "or" instead of just "and," his probability |
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