A Realistic And Objective View Of The Markets

You sit alone staring at your screens in silence. It's just you and the markets. It can be lonely at times, so lonely that it's tempting to view the markets as a person. Indeed, financial reporters who are fond of covering the market in dramatic ways talk about the markets as if they are alive: "Like a marathon runner, every bull market has to pause and get its breath once in a while before it sprints higher." Or you may hear a reporter say, "The claws of this bear market ripped right through the last shred of resistance. Nothing can stop it when it gets its blood boiling!" Other reporters may imbue the market action with a life force: "The market saw a chance to bolt through some resistance today and dashed for 50 large ones." As much as we have a need to personify the market, it has no eyes. It has no legs. It has no blood to boil. It can't "see" or "bolt" or "gorge" or "claw." As much as we want and need to view the market as a person, it's best to see it as nothing more than changes in prices, which may reflect the actions of a collection of market participants, but essentially is nothing more than abstract movements.

Once you start looking at the markets as a person, you lose your objectivity. You begin to impose your thought process onto the market as if you are interacting with a person. But it's not a person. It's just a thing.

It is hard to stay unemotional and detached, and when you personify markets, you may be prone to allow your emotions to influence the decisions you make about trades. You may feel angry when the markets move against you, or afraid and on edge if you believe the markets can change course as if it were fickle. The more experience you gain as a trader, however, the more you will see that the markets hardly act like people with consistent motives and agendas. The markets are not living beings, so you might as well see the markets realistically as nothing more than a reflection of unpredictable forces. It makes sense to be a little afraid, but it doesn’t make sense to take it all so personally. The market is virtually an inanimate object. There’s no need to get overly upset when things don’t go your way. That isn’t to say that the markets don’t seem to act chaotically at times. The markets may sometimes act like a crazy person. It’s vital to protect yourself. For example, limit your risk. If you make the outcome of a single trade relatively insignificant, you will be able to remain more detached. Similarly, trade with money you can afford to lose. If you know that a loss can actually hurt you, it will be difficult to convince yourself that the outcome of a trade doesn't matter. The more you can believe that an outcome truly doesn't matter, the easier it will be to remain detached and objective. So don’t personify the markets. The markets aren’t alive and you shouldn’t treat them as if they are. When you approach the markets as if it is an inanimate object, you will stay detached and be able to trade freely, effortlessly, and profitably.