Are Humans Programmed To Lose: Unbalanced Discipline
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Humans are born hackers.
We like to experiment. We’re curious. We like to play.
This has created a species of generalists and is one key to our survival and success as a species. After all, humans aren’t the best swimmers, the fastest runners, or the strongest lifters, yet we ended up higher on the food chain than sharks, cheetahs, and bears respectively.
This undisciplined approach to exploring does not, however, help us master trading and investing. Because the market requires nearly constant attention and monitoring, the most successful investors have a solid trading strategy and a balanced approach to discipline in executing the strategy.
And discipline isn’t always interesting.
Investors who aren’t disciplined tend to have segments of success, followed by sudden reversals. They discover strategies and then, as soon as they read a new book, switch to another investment flavor of the month appears in the Amazon’s best seller list.
Or, they experiment on their own. Not normally a bad thing (learning and testing can optimize investment systems), but bored investors often stretch winning principles and incur more risk. Eventually they have moved so far away from their core strategy that they are quickly overwhelmed.
The result is a losing trading strategy.
On the other hand, over-discipline leads to too rigid of an approach to trading. Some investors continue to cling to unsuccessful strategies, even after those principles have been discredited. An example of this is an investor who buys and sells at certain moving average points, even though those entry and exit points are no longer valid.
In order to be a successful investor, you must have a balanced discipline: not too loose that you are unable to maintain any trading methodology, but not too rigid that you are unable to refine and hone your skills.
Related posts:
- Are Humans Programmed To Lose Money?
- Are Humans Programmed To Lose: The Greed Factor
- Are Humans Programmed To Lose: When Right Is Wrong
- You Can’t Win for Losing: Why Money Management Matters
- Un-Risky Business: Six Ways Entrepreneurs Master Risk
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is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
