Cultivating Your Independent Thinking

Why independent thinking is crucial in our lives and thus trading itself?

• There exist very wide range of books outlining thousands of different ways to trade.
• We have colleagues that “teach” us how to trade.
• There are articles on “news” sites explaining why something is happening, and what is likely to happen next.

What do all of the above have in common? They are injected with an opinion.

News is scarce these days; really, it’s hard to come by just plain, vanilla news. Almost everything we listen to carries some form of an opinion based on the experiences of the author (this site included).

Social influence is the process by which individuals adapt their opinion, revise their beliefs, or change their behavior as a result of social interactions with other people. In our strongly interconnected society, social influence plays a prominent role in many self-organized phenomena such as herding in cultural markets, the spread of ideas and innovations, and the amplification of fears during epidemics.

Everyone has an opinion to the point where our opinions in and of themselves become the news. Fran Lebowitz.

I realized how rough this industry can be to learn from. Financial theory floods our college classrooms but find me the university that will teach you anything about a chart and I’m there with donations.

We all make our own opinions, perceptions and judgments based on our own individual experiences. We then take those opinions and translate them into action. When we listen to others we are doing nothing more than attempting to take their actions and copy them.

Information gained through others can open our minds to new topics that you might have not discovered on your own (it’s going to come no matter what).

You will rarely find skilled traders listening to the opinions of others too seriously. They might generate ideas and get their motors running, though rarely, if ever follow the exact motions of the person that gave it to them. Their definitions are created with raw information and later transformed by the “hands of the creator”.

Organizing the information flow is critical to the success of any trader. The world is filled with unfiltered information that will more likely mislead than help an individual trader. I once read the quote ”knowledge is power” I later read a more solid quote that totally neutralized the first one, the quote was ” knowledge isn’t power, correctly applied knowledge is power”.

I think of the number of times I’ve received things handed to me on a silver platter, only for a moment worth of poor judgement to step in and see it all go to waste.

I’m a strong believer in “the more you know, the better you are”. I believe what many people view as “psychological” issues associated with trading are really just a facade for a lack of properly applied, correct knowledge, thus confidence in decision making.

There is simply an overwhelming amount of information that you’re likely to absorb over time, but the best stuff typically comes from your own experiences.

The worst feeling in the world is a trader opening a chart and not knowing what is happening in recent price action, where price is headed next, and can’t identify turns in the market. But this happens all the time, and people simply trade very blindly. Your broker loves the fact that this happens, by the way.

Originally published at www.trading-manifesto.com