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Understanding discipline- using our inborn hunting instinct

In part 2, I discussed how Richard Dennis, the legendary commodity trader, proved to all of us that trader can be trained to become successful; he/she doesn’t need to be born with the talent.  We have much to thank Richard Dennis for this very insightful experiment he conducted.  The experiment also taught us that the key to trading success is the temporary restrain of the chest-thumping gorilla inside us (in which I postulated in part 1).  Richard Dennis imposed discipline (external imposition) by threatening the survivability of the trading trainees.  This external imposition of discipline forced the trading trainees to put aside their chest-thumping gorilla and gave themselves the opportunity to witness and experience the strengths and weaknesses of the long-trend trading strategies taught by Richard Dennis.  After knowing that the trading systems worked,  some of the trading trainees learned to trust the systems and went on to become famous money managers on their own.

So, how do we follow the same path without the benefit of a benevolent trader like Richard Dennis to coach us?  One of the key element of external imposition of discipline is that the trading trainees were willing to set aside their chest-thumping gorilla in favor of an external guidance.  The trainees knew that Richard Dennis was a bona fide trading legend and therefore trusted him totally.

In the same token, we are going to find something we can trust totally so that we can control our gorilla better.  And what better way than to trust our very own hunting instinct that we are all born with?  We will let our hunter mind guide our action instead of relying solely on our chest-thumping gorilla.  Think about it, our ancestors did not survive this long without our inborn hunting instinct.  Yes, we have two very important characteristic traits that sustained our survival- the chest-thumping gorilla for protection against predator and the hunting instinct for foods.

Due to our advancement in modern science that pretty much eliminated the need for hunting; we somehow “forgot” about our talent for hunting!  And as a child, we weren’t taught the skills and discipline that are compatible with our hunting instinct inside us. Nevertheless, deep inside us, we are always yearning to hunt.

Try this one for size, our stock market is our own creation as a way to establish a “virtual”  hunting ground to fulfill our desire to hunt!  There, there, if you accept this premise, you are ready for the next step to utilize our inborn hunting instinct to control the chest-thumping gorilla inside us.

What does hunter do to capture their prey?  First thing a child learns from the hunter father is to understand the prey they are hunting.  The child is taught the nuance and habit of the prey- from their eating habit to where they prefer to sleep.

Light bulb light up yet!  Yes, understand the stock you are trading!  Know how your stock price action moved in different market environment.  Understand the fundamental behind it.

Next, the child is taught the hunting skills.  There are many hunting skills to learn since different prey required different skill set and weapon for the kill.

Learn all the technical analysis (chart reading and/or tape reading) and becomes an expert at it.  Learn to know which technical settings are more appropriate for long-term trading as opposed to short-term trading.  Learn the basic financial/accounting skill so you can decipher  the fundamental information provided by the 10K reports.

Next, the child is taught that patience is required for the hunt.  A steadfast and calm demeanor are required so as not to alert the prey.

One must be patience to wait for the proper signal before taking a trade.  The stock must trigger the parameter in your trading system before you take a trade.

Next, the child is taught to summon the chest-thumping gorilla inside to go for the kill when the moment is right.

When your trading signal is triggered, you must summon your inborn strength to take the trade.

Next, the child is taught that if the kill was not successful, he/she must retreat immediately to save him/herself first so they can hunt another day.

If your trade was not successful, take your loss immediately so you can move on to the next setup for trading opportunity.

Finally, the child is taught to be humble and be thankful for the kill since an arrogant hunter will eventually become “careless” and mauled by the prey.  This is more to remind themselves that their chest-thumping gorilla inside them must be contained after the kill.

By focusing on the hunt and all its intricacies, we are putting our chest-thumping gorilla to the sideline and only called out for trade execution- from entry to exit to cut losses or to take profits.

In summary, direct all your energy not at the stock market but as a hunter scouting the stock market.  The focus of energy is different- at the market, you can get carry away by the mob mentality and forget to take your profit or cut your loss; as a hunter, you are focusing on the hunt itself and that put you in a position to “observe” the mob mentality instead of being part of it.  Thus, you are more likely to take profit or cut loss before the trend changed direction in a big way.

We,as human, have two very powerful characteristic traits that we passed on from generation to generation- the chest-thumping gorilla trait and the hunting instinct.  Brush off the dust and bring your hunting instinct back up so as to balance against your gorilla trait.  Both are needed for the success of the hunt.

Now, you know why I always sign off with…

Good Hunting!

Link to Part 1 & 2:

Understanding Discipline- a new perspective (part 1)

Understanding Discipline- Turtle trader approach (part 2)

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Understanding discipline- Turtle trader approach (Part 2)

In part 1, I postulated that exercising discipline on our own is like exerting control over a chest-thumping gorilla inside us.  If you think about it visually, it is almost impossible if you don’t have a strong desire and motivation to make it happen.  Exercising discipline in the trading arena is no different than exercising discipline in the martial art or boxing arena. A lot of time is needed to devote to this endeavor.  Practice, practice, & practice are needed to ingrain the actions (cutting losses and taking profits as trigger points, etc) you wanted into your trading mind.  If you are not embarking on a journey to tame your chest-thumping gorilla inside you, the probability of you being part of the 97% traders who eventually lost their hard-won gain is very high.

Nevertheless, there may be a “way” to master discipline on your own.  I said “maybe” because it is still up to each individual to take this approach seriously.  Before I get into this; let me offer a real-life example of how discipline is being instilled in a group of turtle traders hand-picked by Richard Dennis, the legendary commodity trader who, based on what I read, turned $2,000 into hundred of millions.  I’m sure some of you already know the story of how Richard Dennis and his partner came to a decision (while debating the issue in a Singapore’s turtle farm) to do an experiment to prove Richard Dennis’ theory that traders can be trained to succeed instead of being born with the talent.

Based on the books by Michael Covel and Curtis Faith, some of these turtle traders went on to become some of the greatest hedge-fund and money managers out there.  How did Richard Dennis accomplished this feat?  How did he instill discipline in these traders in such a short-period of time?

It was devilishly simple, Richard Dennis came up with an elegant solution to remove the chest-thumping gorilla in each of the traders he was training by stating that if anyone deviated from the trading methodology he was teaching, he/she would be fired.  He also reminded the traders that they were trading his own money, not theirs.

First, Richard Dennis’ approach, while simple and elegant, is not an approach anyone would try.  If Richard Dennis hadn’t done the experiment, I don’t think we will ever hear any success stories about the former turtle traders.  Come on now, who would risk million of dollars on a group of trading newbies with no experience?  Richard Dennis did it because he could.  It was like making a million dollar bet he could easily afford to lose.

Without a doubt, the new turtle traders learned shortly that Richard Dennis’ long-term strategies worked brilliantly in a trend market.  Despite some difficult periods before the trend took hold, the turtle traders were able to witness and experience first hand that draw-down and cutting losses were very much a part of the trading business.  They also experienced the trials and tribulations of seeing a long-term trend play thru to the end.  This was no easy task since they were witnessing profits disappearing, reappearing, increasing and decreasing thru out the trending phase.  As you can see, if you have the opportunity to witness and experience the strength and weakness of a winning trading system as a participant, the action of executing the trades day in and day out would eventually become part of your daily trading discipline.  The turtle traders began to “believe and trust” the trading system they were taught. In other words, these turtle traders were extremely lucky to be able to “practice, practice, & practice” proper trading discipline using real (but someone else) money; and on top of that, coached by the best trader there was at the time.

Bottom line, if you can master yourself (meaning your own chest-thumping gorilla), you can become one of the 3% successful trader.  Richard Dennis proved it.  But here the caveat, it is all depended on your commitment to tackle the gorilla inside you.  Without an effective coach and free money to practice, mastering discipline can be as difficult as preparing yourself to climb Mt. Everest.  Not every turtle traders in the group became successful, but those who did also possessed the desire and motivation to succeed.  Do you have that desire and motivation?

In human, the chest-thumping gorilla inside us is what make us stand tall among all species, it is actually our greatest asset, from business to artist, unfortunately, it is lethal in the trading arena if not cultivated correctly.

To be continued.

Good Hunting!




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Understanding discipline- a new perspective (Part 1)

Discipline as we know it may conjure an image of a boot camp in a military training facility.  To some, it may be an image of their parent’s stern look.  These are just example of discipline being imposed from the outside.  On our own, discipline becomes a difficult subject most preferred to avoid.  Why?  ’cause discipline is one of the most difficult endeavor to master on our own.

Allow me to venture a thesis of why it is so.

While we, as human beings, are at the top of the evolutionary chain in this earth, our primal essence is not dissimilar to the chest thumping gorilla.  Why the chest thumping gorilla, you may ask?

First of all, despite our small size compared to the wild animals out there, human being is the most fear predator in the animal kingdom.  Unlike the lion or tiger which has four powerful legs and the mass to go with it; human beings, having only two legs, go by the way of the gorilla.  To survive and to dominate, human or gorilla, must show the “presence of force” that cannot be ignored.  The chest thumping gorilla expresses strength and a fearless demeanor.  The vibe generated from this chest thumping exercise is very palpable.  It can induce fear in other predators.  Of course, the chest thumping gorilla is also inflated with a supreme confidence that it can take on any predator that cross its path.  This confidence is definitely felt by other predators.

Guess what, human, being in a higher evolutionary chain than the gorilla, refines this chest thumping maneuver into a much higher level even the gorilla will have to abandon its chest thumping exercise when encountering the human “chest thumping” tactical maneuver.

It began with loud noise, then crude weapon and graduated into fire power.  In other words, human inherited the “presence of force” tactical maneuver gene from our chest thumping gorilla.

In a manner of speaking, we ALL have a chest thumping gorilla inside us.

What does all this has to do with discipline?

Take this: imposing discipline on our own is like trying to control the chest thumping gorilla inside you.  How can you control your own essence?  Exercising discipline on our own is like restricting your own essence to be yourself.  It is just not that easy at all!

To be continued.

Good hunting!

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