- 1999: Volume 8, No. 2 The Stable Trader

Stable traders thrive because stability builds strength and overtakes weakness. There are many different types of strength and the right combination of strengths is important to winning in each situation. When looking at countries, military power was once the answer to stability and strength. Now, a nation needs more than weaponry to maintain its strength. A country needs to be economically and technologically strong to be stable. For an individual to have the stability of a consistent professional trader, the strengths to survive in the trading arena must be developed. Some of the characteristics that are necessary are knowledge of the markets, a good business plan, and a balanced life.

Stability Breeds Success

This principle works everywhere you look. Banks lend to people who are wealthy and avoid lending to people who need money the most. Being needy, which is a classic weakness, is the surest and fastest way to get people to avoid you. People who are self-sufficient and healthy are perceived to be more attractive, and for that reason, they are likely to get jobs, promotions, and opportunities.

Trading Brothers

Michael and Martin grew up in a household where each person was expected to carry his own weight by their father, Max, who worked as a butcher. Max took the boys to work at his shop once they started school. Their mother, Martha, did not think the kids should take on such responsibility at a young age. In fact, Martha resented the stern work ethic imposed on the family by her husband. She loved to spend the money she made on the side on indulgences that her husband refused to buy. Martha worked in the shop during the peak hours and also had a small business preparing and selling dinners from the leftover meat at the shop to her working neighbors. With this extra money, she indulged her appetite for expensive, personal luxuries that brought her pleasure.

When Michael and Martin grew up, they both developed an interest in the markets. Michael traded commodities from his home office while Martin traded on the floor of an exchange. While Michael followed in his father's footsteps, Martin modeled his life on his mother. Michael was frugal with the money he made from trading. He lived in a comfortable, but modest house, and put his profits into very safe investments. He practiced the personal disciplines of eating healthy food, exercising, and taking care of his mental health. Martin, on the other hand, lived beyond his means in a lavish style. He wore designer clothes, drove expensive cars, and lived in a mansion. After seeing the pleasure his mother derived from indulging herself when compared to the dour life his father lived, Martin was determined to enjoy his life. If it felt good, Martin was a devotee.

Over time, however, Martin's life began to unravel. Because he spent every penny he made on luxury, Martin had nothing to fall back on when his health began to interrupt his trading performance. He began to worry constantly about money. Nevertheless, Martin was unwilling to cut back on the luxuries that he was accustomed to. Eventually, he was forced to go to his brother, Michael, whose pockets were very deep, for a significant financial bail out.

Several years earlier, Michael had come to me for help in improving his trading performance. He considered the cost of coaching a business investment since his goal was to improve his bottom line. We worked to make him more aware of the fact that he would increase his profit margin if he traded his better trades. To reach his goal, Michael had to learn to trust his system, follow his trading rules, and stay disciplined. Michael also needed to learn to balance his life and learn to enjoy and reward himself. This emotional balance served to create a positive feedback system in his neurology that supported his success. The result was that Michael's profits improved well beyond our original goals. When Martin asked his brother Michael for help, Michael called me for advice. Michael did not want to loan money to his brother only to watch it spent on luxuries. If Martin's situation remained, he would soon return to the same situation and would be unable to repay Michael the money he owed him.

After our conversation, Michael agreed to help his brother, but he exacted a steep price, Martin would have to create stability in his life. He would have to set aside a significant portion of his money for the future and would have to reduce the cost of his lifestyle to accommodate his real income less the money he had to pay back on the loan and put into savings. In addition, he would have to create stability in the rest of his life, as well. Martin agreed to join a gym and go every day. He and his wife stopped eating out every evening at expensive restaurants and learned how to prepare healthy foods at home.

Slowly, Martin pulled himself out of financial trouble and his trading results improved dramatically. Now, he is trading electronically, off the floor, with his brother. He had enough money set aside to make the transition, with plenty to allow for time to learn and make mistakes.

Building Stability

Weakness is an invitation for something to go wrong. Stability, on the other hand, is the absence of weakness in the system and is a form of insurance. Removing and fixing any weaknesses in the system is the first step in creating stability. In the real world, these steps translate into mending holes in the fence, beefing up security, identifying and remedying weaknesses, reinforcing foundations, laying in supplies, creating resources, building sustaining relationships, buying insurance, and developing escape routes.

The Recipe for Maintaining Stability as a Trader

Any good recipe involves blending ingredients. Stability is the result of a combination of the following ingredients in ample quantities.

Energy—High energy builds physical, emotional, mental and spiritual strength. The result of having positive, high energy keeps you healthy. An unhealthy person diminishes his stability as a trader.

Knowledge—Knowledge gives a trader the confidence and competence to make his own decisions knowing from his own authority that he is right. Those who follow other people's advice are dependent and, therefore, vulnerable.

Wisdom—In order to use the wisdom that is a part of you, you must develop and balance right and left brain thinking. Statistical, mathematical people cannot work beyond a mechanical system. Creative, people often want to trade using only discretion. If you do not develop the wisdom that whole brain thinking provides, you will not optimize your trading ability.

High Self-Values—High self-values such as self-esteem and self-confidence increase your stability by giving you the psychological advantage. You perform better when you have these high self-values, which are a result of developing and using your resources. All skills, abilities, abundance, and positive relationships will add to your resources account. People who are not constantly growing will lose their ability to maintain self-values.

Discipline—Discipline is about following the rules and guidelines set up for yourself in all areas of your life. Keeping to a predetermined winning course is the essence of stability. When you are on course and the outcome is not what you want, you will know what not to do and be willing to try other tactics.

Prosperity Consciousness—Prosperity consciousness creates stability for traders by increasing the probability of success. Prosperity consciousness increases financial strength by keeping the mind focused on maintaining a positive mental outlook and positive expectation, while taking action on creative ideas within a plan.

Flexibility—Flexibility promotes stability by allowing you to adapt to change. Strength cannot exist without flexibility. Without flexibility, you cannot fight the long battles. It keeps you young, fresh, and open to opportunities and growth.

Environmental Support—Stability is created externally as well as internally. The environment where a trader lives and works must support him physically and emotionally. If it is hostile, unsafe, or unhealthy, he is operating from a position of weakness that will eventually undermine his efforts. Another factor in his environment that can weaken his defenses is inadequate resources.

Financial Security—For a trader, no single ingredient builds stability as much as financial security. You must build your financial strength on diversification. This strategy must include long-term investments for retirement, education for the children, and insurance to secure present lifestyle in the event of sickness or disaster. It must also include mid-range savings and investments for the realization of dreams and short-term fund allocation for enjoyment of life in the moment.

According to a recent television news show, a segment of American workers most at risk of losing their jobs are middle managers in their forties earning over $100,000 per year. Companies are letting these valuable employees go to replace them with younger workers that can be started at $40,000 to $50,000 per year. Far too many of these middle managers are living right up to their incomes and putting nothing back in reserve. When they are released, they are at immediate risk of losing their homes and everything they have. To make matters worse, they find that they cannot replace their jobs at the salaries they had once commanded. One former executive sent out nearly 300 resumes without receiving a positive response. Nevertheless, if you had asked him before he was fired how stable his employment situation was, he would have given himself high marks.

Liquid assets are the very definition of financial stability. Money that is tied up in hard assets, even when they are appreciating rapidly, can disappear in a matter of days if a market goes bad.

What is your capital accumulation plan? Capital cannot be accumulated if it is not being saved. Unfortunately, most people who have money to spend do so with a vengeance. Few of us have developed the self-discipline to save because the nature of our culture is to consume. Our economy thrives only as long as everyone keeps buying and we are constantly bombarded by the unconscious manipulation of advertisements to buy things that we do not need.

Attractiveness—If stability is measured by strength in any situation, then beauty and attractiveness are important ingredients for increasing stability. Attractiveness increases the chances of survival, health, and money. Studies have shown that more attractive people get jobs, service, and opportunities at all levels while their less attractive and possibly more capable peers are turned away. Opening many doors of opportunity might require a plastic surgeon and good packaging, but keeping the door open requires the attractiveness of high energy, capability, and character.

Aggressiveness—Aggressiveness is a factor, which increases a trader's stability by increasing his strength in any situation. I have made the distinction between aggressiveness and aggression. Aggressiveness is assertive personal power that does not step on the rights of others or take unlawful action to reach a goal. Nevertheless, the aggressive are perceived as stronger than the passive and non-assertive. They are more likely to win battles and are, therefore, less vulnerable. They are also less likely to be afraid, which makes them stronger in most situations.

Health—How healthy is your health account? Many people tolerate feeling uncomfortable as a part of their lot in life. While there are people who cope as best they can with conditions that are chronic, most people choose to ignore the fact that they are not operating from their optimal health potential.

We often admire the thirty-year-olds burning the candle at both ends while managing to turn out good performance. These bon vivants are borrowing on their future energy supply and will pay the price with their health when they are in their fifties. There are those who have been gifted with unusually strong immune systems that seem to thrive no matter what their choices and live to be centenarians, but these supermen are the exception. Others with the strictest health regimes are sickly all of their lives. Most of us, however, reflect our choices in our health and appearance.

The stable person, who is not a superman, makes healthy choices in food, drink, exercise, rest, and relaxation. To achieve stability in your health, pay attention to the signs that your body gives you. Aches, pains, and negative behavior are signals that your body sends to let you know that you need to take notice and act on better choices.

Relationships—Harmony with others surrounding you is necessary for the welfare of your stability account. Most people habitually interact in set patterns of conversation and behavior. When you recognize and notice negative patterns and make a conscious choice to change them to positive interaction, you add to your stability account. You will notice how everyone around you will follow suit and what follows is a volleying effect of even more positive relating. Each major relationship is like a living system. If there is bad feeling in an important relationship, either expressed or unexpressed, the system is weakened and can become unstable. Pushed far enough or neglected too long, the relationship can spin out of control causing havoc in the lives of those it touches. Building a healthy marriage or partnership will add a significant number of stability points to your account.

Conclusion

The stable trader operates from a position of strength, which allows him to fight the long battles and emerge victorious. The trader whose life is stable can weather losses, bad markets, and change because he has the resources to grow and adapt. Any trader who wants to stay in trading for the long haul must make a commitment to increasing stability in all areas of his life. Michael and his brother, Martin, learned that the cost of stability is years of self-discipline, but the cost of instability can be the loss of all we hold dear.