It’s the brain ‘power’ that provides the discipline we need to help us chart a course to make the right investing decisions on the stock market. It is also the miracle of our imagination that drives wild price trends that we know can take us to places we dream of. The combination of these two powerful brain powers can go a long way to fostering a very unique trading experience. But they need to work in concert.

Understanding our thought processes and controlling our emotions is the key to investing success.

Recently I wrote about the Miracle of Thought and the Power of our Imagination (See Stockradar Blog) and the wonderful freedom it can offer us and how it can drive wild and seemingly excessive price moves. That’s what happens on the stock market. We see it time and time again.

In this article I want to highlight the unique collaborative aspect of our brain power that will allow us to harness, tune in and enable us to embrace and benefit from the powerful price forces that our imagination delivers.

This is not an easy task, but these are forces we need to understand and control to have a chance at enabling that consistent success. This is called discipline.

I don’t want to complicate things for you, but the mind can have a very adverse and uncontrollable effect on our investment process if we let it. If we can learn to control it, it also becomes a powerful tool. I’m sure many of you who have delved into this world of stock market investment have quickly discovered the difficulties and the many complex variables attached to what would seems a very simple process of buying (low) and selling (high) especially with real dollars are on the line. Being able to control and capitalise on extended price moves is a challenge not easily mastered, but entirely possible.

Our brain is a tireless and emotional ‘worker’ but it is also smart enough to make us aware that we need to be able control those emotions to be a consistent, vigilant and controlled investor ,and ultimately a profitable one.

The emotional side comes easily and naturally to us while the
ultimate success of an investment strategy necessitates hard work and control.

Our brain knows we need systems and checks to monitor ourselves and keep ourselves on track. To put it simply there are rules we have to follow when we drive a car. If we don’t, we go off the road and can crash. If we go to fast or don’t follow the rules the regulator, in this case the policeman books us and we pay for it. We need both controls and prevention techniques to steer a steady course.

So, one naughty part of our brain likes to go to fast, have fun and be recklessly emotional about events. Trading when your drunk is probably not the best of matches! To let the brain run free when investing is dangerous, and it knows it, and it challenges us.

Doing the ‘right thing’ however can often be boring and tedious and requires hard work but alas that is what we have to do to buy and sell ‘right’. Putting systems and checks in place requires an educated and competent awareness. To focus too much on the analysis of stock is a mistake when in fact it is the money management that controls the success.

So, in an emotionally detached environment of perspective, understanding and knowledge we need to go about setting out the rules of systematic and methodical engagement that our brain must follow when we are investing.

We know certain things happen on the stock market. The stock market is a reflection of us as emotional beasts and this is what drives the excesses, in both directions. Stopping a loss getting larger is as important as letting a profit get bigger.

As we often find this hard to achieve in an uncontrolled environment, we set rules that we know that if followed unemotionally or with little regard to what we ‘think’ it will put us in good stead to be able to capitalise on those big stock prices moves. We know the rules we set will work.

It is easy to set rules, but ultimately it is the discipline and strength of our brains that makes us follow the methodology that will deliver us the success we strive for. Over to you! Remember the Nike motto ‘Just Do It’.