Day Trading Tips
Mind & Money Part 4

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Learn to use Elliott Wave in your Day Trading

Values and Beliefs - Why You Do What You Do

Your ability to take action is not based on your skill or knowledge level, but on your emotional state at that exact moment. Your state is largely controlled by your underlying values and beliefs. If you are moving toward your most important values, and keeping away from the things you most want to avoid, you will be in complete control and able to take action. When you are in power, you feel powerful, and you easily take action.

When you are in a state of powerlessness, the inclination is to wait and see. Perhaps avoid the situation (don't trade), and avoid the associated negative states you don't want to experience. It is that simple. So, how do you change your state to be powerful when you need to be?

Some people dream of being a movie star, but they dislike crowds. That is a problem of conflicting values. Part of you wants one thing, but another perhaps stronger part wants something entirely different. These value conflicts can cause many of the troubles traders have with pulling the trigger.

What if you really want to be a successful trader, but you do not like excitement? Should you daytrade? Probably not. How about someone who loves skydiving, but plans to hold his trades for months at a time? Is he going to be happy with that system, or be impatient, pulling the trades long before he should? Determining your values and beliefs will go a long way to determining whether you have any conflicts. By simply rearranging those values, you can effectively eliminate conflicts.

Step I - Know What You Want

Start by determining what emotional states are most important to you. Many of these emotional states are probably important to you, but equally obvious is that some will be more important than others.

List these 10 emotional states in their order of importance according to your beliefs at this point in time. Try not to think in terms of what would be best, but truly determine what is most important to you. There is no right or wrong order. Why is wealth not on the list? Because wealth is not an ends value, it is a means value.

No one wants wealth so they can sit surrounded by great piles of money all alone (except perhaps Scrooge). Money is a way to attain other things such as comfort, freedom, etc. This is an idea list, feel free to list anything that comes to mind:

Once you have these items in order, it is fairly easy to ascertain why you make the decisions you do. Contrast someone who lists adventure, power, and passion as the top three, against someone who lists security, comfort and intimacy.

Will these two make a good couple? Will they even survive courtship? Unlikely. While Mr. Adventure wants to jump out of airplanes, Ms. Security wants a warm blanket. Mr. Power wants to rule the world, Ms. Comfort wants to read a book, still snuggled in that blanket, and while Mr. Passion wants erotic, exciting sex, Ms. Intimacy wants moonlight and romance, before slow, lovemaking. Conflicting values are why some relationships are doomed to failure.

Conflicting values can also cause a trader to be unable to take trades. You may tell yourself you want to be a trader, but value your sense of security too much to take any kind of risk with your discretionary income. If your number one value is security, followed by comfort and intimacy that would tell a lot about which type of trading you would be best suited for (position).

If your number one value was adventure, followed by power, and success, a different type of trading would suit you (day trading). Don't despair if your list does not match up. And don't try to rearrange your values list to suit what you think is best.

Later you can rearrange your values list to support what you truly want and effectively change conflicts, but for now, we want to determine what conflicts exist. Once this list is finished, you will be ready for Step II.