Four Habits Of The Stoic Mind
"Our rational nature moves freely forward in its impressions when it:
1) accepts nothing false or uncertain;
2) directs its impulses only to acts for the common good;
3) limits its desires and aversions only to what's in its own power;
4) embraces everything nature assigns it."
—MARCUS AURELIUS, MEDITATIONS, 8.7
When I read today's meditation, I started thinking if I could relate these "four habits of the Stoic mind" to our trading mindset. I actually realised that I was subconsciously using these habits, when I trade. Let me compare each one individually.
1) Accept only what is true: This is what we should be checking with every trade that we enter. If our historical stats/data are telling us that it is highly likely that a horse will start a race slowly, or that a football match is likely to start slowly, with no early goals, or a 2nd half goal is likely to be scored etc. Then this is true that it has happened on a regular basis and because it meets all of our rules/criteria for our strategy, we will take the trade on.
2) Work for the common good: We are not acting spontaneously, on impulse because we spot something that may work, but we haven't checked if it meets our rules/criteria, or because somebody has suggested it, or through boredom etc. By sticking to the rules/criteria for our strategies, we are selecting trades that work for the common good, with a high probability of achieving the outcome we would expect.
3) Match our needs and wants with what is in our control: We have a pre-event targeted profit, that we will take once matched, when a trade goes to plan. We also have a pre-agreed exit point, should a trade start to go against us. If the trade goes as planned, our targeted profit is taken. If the trade goes against us, we are taking our pre-agreed controlled loss to protect our trading bank and keep us in the hunt for the next battle. This way, we are managing our needs and wants and even the occasional losses are fully managed and in our control, to preserve our trading bank and ensure long term profitability.
4) Embrace what nature has in store for us: By comparison and for trading purposes, nature will become the markets that we are trading. So basically, we are embracing what the markets have in store for us. When the markets are kind to us, the trades go to plan. When the markets are not so kind to us and trades go against us, we take the controlled loss.
This means that we are embracing what the markets have in store for us and we can deal with whatever is thrown at us, confidently and effectively.
In summary "four habits of the Stoic mind" can also be used for the trading mind.