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A Trading Psychology Lesson From a Nine Year Old

  • Posted on January 10, 2010 at 10:08 am

I was driving in my car the other night with my twin daughters when the conversation somehow turned to what they wanted to do when they grow up.

Naturally, being only nine years old, they had many ideas. There were those that I was very happy with – an astronomer, a veterinarian, a professional soccer player, or a guitarist in a rock band. And there were some suggestions that I just didn’t like at all. Not that it’s my decision! I’ll naturally support them in whichever path they chose for their life; however let’s just say a nine year old should not know what a Forensic Scientist does.

I asked if either were interested in trading, to which Caitlin replied, “But isn’t trading just guessing?”

That was unexpected! I was a little taken aback and frankly quite annoyed that she thought that all I did was ‘guessing’. I replied by explaining that there was a lot more to trading than just guessing which way the market went. But the conversation quickly moved on to other areas, as appears normal when speaking with nine year olds.

That night I put a little more thought to our discussion, not so much out of concern about my daughter’s perception of my career, but rather my emotional reaction to her statement. Why should I allow myself to feel a little insulted by claims that all I do is ‘guess’ market direction?

What do I actually do in the markets?

I assume risk in the markets, with an expectation of profits. But surely it’s not just guessing, or gambling, or taking a punt. I take positions on my terms only. It’s a calculated business decision. Through skillful analysis of past and current price action and an assessment of likely future price action I am able to identify opportunities to profit from market trends. And I combine this with action designed to reduce or eliminate any risk while seeking to maximize that profit. This is no different to any other business.

I’ve been lucky enough to be involved in a number of other ‘cool’ careers, but nothing has satisfied that need within my soul for a meaningful existence like being a trader does.

And I certainly believe that the career of a trader does provide significant benefits for society (a subject for another future article perhaps).

But when you really get down to the nuts and bolts, is what I do any different from guessing?

The definition of guessing according to the American Heritage Dictionary is:

a)To predict (a result or an event) without sufficient information.

b)To assume, presume, or assert (a fact) without sufficient information.

The common point here is ‘without sufficient information’, a phrase which certainly applies to the world of market analysis.

A novice trader expects that certainty can be found through better analysis or better indicators or indicator parameters. And so they get stuck for several years on this search for the Holy Grail solution. It’s only when all attempts at this have failed and they’re willing to accept it as a misguided attempt to hide from their fear of uncertainty, and are willing to embrace that uncertainty, can they take the next step on the path towards professional trading.

The fact is that market analysis cannot predict the future. All future events cannot be known. And even if they could be known, then we still don’t know how these events will be perceived by the market participants and will therefore influence price.

A trader operates in an uncertain world. And all trading decisions are made without sufficient information, based on an assessment of the probabilities and a minimization of risk to protect your capital when you get it wrong.

Essentially, my daughter was correct – I ‘guess’ market direction.

The difference is that some traders guess market direction without any real plan or guidelines for formulating that decision, with an inadequate appreciation of both risk and opportunity and with an undisciplined, unprofessional and emotionally influenced execution of their trade. And their losses feed the account of those who guess market direction based on a documented, tested and proven plan which is designed to contain risk when they’re wrong and maximize opportunity when they’re right, combined with consistency in execution of their plan.

I guess market direction, but I do so within a framework provided by my business plan and an understanding of the probabilistic nature of the markets.

I had assumed I was at a stage where I was comfortable with who I was and what I did. It appears now that this assumption was false and I have more work to do on myself. It makes sense – personal growth shouldn’t be expected to ever end.

Why was my ego bruised at claims that I’m just a ‘guesser’? There are many possible reasons that I need to address in more detail:

• At a deep level I really want my daughters to be proud of me. Perhaps for a moment I suspected they weren’t?

• Maybe my own self-importance was inflating at too rapid a rate (finally reaching an overhead resistance for a great shorting opportunity)

• Maybe at some level I still have concerns that being a trader is a Way of life that adds limited value to society?

• Maybe I still have some doubts about my long-term survivability in this industry, and so feel that by ‘guessing’ I am gambling my family’s future?

Who knows? I’ve got more work to do in understanding this.

Your beliefs about what trading is and why you do it are fundamental to the success of your trading business. You cannot expect to operate in a consistently profitable manner if you have conflicting beliefs about the value of yourself, of your chosen career or of your ability to succeed at it.

So when your ego takes a little hit from someone’s comments about trading, take the time out to examine your own beliefs. It doesn’t matter what the comment is:

• Suggestions that it’s impossible to profit from the market.

• Claims that you’ll never be able to make it.

• Cutting comments about how those losses could really have been better used elsewhere.

If it produces an emotional response in you, take some time out to ask why? What does your emotional response mean in terms of your beliefs about yourself and your chosen career as a trader?

That self-examination may reveal the breakthrough you were seeking, to take you to the next stage of your career or personal development.

Happy guessing,

Lance Beggs

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Back to School Lesson for Parents: Bail Bonds 101

  • Posted on January 5, 2010 at 3:06 pm

By Tonya Page-Rynerson

The parents of college students know that college is an expensive venture. Throughout the coming school year they know they’ll write checks for tuition, dorm furnishings, books, meal plans, and, of course, there will be unplanned expenses. All parents expect to get calls asking for more money, but few are prepared for their son or daughter to call from jail and ask for bail bond money.

This isn’t just an unexpected expense; it’s the shock of an arrest of a young adult. It’s not just a financial decision; it’s an emotional and emotionally challenging time for parents and students.

Most parents have no idea what to do next and are full of questions. Should they stay out of it and “teach the kid a lesson” or post bail? If they want to help, what’s the next step? Can they even afford to pay for a bail bond? Is it possible to bail out someone in another state? The best way to get answers is to call an expert – a licensed bail agent.

Parents’ Dilemma: To Bail or Not to Bail?

The most common question most parents ask is: “should I post bail?” They’re thinking of all the times they sternly told their teen (and maybe their parent’s told them): “you go to jail, be prepared to spend the night.” A night in jail is a lesson nobody will ever forget.

However, jail conditions vary widely. For instance, in Los Angeles County, a college student who isn’t bailed out quickly from a local jail may end up in the Twin Towers or Men’s Central Jail facilities. We’re not talking about the Mayberry jail with gentle Otis as a cellmate. These jails couldn’t be farther from Mayberry if they were located on the Moon.

In Los Angeles, a night of college carousing can have serious implications. Jail is a scary place to be and can be dangerous. As the Los Angeles Times reported in 2006: “With nearly 6,000 inmates – some of whom are only awaiting trial – the Men’s Central Jail is also one of the nation’s most violent facilities. Since 2003, nine inmates have been killed in the jail.”

Of course, not all arrests land a young person in a violent jail, but location is an important consideration. Many small community jails don’t keep detainees for a long period of time. If they aren’t bailed out quickly, defendants are transferred to larger city or county facilities and have to go through the arrest and booking process all over again.

That promised “night in jail” could literally become days in jail if the student isn’t bailed out promptly.

Any way you cut it, dealing with the legal process itself is enough to “teach a lesson” to any student who will learn it. The student suddenly is faced with the embarrassment of arrest and booking, loss of personal freedom, and the prospect of explaining himself to the law and court system. College students make mistakes and show bad judgment – parents might say horribly bad judgment – but leaving them in jail longer isn’t necessary to create an impact.

Bail Bond Agents Prefer to Work with Families

Don’t be surprised if your college student calls someone else first when they’re arrested. Bail bondsmen get a lot of calls from friends or roommates, mainly because no kid wants to call his parents from jail. Usually though, parents have to get involved if bail is required. Even though college friends want to help, most don’t have the means to pay the full bail amount and often don’t qualify for a bail bond from a bail company.

A bail agent usually insists that a parent or family member get involved to vouch for the student and take responsibility for making sure he’ll show up in court. Generally, parents and grandparents know the student best and know that the matter will be addressed seriously. Distance isn’t a problem: bail agents work with clients around the world by phone, email, and fax. Most take credit cards and can handle wire transfers and other payment methods. When necessary, a bail bondsman may even arrange a payment plan.

When you contact a bail agent, be prepared to answer some questions about yourself, the student, and share some financial information. The bail bond interview process may seem intrusive, but it’s a necessary part of determining risk. If the person getting bailed out doesn’t show up in court, the bail bond agent, and ultimately the person who bailed him or her out, is liable for the full bail amount. Agents have to be very careful and make sure they’re dealing with people who will take responsibility for the situation and keep their promises to appear in court.

For parents, it’s terrifying to have a child in jail and even worse if the jail is out of state. But bail bond agents can help you 24 hours a day no matter where you’re located. They’ll explain how bail bonds work, provide payment options, and advise you on whether you even need to start the bail bond process.

Most Arrests Involve Alcohol or Drug Offenses

Unfortunately, alcohol abuse is about as common as skipping classes on college campuses – and may actually cause absences. According to studies compiled at CollegeDrinkingPrevention.gov, 25% of college students report that excessive drinking has caused academic problems. The same Web site reports that: “…an estimated 110,000 students a year are arrested for an alcohol-related violation such as driving under the influence or public drunkenness.”

Drinking problems aren’t limited to campuses. A substantial number of students become involved in bar fights, heated disagreements at sporting events, and similar altercations, with almost 700,000 cases of alcohol-related assault reported each year. When students combine their inexperience with alcohol with fluctuating hormones and overly emotional responses to events, the result is often an arrest on alcohol and/or assault charges.

Even so, most parents expect college students to experiment with alcohol. They’re far more frightened when a child is arrested on drug charges. Parents are shocked at the thought of a child using drugs and worried about the consequences. Beside the obvious health concerns, the penalties for drug offenses can be much more severe than for alcohol-related charges.

Minor Offenses May Not Require Bail

Depending on the offense, a bail bond may not be necessary. Students are often arrested, booked, and then released with a citation to appear in court – called a “cite out.”

Authorities are most likely to issue “cite-outs” when dealing with relatively minor offenses like public drunkenness or a basic DUI. “Basic” means that the person doesn’t have a history of DUI arrests, there was no accident involved, no minors in the vehicle, no leaving the scene, resisting arrest, etc. In those cases, the police will often keep the offenders for 8-10 hours until they’re sober enough to leave with a promise to appear in court. However, expect to post bail in cases where there’s a felony or serious misdemeanor involved.

In a minor case, the bail bond agent may recommend that you not post bail. If the student is likely to be released quickly anyway, a bail bond is a waste of money. That’s a good reason to find a local and reputable bail bondsman who understands the policies and procedures of area jails. They can’t give you legal advice, but they can help you navigate through the jail system.

And remember, neither a bail bond nor a “cite-out” means that someone is cleared of all charges. The legal process is just beginning. The student will probably still be required to appear in court, may need an attorney, could still stand trial, and may have to pay a fine, perform community service, take classes, or even serve jail time.

Parents worried about letting their kids off the hook by bailing them out of jail can relax. An encounter with the police, jail system, and court process teaches a hard lesson that most kids never, ever forget.

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