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"They were numbers. They were
always changing" – Jesse Livermore
"They were numbers.
They were always changing."
Jesse Livermore was referring to the stock prices, commodities prices,
index, ... of the market.
"They were numbers. They
were always changing. Why did they change?
I didn't know. I didn't care.
I didn't think about that. I simply saw that they changed. That was all I
had to think about five hours every day and two on Saturdays : that they
were always changing."
It is a very difficult discipline
for most people not to ask "WHY?". We have been trained since
day 1 in school and reinforced daily in work, business and at home. We
need to use our logical mind, the rational thinking. We were trained to
ask "Why?", "Seek Answers" and use the
"Answers" to guide further action or decision. It is automatic
and we cannot not ask WHY?
But such thinking and behavior is
most detrimental to market investors or traders. Because of the use of
such thinking, many end up losing money with a lot of logic and reasons
why they lost money, but still cannot figure out how they can minimize
loss and make big profit.
When the market is charging upward,
getting bullish, people like to ask "Why is the market so strong, or
so crazy?" And they get good, satisfactory answers e.g.
"Economy is good" "New government incentives, or good budget" "foreign investors are coming in" etc. etc.. When
people are happy with the logical explanation, they get excited and they
start jumping into the "happy wagon", wanting to make money. In
most cases, such frantic market is where most people get burned, lose
money or commit suicide. What really is the use of getting all the logical
answers to the question "WHY?" with losses or even suicide.
For those having stocks in hand,
they are happy no doubt when market is up and they have much paper gain.
They ask WHY and they get satisfactory answers, with good logic and
rationale. Hence they feel comfortable and immerse themselves in all the
good news. When the market starts to correct downward a bit, there are
still more good news. It is illogical to panic when the factors and
reasons supporting the market are there. Then when market crushes (because
the higher the market goes up, the sharper it falls), Then they regret.
What is the use of getting all the logical answers to the question WHY,
when one can be blinded by such logic and miss making large profit?
When the market is dropping,
getting bearish, those who hold stocks panic. They ask "Why is the
market doing so badly?" They are depressed, anxious. They need a
logical and rational explanation as to why the market behaves so badly.
Then they get answers, mostly from the newspapers "Due to bad
economy." "The terrorist factor" "The SARS"
"The shaky government" "Poor election results"
... When such rational explanations are given, investors
psychologically feel "comforted" in their rational mind (but
they sure don't feel good losing money.) Since they can still behave
rationally with the rational explanation, they bear the pain (But they do NOT fear
losses.) They hold on to their purchased stocks (declining in value
fast). Since it is "poor economy factor" just wait for a better
economy. Since it is "Terrorist factor" let the big brother
teach them a lesson and thing will get back to normal. Since it is
"the SARS" factor, it will be over soon. And so and and so
forth.
Similarly, the Unit Trust Fund
Manager uses the same logical and rational explanation to calm the
investors. "Our current poor investment performance is due to the
weak market, or high competition from neighboring countries economically,
etc. etc." Implying that it is not the fund mangers' fault, (never
their fault in any situation, isn't it?).
Good rational answers to the
question "WHY?" give people the explanation. When answers are
given, explanation made, what else can one do? Such psychological
rationale numb people nerve and senses and they cannot fear
losses. They are psychological paralyzed. Emotionally being hijacked.
Like drunken, they say they are ok, they are actually somber.
For those who have not purchased
any stocks, when the market goes down and down, they also get curious and
ask "Why is the market behaving so badly?" When they get the
answers, they will say "No wonder." "Luckily I am not in
the market. The bad news is really terrible. Only fool will enter the
market!. In most cases, these could be the signal of market bottom
and market goes up. These people regret and curse and curse that they miss
the market. what is the use of having the answers to the question why when
such logical explanation reinforces our thinking and behavior to avoid the
market and miss the opportunity to make money?
The use of logical and rational
thinking, asking why and linking current events with market behaviors
never pay.
Jesse Livermore said : "They
were numbers. They were always changing"
He just focused on the changing
numbers. The changing pattern. Not asking why? Jesse Livermore further
said "I'd jot down the
figures I wanted and would study the changes, always looking for the
repetitions and parallelisms of behavior."
"The reasons for what a
certain stock does to-day may not be known for two or three days, or
weeks, or months. But what the dickens does that matter? Your business
with the market is NOW - not tomorrow. The reasons can wait!"
I am glad that our
QuaSyLaTic Investment System training is progressing well in this direction. We concentrate on the
Technical Analysis (TA) tools and application. We only use the TA language
until our thinking and behavior are on pattern and trend, We do not
relate to world events, economic factors or situation, political
development, We do not ask WHY, we do not need logical and rational
thinking on snapshot happening. More and more we minds are more relaxed
and focused, as we have strategies to protect our capital, as we fear
losses. We let profit
run when the pattern and trend create that momentum.
"They were numbers. They
were always changing"
" ... always looking for the
repetitions and parallelisms of behavior."
The reasons can wait!"
End.
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