Arrogance
Probably the worst bad habit for both traders & investors
No matter how long I play this game I always fall back into bad habits arrogance is probably one of the very worst.
It never fails that after a big win, particularly when I have executed almost perfectly. I start to believe, not only that I am a legend but that I have finally cracked the market code. Of course, there is no code because the market is always evolving. Everyone reading this will experience this emotion after a big win. This is the most dangerous time because you’re most at risk of acting against your rules.
So, it’s vital to recognise when arrogance is present and when it is most likely to occur. As I mentioned above it’s generally after a big win, but it can also creep up on you when you have had a few positive weeks or months. Early warning signs are when you fail to stick to your profit targets because this time it’s different or you start to believe a particular investment is going to moon with no real catalyst.
An early warning sign for me is whenever I have the urge to tell my wife now well I’m doing. For others it made be the urge to jump onto social media to boast on your success. Once you recognise your early warning signal to you can learn to put it back in the box before any harm is done.
Records
Recording your investments needs to be much more than your daily profit or loss. Your daily journals need to capture everything that goes into making your decision.
Each day I record my arrogance level. At the start of the day and before each trade I assign an arrogance number between 1-20. The reason I’m writing this note today is because I just logged a 17 out of 20 on the Alonzo Arrogance Scale. That equates to a very high level of “self-importance” and that’s where my arrogance rule clicks in.
Alonzo’s Arrogance rule.
Value 17-20 Reduce my exposure and limit trading over the next 3 days.
I have found that 72 hours normally brings me back to the real world, for others it may be shorter or it maybe longer. Your records will tell what is right for you.