Becoming Independent Minded

Becoming Independent Minded

Independence is essential for trading success. Or at least that's what authors of many books on trading psychology argue. Why must a trader be independent?

Joseph Schwab developed sophisticated arguments for teaching science as
"enquiry."An independent mind is one that is grounded in ‘enquiry’. Enquiry
demands the ability to develop significant questions and the ability to utilize
good judgment while separating the wheat from the chaff.

John Dewey, a great philosopher, psychologist, and pedagogy discussed the discrepancy between the skills valued in adults and the skills taught to children in schools. Dewey lamented the fact that independent thinking skills were demanded of adults but our children were being taught the converse in our schools.

Traders who can't think independently feel uncomfortable unless they receive support and confirmation. They are uneasy when dealing with uncertainty. And this sense of uneasiness often makes them act on impulse. The markets don't always provide you with confirmation for your decisions, however. It is difficult to trade in the short term if you wait for confirmation and require a sense of certainty. If you wait for a classic chart pattern to materialize completely, for example, you may be too late. Let's suppose that you wait for a head and shoulders pattern to develop. It may take some time, and by the time the full pattern results, and signals you to sell, it may be too late. You may end up selling as everyone else is also trying to sell. There are times when it is vital to anticipate the crowd and try to stay ahead of them. But staying ahead of the masses requires you to think independently.

If you are a successful person, you probably have some conforming tendencies. You have been able to identify important social rules and follow them. You may have a tendency to look for subtle situational cues to guide you, but universal rules or unfailing signals rarely exist in the markets. You must look inward toward your own personal rules and values. True independence is not the same thing as non-conformity. Just like the ultra-conformist, non-conforming rebels also allow societal norms to overly control their behavior; they merely automatically break the rules rather than automatically follow them. True individualists, instead, are willing to go against the crowd in effective ways. They don't break a norm just to be a rebel, but they break a rule because their own personal motives and values tell them that there is a valid, more compelling reason to go their own way. Complete independence means both the abandonment of conforming and non-conforming behavior. Individualists are free to conform or not conform; they do what they want. They strive for the optimal balance between complete self-reliance and identification with the broader group and societal norms.
How can you overcome the tendency to conform? Here's what you can do to compensate for the tendency to seek out assurance from others. First, learn to trust your instincts. Second, don't seek out or wait to receive the opinions of others. Third, accept the uncertainty of the markets; don't seek out confirmation and a sure thing. Conformists tend to want to seek the advice of others to relieve the unpleasant feeling of not being able to perfectly forecast the markets. But infallible experts are hard to find. They may be right for a while, but eventually they are wrong. And when they are, you get burned and feel disappointed. It's better to trust your own instincts and go your own way. Become aware of your desire to seek out and listen to other's opinions. Try not to, or at least wait until you have a clearly defined investment strategy before you do. By all means, though, don't follow the prevailing opinion if it contradicts your own. Look inward and go your own way. Making independent decisions isn't as difficult as it may seem. It just takes practice. Don't try to please anyone but yourself. Think independently and win.

thanks to marketwise.com