The Quiet Investor: Why Emotional Control Is the Ultimate Edge

The greatest edge in investing has nothing to do with charts or headlines.

Most investors spend their time searching for better information, better charts, better indicators, and better news.

And while all of this is admirable, I’ve found that very few actually work on the one factor that matters most: The mind.

Markets are not hard because they are complex. After all, supply and demand are basic concepts. Instead, markets are hard because they trigger fear, greed, impatience, and regret. The untrained mind reacts adversely to rapid price movements, loud headlines, and conflicting opinions.

Instead, the quiet investor understands that he doesn’t not need to predict the future to succeed. Instead, he needs to cultivate the ability to remain steady as uncertainty unfolds. It is within this mental steadiness that the quiet investor is able to continue following a process when others base their decisions upon the emotions of the day.

Of course, emotional control does not require you to ignore risk. Instead, emotional control enables you to discern risk without panic.

This is why rules-based investing (and trading) works so well. By adhering to time-tested rules, the quiet investor is able to take action without second-guessing himself.

After two decades of trading, investing, and teaching others, I can confidently say that most losses in the market are due to poor mental and emotional control. This may take the form of chasing prices (FOMO), revenge trading after a loss, or failing to implement wise risk management techniques.

When I was younger, I falsely believed that trading and investing should always be exciting. Today, I understand that successful investing and trading are actually quite boring. We can often become our own enemies by attempting to make it more exciting by interfering with our “boring” rules-based process.

In the end, most investors lose money not because they lack intelligence, but because they lack emotional control. The quiet investor understands that patience and calm discipline are the real edge.

Just some food for thought as we prepare to enter a new year.

Blessings!

Related Resources

• PODCAST: Trading Psychology 101
  
• VIDEO: Trading Psychology 101 (Overcoming Greed and Impatience)
• CHART: The Psychology of the Market Cycle
• Five Levels of Financial Freedom

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