"Tabula Rasa"

Human mind is a blank slate and experiences shall write on it

John Locke, the renowned psychologist wrote a brilliant piece “Essay concerning Human Understanding” which gave birth to this beautiful concept of Tabula Rasa - which states that the human mind is a blank slate & experiences shall write on it.

Every time I see an analyst comparing the current correction in the stocks to the past instances or every time I hear that every secular bull trend has these corrections in the middle takes me to the concept of Sir Locke. It may be important to learn from past mistakes but the same past will be replicated in the future is the subject matter of "Forecasting”. Anything forecasted becomes highly uncertain as the time frame of the forecast is increased.

As a trader - your work is to sell at a much higher price than you bought the security at. That is it. We are often falling in a race to catch the exact lows and therefore buy every dip considering it to be the last one. In the process, I have seen many traders losing their capital and the more they go far away from the initial capital, the more difficult is it to come back. A loss of 20% needs a 25% gain to break even. The risk & reward are not proportional to each other.

Therefore, you don’t need to catch a stock right at the bottom unnecessarily pressuring yourself. You need a market that is healthy where you find good quality setups working through. Your task is to take up the value of your expectancy.

To those who don’t know what E is:

Even though some of the trades may work for you & your avg. gain may go up but the % of winning trades will take the game out of your hands. It is too important to preserve your mental & financial capital during these phases. As and when the market structure improves, you’ll start your account right from the same level where you got out. No need to cover up for your losses because you didn’t make any. :)

Ending with a quote from Sir Mark Weinstein that is on my wall:

“Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably one that is also sick or lame; only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading.”

All the best. :)