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Mindset & Philosophy

Core philosophy and mental frameworks for trading.

The Mind Games Theory

Stock Market as Collective Consciousness

If the stock market is something like a collective consciousness and if you assume that it's like another living organism, I think stock market is all about mind games.

It's not about beating the system or beating the random walk algorithm, but it's about: - Beating the average person - Beating the collective consciousness - Beating the ETF index

Everything is Relative

Universal Truth

I think one could also interpret Fantasy Premier League or FIFA or poker or academia in general. Everything is basically mind games because money, success - everything is relative.

  • You just have to beat the other people
  • There is no proper upper limit
  • There is no ceiling
  • There is no theoretical maximum value to reach
  • It's all relative value

Defense Over Offense

My Style

Investing is about defense. Think in terms of Risk and Reward, not expected profit.

This suits my personality because I am more like Jose Mourinho and Rahul Dravid.

The Experiment Approach

Learning by Doing

If you want to experience it, just do it for fun:

  1. Keep aside €2,500
  2. Assume that they are the inflation bonus which I'm anyway going to get for this year from the German government
  3. So use only this amount and blindly follow Nishant Pant and see what is going to happen
  4. Never touch your actual portfolio and just invest that in ETFs

Controlling Emotions

The Biggest Challenge

In order to control emotions, I need to have a strategy.

  • People say that keeping your emotions under control is the biggest challenge when you do such day trading or strategy trading
  • People say that doing paper trading is completely different from live trading because our emotions come into play and it's nothing like paper trading

The Dilemma on Options Trading

Self-Awareness

I need to think really hard if options trading etc is my cup of tea. For me it's not easy to follow a person like Nishant Pant because I think I am really bad at controlling my emotions. And controlling emotions is really really important when you do such leverage trading using options.

Following Gurus

The FPL Parallel

I will follow Nishant blindly until I either make profit or totally lose the €2,500. Because this is similar to following people with Fantasy Premier League gurus.

It's better to follow such gurus because they have a track record of winning in the past 2 or 3 years. That means they have a methodology.

If I tweak the methodology and take my own decisions, then I may incur losses. This is exactly what happens when I also take my own decisions and don't follow the Fantasy Premier League gurus.

Newbie Investor Mistake

Wrong Framing

A newbie investor tells himself about the expected profit. Instead, he should think in terms of risk and reward. That should always be the story you tell yourself in the head.

From Paul Tudor Jones

Defense First

He also says that investing is all about defense, not attacking. And I think this perfectly suits my mentality.