Confidence is Everything!

• Posted by Joe Fahmy
• on October 12th, 2009

In my Recommended Reading List blog, I suggest “self-help” books because I believe confidence and a positive state of mind is extremely important if you want to become a successful trader…or a successful anything for that matter! You cannot convince a jury if you are not a confident lawyer, you cannot properly construct a building if you are not a confident engineer, and you will certainly have trouble making money as a trader if you do not have conviction in your ideas.

By conviction, I do not mean that we should blindly be bullish or bearish on a stock. One of the worst things a trader can do is “marry” a stock because at the end of the day, all stocks are “crap” (pardon my language). In other words, many companies will have strong growth periods when their stocks perform well, but eventually this growth will slow and their stocks will get hit. In fact, the majority of great winning stocks give back a large portion of their gains over time. My objective is to take advantage of a company’s growth period and move on to better stocks after the technical and fundamental story weakens.

In many of Tony Robbins’ books, he uses the phrase “Personal Power.” He is referring to our ability to make decisions. He believes that making decisions is like training a muscle. The more “small” decisions we make, the more we empower ourselves, and the easier it becomes to make “bigger” decisions. He goes on to say that it is okay to make a bad decision because "bad decisions lead to experience, and experience leads to good decisions." The key is to MAKE a decision, learn from the experience, and make better decisions in the future! (By the way, I am not claiming to be a “self-help” expert; I am simply paraphrasing some of the concepts I have learned from Tony Robbins’ books and I highly recommend reading them).

Part of making good investment decisions involves formulating your own opinion and letting THE MARKET tell you if you are right or wrong, not other people. Jesse Livermore says: “A stock trader can be convinced to move away from his own convictions by listening to the advice of other traders, or in the least case, listening to others may cause indecision and bad judgment. This indecision may also cause a loss of confidence, which may well mean a loss of money.”

Bottom line: Confidence and decision-making is crucial to becoming a successful trader. I highly respect the ideas and thoughts of many sharp people in the business, but eventually, my own work and experience is what I rely on. The key is to find an investing/trading philosophy that you are comfortable with and one that fits your personality. Once you have discovered this, work hard, study it, and try to perfect it. My best advice to gain more trading confidence is to make decisions, evaluate if your ideas are working, and constantly make adjustments until you can replicate a successful and disciplined trading methodology. Believe me when I tell you this: I am still working on it myself and I plan to continue learning and improving my strategies indefinitely.

Follow me on Twitter @jfahmy

Tickers: Anthony Robbins, Jesse Livermore

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