Everyone Gets What They Want Out Of The Market, Even In Loss.

Hey all! This is my first post here. I was thinking about investing recently and the pitfalls that many succumb to. It got me thinking about the overlap between investment success and psychology. Maybe you fall victim or benefit from certain behaviors that you either reinforce or suppress when making decisions throughout life. Here’s my thoughts on the matter. 

I believe strategy and psychology are very closely linked. I was thinking about a quote from Ed Seykota where he says “Everyone gets what they want out of the market.” He continued, saying often even when people are losing money, they are still getting what they want out of the markets. Some people unconsciously want to lose, not in the literal sense, but because losing fulfills a psychological that they have deep in their mind. Some people seeking excitement or adrenaline through taking on extra risk, gambling or whatever. Some want to prove something to themselves or others by trading a certain way. Some self sabotage themselves by a desire to validate a belief like the market being rigged or that they can't possibly win. Many people say they want to make money but their behavior produces loses, and one factor might be because that is what aligns with their deeper mindset. It is true that you can’t predict the market so this isn’t 100% true, but I believe it is very close to reality and easily observable in many different aspects of peoples lives. For example, look at people who self sabotage relationships, gamble all their money away believing they will win big, or refuse to buy a stock that they might have previously lost money on but at a different point in time might be a very good investment. There are biases in everything. 

I resonate with this line of logic and believe that trading success is strongly connected to psychology. It is fascinating and sometimes not as empirical as other sciences, but apparent to anyone who wants to see it. I believe that my own investment strategies fall victim to my behaviors as well. I try to recognize it, but identifying a pattern in the way you think is hard sometimes. Because of this I want to implement methods of identifying and correcting my behaviors. I think I will begin looking at what behaviors I am repeating, try to understand what I am actually getting out of that behavior, and see if it aligns with my existing strategies or is a harmful deviation. 

It’s my belief that good systems rarely fail, but losses are incurred when you fail to follow them. If you build something that works, you should observe it, but trust in yourself. Breaking some rules here and there with purpose isn’t necessarily bad though. In fact, it is critical to a positive feedback system. You must be able to identify an issue and remedying them. The identification of problems can be dangerous however. A problem may be real but its easy to mistake them for a string of bad luck and random chance. A problem can also be mistaken for a result that misaligns with the way you think or behave. The most difficult thing I have found is to realize that I may have lost money in an investment and also believe that the investment was well researched, reasoned and was by all analysis, a good purchase. What I am getting at is that you may break rules to solve problems but very carefully as to not get it confused with self satisfying behavior coping mechanisms. You must ask yourself why you broke the rules and what you gained from breaking it. 

By breaking rules we can see loses in many ways which are transactional with our own minds. Overtrading can be a relief from boredom or a sense of inaction. You could also be avoid the pain of your own choices, like not cutting a loss when it really should be because you don’t want to be wrong. You might want to feel right or desire the excitement of high risk bets. These choices come out quite obviously in an observation by Seykota. Many people trade the exact same strategy, but often results change, and that is because the real edge in a random environment is the psychology of the person wading through it. 

I would like to begin tracking not just profits and losses, but where I followed plans, when I broke them, the emotion state I was in before, during and after, then aligning that to actions I took. I want to continue to write justifications for what I do and when. With enough data points, I could begin understanding myself better and I believe have a better understanding of myself. If I behave in a way that loses me money, and I continue to behave in that way, on some level losing money is what I want. I would be acting consistently with my deeper desires thus my behavior is actually in alignment with what I want.

What do yall think about this? I would love to hear about it.