Luck,Life and Stock Market

[amitrandive]

We’re Closer Than You Think – “Less Than” Six Degrees Of Separation

Have you ever been away on holidays, only to meet someone there who is from your neighborhood? Did you think this was an unnatural coincidence? Think again.

In his book, Max Gunther noted the work of Harvard funded psychologist Dr Stanley Milgram. Milgram created an experient designed to test just how intertwined we as human beings were.

He selected one “target” lady at random, and then a distant group of completely random people. Sending a letter to each of the far-spread random group of people, Milgram advised the rules:

“If you know this lady on a first name basis, please give the letter to her directly. If you do not, pass it on to someone you DO know on a first name basis and who, in your opinion, might know her.”

How many times do you think these people had to pass the letter on for it to reach its intended target? 100 times? 200? More?

Incredibly, the letter reached the target woman in only 3 passes. The longest chain of passes was 10, and the average was 5. Suddenly, people don’t seem so distant after all…

 

[amitrandive]

 

[amitrandive]

How To Use The Spiderweb Structure

So obviously we’re all fairly close, or can be reached fairly easily using our network of friends and aquaintences. Does this impact us in our trading? Of course! The more people you know who can help you in the stock market, the better – whether it is simply emotional / psychological, or whether it is a great mentor to help you on your quest.

But how do we use this to our advantage? Max Gunther says that lucky people have one thing in common – an aura of “Come and talk to me – we’ll get along”. And because of this people often gravitate towards them. But there are ways we can also tip this to our advantage:

1: Start Conversations With People You Don’t Know

Get out and about – go for drinks after work, go to your wife or husband’s function, go out to a concert or play and talk to people. Ask “open” questions that people need to elaborate on to answer, like “How did you find such a nice tie?” or “What did you like most about your holiday?”. Anything - get out and about and start talking to people. And the good news is – there ARE lots of people to talk to out there! You never know who the one will be who makes a massive difference for your life.

 

[amitrandive]

 

[Shantala]

How To Use The Spiderweb Structure



1: Start Conversations With People You Don’t Know

I think we are doing the same here.

 

[amitrandive]

2: Think Nice Thought About People You See

This may seem strange, but that aura of “Come and talk to me, we’ll get along” doesn’t at first seem to be a physical, measured thing. But here’s the rub – it IS physical and it is measurable – it’s just subconscious – it’s all in your body language. Every second we’re doing little things – shifting a certain way, folding our hands a certain way, looking up, looking down – even the size of our pupils – that we’re not aware of. But other people, subconsciously ARE aware of them. That’s why you might get a feeling about someone before you meet – it’s your subconscious trying to protect you by analysing the hidden situation.

So instead of trying to make your pupils dilate (a subconscious sign that you’re interested), or strapping your hands to your sides, I’ve found the easiest way to get this “aura” is to simply “Think nice thoughts” about the people I see. That way my body does the rest naturally.

Is there a way you can improve the spiderweb in your life? Widen your social network of aquaintences? Is there a way you can think good thoughts about the people you meet?

 

[amitrandive]

 

[amitrandive]

Our journey on the road of luck has been amazing so far – we’ve looked at “The Ratchet Effect” and how cutting our losses when things go bad can help make us lucky. We’ve looked at being bold, and thinking in terms of “how much reward” is possible against the risk involved. And we’ve looked at “The Spiderweb Structure” and how we are more connected that we might realise, and how to use that to our advantage.

But by far the most amazing thing Max Gunther stumbled upon in his book “The Luck Factor”, is the next principle of luck. At first he didn’t believe it, but during his study of Lucky People over 30 years, he eventually could not deny it. What is our next method for improving our luck?

Luck Factor Four: The Pessimism Paradox

When you think of lucky people, do you think of them being optimistic or pessimistic? One of the most shocking discoveries to Max Gunther in his study of the Lucky was that they were all naturally pessimistic.

At first glance this might confuse us – how can a person always look for the worst in things, but also be extremely lucky? But as we dig deeper into the psychology behind it, the pieces of the puzzle start to come together. If a person is always expecting things to work out well, how much preparation will that person do for when things go wrong? Exactly – not much. And that’s the key – pessimistic people think things can go wrong, or go from bad to worse, and so they prepare as much as they possibly can for when that time comes.

As the great Stock Market Investor Gerald Loeb said, “On the Stock Market, optimism can kill you”. A brilliant and successful female commodities trader said “Out of every four trades, I figure I’ll lose money on three. And I’m not surprised when I lose on all four.”

 

[amitrandive]

But how can we use the “pessimism paradox” to our advantage? Max Gunther found two rules we can use:

1: Murphy’s Law

You’ve probably heard of Murphy’s law – it states that “If something can go wrong, it will” and some people like to add: “In the worst possible way”. If we believe this, then we will prepare as much as possible for the worst case scenario. We will think of all the things that could go wrong, and have contingencies in mind if they do occur. This can be an immensely powerful thing when we come to terms with it.

And what of the Stock Market? Well you no doubt already know the answer of how this applies – we can use principle one (the Ratchet Effect) to cut our losses if (or when) things go bad. More commonly in trading or investing, this is called using a “Stop Loss”, and it simply means having a point in the share that we will absolutely get out if we are wrong.

But we can take Murphy’s Law one step further – by knowing our total risk and total possible losing streak (for many investors this will be over 16 losing trades in a row), we can ensure we are not risking too much per trade, and also know that we can handle any losing periods, or “drawdowns”.

 

[amitrandive]