I am a picky person when it comes to watching movies. So when I have someone ask me about the latest movie I have seen…my answer is normally a blank stare.
More recently a movie which I could mentally co-relate to financial markets is The Imitation Game. No, this post is not about The Imitation Game but rather about a movie that I hold close to my heart; as containing valuable lessons in trading/investing. The movie- “Revolver”(click).
The reader can figure out the plot of the movie and I’ll jump to the key aspects which I find simulating. While the movie is filled with quotes and indirect inclinations to the sublime, it clearly distinguishes between the rules of the game (viz markets, life) as being twofold. One set of rules governing the physical word and another governing the internal world or psychological/para-psychological word of an individual.
Rules pertaining to the physical world (markets)
- “The only way to get smarter is by playing a smarter opponent.” —Fundamentals of Chess 1883
It is easy to become compliant when a system or strategy is working…and working well. This complacency can often result in stagnation. Evolution is a state where change is continuous and since markets are in a continuous state of expression; it is our utmost responsibility to constantly lookout for a smarter route (to profit). For every loss an investor/trader makes is a resultant of a smarter player profiteering.
I’m sure most of you have heard this numerous times. But the discipline to practice this is what sets the chaff apart from the grain. I wouldn’t doubt that even the best of the best in risk management have caved into this trap some time or the other. When I place a trade, I always look at how much I can lose rather than how much I can make. This is a difficult mindset to train yourself into…but give it a go and you will promise yourself a positive change in your decision making capabilities. The importance of this rule is reiterated in the movie through the aphorism- “In every game and con there’s always an opponent, and there’s always a victim. The trick is to know when you’re the latter, so you can become the former.” i.e become a good loser rather than a big loser.
Rule pertaining to the the psychological/para-psychological world (markets)
Where is the last place an enemy can hide? A place where you would never look. It’s in the mind! Along this journey of trading and investing, I have realized the mind plays a vital role in determining a profitable outlook. We all recall those moments when we have a gut feeling (different from intuition…an intuition is void of emotion. It just is ) that made us that lucky profit and then the very next moment the very same gut feeling deserting you with a loss. Why? Now, a solution to this is (or probably is) different to every individual. All I can suggest is beginning with the study of your ego to attain the grace of intuition. The solution as per the movie is to “use your perceived enemy to destroy your real enemy”.
There are more antidotes in the movie but the above stand out to me. As for the rest…Go figure it out by watching the movie!