Welcome to the Smart Money Circle
Highlights From Chapter 15 of Psychological Analysis by Adam Sarhan
I’m in the process of buying a house, so I was pretty busy handling that again this week, but I did manage to make some progress on several books.
I finished Project Hail Mary by Andy Wier and Mastery by Robert Greene. With those big books finished, I started some smaller reads with When Food is Your Drug by Kristin Jones and Fight Club by Chuck Palahniuk.
I also finished off Psychological Analysis by Adam Sarhan for the email this week, and I enjoyed this last chapter every bit as much as all of the others. Let’s get into that!
There Will Be Tough Years
If you plan on quitting your job and becoming a full-time trader, you had better have a couple of years of living expenses or other streams of income, so you know you can get through the lean years - and there will be tough years. (206)
You cannot quit your job to trade full-time until you demonstrate a multi-year track record of positive returns, so you better focus on developing some alternative income streams.
I’ve made a massive shift in the other direction over the past few years by transitioning my day job into something I enjoy by emphasizing the things I like and being more willing to live with the things I don’t.
The result is the same: there is far less pressure to trade when you don’t need to be successful to pay your bills. Don’t put yourself in that position.
What Can Go Wrong?
Warren Buffett also talked about focusing on the things that could hurt you and eliminating them. It’s helpful to ask yourself, what can go wrong? Then eliminate those things. If you can’t do that, mitigate the risk as much as possible. (217)
Develop a good understanding of what could go wrong and figure out how to eliminate or reduce the risk of that happening.
I tend to lean too far into this thinking, and I often make myself sick worrying about catastrophic scenarios that are unlikely to ever be a problem. This isn’t healthy, but there’s nothing wrong with having a healthy respect for the twists and turns life can throw at you.
A Handful of Really Good Decisions
You only need a handful of really good decisions each year to create life-changing wealth. Great trades do not show up every day. (218)
There are only a few times / year when the market conditions are primed to create life-changing wealth and success. Be selective about trading only during those times.
This same line of thinking applies to life in general as well. If you just make a few really good decisions each year when the time is right, almost everything else will take care of itself. After that, all you have to worry about is the last quote from this week’s chapter!
Sit Back and Let It Grow
Remember, Jesse Livermore said, “The big money is made by sitting.” That means that once you sink your teeth into a good trend, sit back and let it grow! (219)
When you find a trade that works for you, stay committed for the long haul. If a trade is not working, get out BEFORE you get hurt.
Once again, this applies to much more than just trading. It’s a great rule for life, work, exercise, and just about anything else you can think of.
Stop Doing Dumb Stuff
Put simply, stop doing dumb stuff! You can improve your entire life by stopping your bad habits, thoughts, and actions. (221)
Sarhan uses unforced errors in tennis as a metaphor for life. Stop making the same mistakes over and over, and the rest will take care of itself.
This idea of simply not doing “dumb stuff” is my biggest takeaway from the book. You have to put yourself into a state of mind where you can make intelligent decisions and avoid the self-sabotage that wrecks most of us at one point or another.
I can’t think of a better way to close out our time with Adam Sarhan and Psychological Analysis, which was a fantastic book that I highly recommend everyone read and re-read whether you stuck with us through the entire book or not. There’s a ton of wisdom all through these pages.
We’re moving on to Money: Master the Game by Tony Robbins starting next week, so get your copy ordered if you don’t already have one. The introduction is super short, so let’s plan on diving right into the entire first section this week and meeting back here to discuss it next Sunday morning.
Have a fantastic week, and I’ll see you next Sunday!