Trading/Investing: Infinity Minus X – The Secret Formula for Bigger Profits

Think about it. Theoretically. If you could put yourself, or your trading system, into perfect alignment with the market—you’re long in a bull and short in a bear—over time you could earn infinity.

Of course, we all know in the real world this is impossible.

There’s no magic formula to determine when a bull market begins or a bear market ends, no way to be certain a pitiless bear just got started or a long-running bull finally petered out.

Then there’s the issue of slippage. You may not get the idealized entry or exit prices you want, thus making it harder to “stay in tune” with the market.

So in reality, the best thing you can do is identify low risk/high reward entry and exit points and, combined with sound money management principles, place your orders accordingly. These “inefficiencies” mean you will never be able to be “perfectly in tune” with a market, you will never be able to earn infinity.

But still, in an idealized world, the goal of every trader is what? To be long when the market is trending up and short when the market is trending down. Or, alternately, being flat or swing trading in a sideways market. In any event, if you could do that, you would, in effect, earn infinity.

So, other than the issues noted above (and not counting standard business expenses and taxes), what’s preventing you from doing that? What’s preventing you from earning infinity?

I posit the answer is “you”—you are preventing you from being in tune with the market. You are preventing you from earning infinity.

For discretionary traders, this means your beliefs, emotions and biases have an effect on your trading decisions, thus reducing your chances of “staying in tune” with the market, thus reducing your ability to earn infinity.

For systems traders, this means your beliefs, emotions and biases are written into your computer code, so the result is the same, a reduction of your ability to stay in tune with the market, and thus a reduction in your ability to earn infinity. (And that’s not even counting those wild hare-brained moments when you ignore your computer-generated trading signals altogether.)

In sum, no matter how hard you try to avoid it, your personal beliefs, emotions and biases will have an effect on your ability to “stay in tune” with the market, thus diminishing your ability to approach earning infinity.

If this principle were to be written as a formula it would look like this:

Trader/Investor Earnings = Infinity – X

Where “X” is “you”—the trader/investor whose own personal beliefs, emotions and biases interfere with your trading performance, an interference which can never be completely overcome, no matter how many lines of computer code you write.

For example, if a discretionary trader has a serious personality disorder—an inability to admit being wrong, for instance—this disorder will make “X” larger than it needs to be, thus reducing the trader’s ability to “be in tune” with markets, thus reducing their earnings potential.

For systems traders, the effects of beliefs, emotions and biases are usually more subtle—that’s the whole point of using systems, right?

But what if other systems traders begin to use the same definitions and assumptions you use?

What if all systems traders are already using the same definitions and assumptions you use?

Similar assumptions and definitions used throughout the systems trading community could easily lead to a “black swan” type event—a generalized wipe-out the “quants” never imagined, so they never wrote such a contingency into their code.

In short, for every trader/investor, whether you are discretionary or a quant, the key to success can be found by reducing “X” to the smallest number possible. In the formula above, the smaller the “X,” the greater the profits.

This is where it becomes evident, a trader’s “psychology” is more important than a trader’s “system”—discretionary or otherwise.

And this is where hypnotherapy comes in.

By reducing subconscious blocks and/or conflicts, hypnotherapy can help trader/investors to free their minds of potentially dangerous beliefs, emotions and biases, thereby allowing them to make discretionary trading decisions with a clearer mind, or, to write innovative computer code from a totally new perspective other trader/investors don’t see.

This, in turn, will allow trader/investors to reduce the so-called “X” factor, thereby enhancing their ability to “stay in tune” with the market, thereby increasing their profits.

Thomas C. Williams

Clinical Hypnotherapist

Copyright © 2018 by Thomas C. Williams