A Warning for Traders: Don't Get Addicted to Hopium

Jun 30, 2020

Vijay Bhambwani, Editor, Fast Profits Daily

The question I want to ask you in this video is, are you addicted to hopium?

I am talking of hopium with an H, not opium the narcotic. Hopium is actually a combination of two words, hope and opium.

Now, this is something that I learned in my journey as a trader over the years from market veterans.

As a trader who has to put food on the table thrice a day, or maybe more for the family, you need to live day by day. So as a trader, you cannot really resort to hope.

But after entering a trade, if you start to close your eyes and pray to God, then basically you're snorting hopium.

This behaviour is dangerous to your trading profits. Find out how to avoid it.

Hi, this is Vijay Bhambwani here and come back with you recording this video still from my residence about a very critical topic from my point of view, as a veteran trader.

The question that I want to ask you in this video is are you addicted to hopium? I am talking of hopium with an H, not opium the narcotic. Hopium is actually a combination of two words. Hope and that addictive which is as addictive as opium.

Now, this is something that I learned in my journey as a trader over the years from market veterans. When a trader initiates and trade, remember, I am talking about traders, not investors. As an investor, you have no choice but to nurse hope because you're hoping that the stock that you bought appreciates year after year, decade after decade or maybe longer, if that's your time frame.

But to me, as a trader who has to put food on the table thrice today, or maybe more for the family per day, I need to live day by day. So as a trader, I cannot really resort to hope but many a times and this is something that I have found over the years from my Sunday video chats which I have come to relish, enjoy and really, really look forward to with people whose opinions I love, respect and over the years have learned to even imbibe in my trading systems.

Now, what we discussed over the weekend is, if at all, you are to enter a trade and after entering a trade, if you start to close your eyes and pray to God, count rosary beads or start saying Oh God, Oh God, look after my trade, let it go in my direction, basically that is snorting hopium.

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Why does this happen? Why is it that after you enter a trade, your mind kind of blanks out? Why is it that you start to feel like a deer crossing the roads in the night on a highway and is caught in the headlights of a moving automobile? You simply freeze used up.

You thought you knew what to do before the market opened. As soon as the market opened, you initiate a trade and things start to go completely whack out of control and then you start to resort to hope. You start to chew your nails. You start to wait for another five minutes, another five minutes, another 10 minutes, hoping against hope that the trade will move in your direction. If this is happening to you, you are a trader who's addicted to hopium.

What do you do? Since you cause the problem, you are supposed to find the solution. If you look around you and you cannot find the problem which I think you should not be able to find because it started from you, you should basically reason out with yourself using common sense that if you're not a part of the solution finding process, you are the problem itself.

Now many a times and I am now talking about behavioural science, many a times we rush into toward trade. Maybe because the previous evening or the previous night we had some social commitments. We want to go out for dinner. There was a wedding in the family or what not.

You did not give the routine amount of time that you spend on the charts looking at your systems, updating your statistical data, looking at screen reading signals, etcetera, etcetera and in the morning you kind of enter into transaction which you think will go in your direction.

You know what? Your mind is a very well honed machine. When you are resorting to short term trading, the part of the brain that you're deploying is just behind the forehead and just under the crown, the surface. This part of the brain has called the prefrontal cortex. Now am talking about sheer near of behavioural science here.

Trading is scientific and far more scientific than people know or, if they do not know, would admit that they do not know. The prefrontal cortex is a very rational part of the brain and is responsible for short term actions, reasoning and short term memory. Which is why

Amir Khan gets hit on the prefrontal cortex in his famous movie Ghajini and suffers from short term memory losses.

So the prefrontal cortex is a part of the brain that is responsible for short term trading, as compared to the deeper brain inside known as the limbic brain, which is responsible for long term investments. So your prefrontal cortex knows some consciously and actually very consciously that you are under prepared for this trade.

Therefore, it basically tries to block your senses and you do not know what happened to you once that trade goes against you and you start to see a mark to market loss on your screen.

The prefrontal cortex of the brain requires logic. One plus one is equal to two. Two plus two is equal to four and hey, you did not feed it enough logic because you underprepared or may not have prepared at all for the trading session, and your subconscious mind knows that you do not have sufficient data to follow back on.

What is the cure? I've shown you the problem. What is the cure? You need to spend more time on your trading systems. You need to more time to spare for yourself away from everything else and prepare for the next day's trading session on maybe the next trade. whenever it happens. Your mind must be completely relaxed, knowing well that you've done your homework. You have done all that you could have humanly done to prepare yourself for this trade. You basically worked out all the permutations and combinations of what can and cannot go in your favour so that there is no element of surprise.

As the old saying goes, chance favours the prepared mind. It might look like basic elementary sense to you. Some of you might even call it boring, but do not underestimate the power of preparation. Soldiers know that, which is why you have war games. You have drills. You have morning physical training, or PT every day and army camps. This is to keep your mind and body completely prepped up for any kind of exigencies, emergencies and contingencies.

So instead of resorting to hopium, I think you should start to prepare more and more often, Which is why on Equitymaster's Telegram channel with the handle Equitymaster official, I keep putting out statistical data, and I have explained to you earlier that the F&O turnover in which I mentioned the kind of volumes that was traded during the day. If on a bullish day the turnover is higher, which means increased participation, that's something we actually want as a positive trigger. On the other hand, if the market is falling and the turnover is higher, which means this higher selling pressure, which is what we don't want.

Then I also send out another update, which is on the basis. Which means is the future trading at a discount to cash or at a premium to cash? Ideally, all other factors remaining constant, the futures should be trading at a premium to cash. If it is not so, it's a sign of concern.

Then I give you a list of stocks. Six lists of stocks. 20 top stocks from each category and your job is to see to it how many stocks are figuring in as many lists at as far as possible. These are the stocks that will see a heightened degree of activity on the next day's trading session.

Simple enough. Have taken out a whole lot of footwork for you. I've done all the heavy lifting. All you need to do is spare an hour or two and study for the next trading session so that you can put better quality food on the table for your family. With the simple hack, I assure you, your trading profits will simply improve substantially or if you're one of those traders who have not yet enjoyed substantial trading profits, it you will get you started and jump start your trading experience.

On this promising note, I bid goodbye to you in this video till I meet you in my next. In the comments section, do let me know what you think of this video and what you would want me to record in my next one. Do click like on this video if you are watching it on YouTube and subscribe to my YouTube channel. Do not forget to share this video with your family and friends and help me spread the cult of knowledge based investments and trading.

Do take very good care of your investments, your trades, your family, and your health. Thank you for watching my video stay sharp.

Stay safe and have a great trading day!

Warm regards,

Vijay L Bhambwani
Vijay L Bhambwani
Editor, Fast Profits Daily
Equitymaster Agora Research Private Limited (Research Analyst)

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