"Under pressure, emotions determine our action." (p. 72)
The flip side of fear is the emotion of greed. The operative emotion of greed is envy. Mamis notes that ". . . whereas anxiety paralyzes, envy cause one to act. . . " It is difficult to see the spectacular trades/success of others, and not feel a small bite from that evil twin of jealousy, envy. Envy can cause very risk behavior which is simply, "the risk of 'denial of risk'." Both greed and anxiety often lead to doing the wrong thing. Inertia can be one of those 'wrong things': failing to buy when one should buy; failing to sell when one should sell.
These emotions and their operative manifestations into our action (or inaction) govern all market participants. The impetus for buyers/sellers is reversed in bear/bull markets. Regardless of the market participant regalia you dress in each day, it is best to understand both your own and others' motivations and perceptions of the current risk environment. Mamis' book came along for me when I was feeling 'inertia'--that inertia having been brought about by the overwhelming need to have more information, more certainty, more sense of direction. Granted, there is nothing wrong in standing aside when there is great murkiness...but my inertia was spanning a time when there was some market direction, AND my emotional state prevented my seeing that. Providence must have set this book into my hands, because it helped me come to terms with that inertia.
As market participants, we have to balance the two opposing points off view of being free enough to take risk and while not falling into the trap of 'the risk of 'denial of risk.' I'm not going to leave you with that concept in a void. How does one find the right action in that balance?
We need, we crave, the trust and belief from others, but when information is insufficient we need trust and belief in ourselves. We need the discipline to accept whatever is available, and the experience to understand all the ifs, ands, and buts, and yet still take the risk: we need to be able to make the decision. (p. 79).
As with most things, the right-rootedness of these important concepts is discipline. My distillation is that we need discipline first to ensure that our trading/investing capital lasts long enough to give us the experience that we need to build mastery. Without experience, we cannot build mastery. It is mastery that produces intuition and insight, and those ultimately support our confidence. Mamis notes:
Discipline means choosing what to do unencumbered by the fear of making a mistake. Confidence means trusting our intuition and that what we 'see' is what we "know." (p. 80)
He closes his chapter with a question that I hope that all of you embrace as your own mantra for coming to terms with this concept of risk: "How do we create within ourselves the heroic condition of confidence wherein risk is not a danger but life?" (p. 80) I also implore (v. suggest) you to get this book. I promise you that it will make you think of and about risk in a way that you may not have considered previously. I particularly recommend it for any who are feeling inertia and feeling compelled to have more information, more certainty, more (this, that, the other) before forging ahead and making a decision.
(1) Mamis, Justin The Nature of Risk: Stock Market Survival & the Meaning of Life. Flint Hill, VA: Fraser Publishing, 1999