not available in this challenging field.
Here, you cannot adjourn the meeting to think things over, you cannot temporarily turn to a different subject, you cannot postpone a decision to consult with an expert or friend. Nor can you take time out to relax. The market goes on with or without you, the moment of decision cannot wait. Your emotions and your psychological make‐up must be such that they will not interfere with a prudent decision at the instant when you must make it. Your personality cannot be such that it requires some form of diversion before you can rely on your judgment at a critical moment.
These psychological elements are but a sampling of the important essentials in determining your probable chances of success or failure in futures trading—quite apart from luck and being right on the fundamentals. In futures trading, more so than in most other fields of endeavor, one's psychological make‐up is critical.
Best wishes,
Leo Melamed
Chairman Emeritus, CME Group, Inc.
Prologue: You Deserve to Win and Be Rich
This book will help anyone who wants better results in their life, with their money, and in the market. Most people suffer (lose money or are frustrated with their performance) in the market and my goal is to change that by teaching you how to win (make money) by taking control of your mind, so it stops controlling you.
This book has the potential to change your life. Why? Because the stock market has the potential to change your life. Keep in mind, real wealth comes from being fulfilled, by being happy, and by winning (in whatever activity you put your mind to). This book will show you how to think like a winner and bring out the best version of yourself (even when you don't feel like being it).
This book will also show you how to think like a winner so you can help yourself, accomplish more in life, accumulate wealth, compound your returns, help others, do the right thing, and have great relationships with other people, yourself, and the world around you. When you do that, there will be nothing for money to do but to flow to you in abundance.
The first thing you should know is that you deserve to win and you deserve to be rich. Let that sink in for a moment. You deserve to win, and when you win, you will be rich. Most people focus on money and not a winning process. That's why most people do not accomplish their financial goals. If you chase money, and don't focus on a winning process, it will be very tough to accomplish your goals. This book will give you a foundation you can use to build a long‐term winning process that will work in any market condition. The beautiful part of life is that you don't have to be a superhuman genius to win and get rich. You just have to learn how to control your mind so it doesn't control you. That's one of the core principles of this book.
It's possible that you're uncomfortable with the word “rich.” Maybe you prefer to be wealthy. We'll get to that later, but for now, if you have chosen to read this book, I believe you have the capacity and the obvious desire to take control of your life, win more often, control your finances, get richer, and build generational wealth. You can be rich. You should be rich. You deserve to be rich. You just have to learn how to do it.
Maybe you work with a financial advisor who keeps charging you fees while your portfolio languishes and it seems like the market (and everyone else) is taking off without you. Or perhaps you like to trade and are not getting the results you want. If you find yourself watching the market all day or constantly opening up your brokerage account, hoping or praying your stocks go “up” or only get back to “even,” I'm here to tell you there is a better way. The madness can end. You don't have to sweat while you watch the numbers tick up and down, making uninformed, emotionally charged trades, unsure of whether some imminent catastrophe is going to wipe you out or lead you to live in a negative state (angry, upset, frustrated, or any other negative emotion you can think of).
I believe you can beat the market. “Beating the market” means you have the ability to consistently earn more in the market than someone who simply parks money in an index fund like the S&P 500. On Wall Street, they call it “generating alpha.” To consistently beat the market, you need to develop a trading strategy proven to perform well in all market states (up, down, and sideways), and you need the will and mental discipline to stick with your strategy, even when it gets difficult (during the inevitable drawdowns that happen to everyone). In this book, I'll share my trading strategy, I'll give you suggestions on how to build your own strategy, and most of all I'll help you take control of your mind and your money.
SIMPLE BUT NOT EASY
Building wealth is simple but not easy. The key to building wealth is to earn more money than you spend. That's simple. However, repeatedly making the decisions that allow you to build wealth and avoiding the common mistakes that hold people back—that's not easy.
Denying yourself the car you want, or your dream vacation, or the big house you feel your family deserves—that's hard. Putting in the work required to make more money, or finding the courage to start your own business, or making uncomfortable changes to increase your income—that's hard.
Most things in life are simple but not easy. Think about personal fitness; it is simple but not easy. Losing weight is a matter of calories in versus calories out. Eat less and exercise more. That's simple. However, just like with your financial health, fitness is about denying yourself things you desire (eating the cookie) and putting in hard work (doing the sit‐ups) to meet your larger goals. You have to forgo indulgent foods and you have to engage in strenuous physical activity. For most people, that's hard to do. If you have a trained and disciplined mind, however, losing weight is a piece of cake (pun intended). The same is true with becoming financially fit.
TWO TYPES OF MONEY
Capital comes in two forms: smart money and dumb money. The decisions people make regarding how they manage, invest, and spend their money determine whether they are in the “smart money circle” or the “dumb money circle.” Don't worry where you were yesterday; the key is to focus on where you want to be today and to set yourself up for a better tomorrow. Nearly everyone starts off in the dumb money circle and, sadly, most stay there forever. I'm here to change that. Over time, I've learned how to stop making dumb money mistakes, I've entered the smart money circle, and now I find tremendous joy in helping other people enjoy financial freedom and do the same thing.
Cash flows in and out of the market all day long. The same is true for cash flowing in and out of your pocket. Before I go any further, it is important that you know that there are an infinite number of ways for people to make money in capital markets, and you just have to find one that works for you and your personality.
Regardless of your approach, it boils down to one thing: successful people, people in the smart money circle, consistently take money out of the market, while unsuccessful people, those in the dumb money circle, consistently put money into the market. By the time you finish reading this book, you will learn how to join the smart money circle and consistently take more out of the market than you put in. Plus, you will learn my strategy and how you can build your own successful strategy for beating the market.
Perhaps the most important thing that will allow you to consistently make big money, achieve financial freedom, and join the smart money circle is to learn how to make great decisions—objective decisions based on information, not emotions—especially when you are under pressure. Everyone makes decisions, but making great decisions is what separates those in the smart money circle from everyone else.
I have been studying “smart money” since the 1990s, and I've managed to transform my life by moving from the dumb money circle into the smart money circle. People don't get rich by accident, just as athletes don't win championships by mistake. It's not a fluke that Michael Jordan was number one in basketball or that Tom Brady was number one in