Positive Mental Expectancy
I first noticed the term “positive expectancy” in Van Tharp’s works. The term defines a system or game that over time will win more then lose. Dr. Tharp points out that it is essential for traders to know that their system or method has “positive expectancy”. Positive expectancy for me can also be described as a state of mind. Jay Norris
We were in Florida last week getting things sorted out for our coming educational courses. While in one meeting, myself and Teresa, our youngest partner, were engaged in an Irish discussion on what the most important aspect of trading is. (To the outside observer an “Irish discussion”, similar to an “Italian discussion” can appear to be an argument.) Al, our head trader just sat there watching as he always does with a slight smile on his face. I wasn’t even sure if he was listening. Then, he nodded and ended the discussion by saying, “The most important thing in trading is Mind Set. You have to have a traders Mind Set”. Over lunch he went on to explain that you have to know from experience that over time you are going to make money. It comes down to confidence brought on by experience.
I knew last night that I had gotten to that point myself, when I opened up the platform and saw a long EURJPY position I had entered on last Friday’s close had just taken a 100 pip drawdown against me. I double checked to make sure the stop loss was in place, turned off the computer, and watched a movie. I slept soundly through the night and awoke to see the trade just below my upside target which was just below the January high. I actually had a dream the trade gave me a 50 pip per profit, which was not quite as generous as the 150+ pip per profit I did take out. I had a good feeling, even after seeing the draw-down, that I had a winner on my hands. And that had more to do with just having the weekly and the daily trends in my favor. It had to do with my own PME — Positive Mental Expectancy. I’ve experienced enough examples over a large enough period of time to know that the method I’ve been taught is much more sound than my own decision making process when it comes to trading. Because I know this, the method has replaced that process to the point that I know not to think. And the best part about acquiring the PME, through Al’s mentorship, is that I don’t have to think any more. I just have to remember to look up every now and again and say “Thank You”
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