We firstly need to understand what knowledge actually is. Many spruikers spruik that all you need is knowledge and they have the knowledge that you need to get ahead. Well I have some bad news for you, knowledge alone will not do the trick for you. There are thousands of well educated derelict people around the world.

Knowledge is the difference between being unaware of some information and being aware of it. It is merely the comprehension of some information that you didn’t comprehend before. In a sense, you create some information that is new to you by experiencing it through any of, or combination of your five senses.

This doesn’t mean that it is new to the universe or to everybody else on the planet. It has most probably existed in the universe since year dot, but you will have needed to go through the creative process to gain this knowledge for the first time, which makes it new for you.

When a new idea is created by a human being for the first time in the history of the Earth, this is an invention. There clearly have been thousands or even millions of occurrences of this over the centuries. Even so, investors merely uncover truths or combinations of truths that already exist but were not seen or known by them before.

But here comes the catch—being aware of something and applying it in your life are two very different things. It’s the application bit that causes the greatest trouble to the majority of human beings.

This is the gap between knowing and applying, or put differently, between knowing what to do and doing what you know.

The fact is that most people don’t apply new knowledge. To themselves and others around them, they appear to ‘give up’, when, in fact, they never even started in the first place. All they were doing was applying their existing knowledge—information that existed before the new knowledge came along. This is the way that our minds work. Our current beliefs, which are the caretakers or our current habits which, in turn, are the application of our current knowledge, will defend themselves to the hilt. It takes effort to change.

Being aware occurs in the conscious mind; applying awareness or knowledge occurs in the subconscious mind. The challenge for us all is to get new knowledge from our conscious to our unconscious minds at which stage it becomes a habit. Only then will new knowledge become an ongoing working part of our being. To develop a habit we must step through a process that embeds the new knowledge into us as a part of our personality, that is first nature, so it becomes effortless to use the new knowledge to achieve our objectives.

This is where sayings come from such as: ‘I tried that once and it didn’t work.’ Because it was tried a few times, people perceive that they have covered that ground and there is no need to revisit whatever they tried. Their current, maybe dysfunctional, beliefs even convince them that because they tried it once (or twice) before, they are an expert as to why it didn’t work and hence why they shouldn’t use it any more and just carry on doing what they were doing before. And carry on getting the same results as before! With the same old bad habits, beliefs and thinking patterns.

From there they move on and try the next thing that is novel to them. And so the endless loop of failure continues. Nothing will work not because there is necessarily a problem with the new knowledge but because there is a problem with the process of embedding the new knowledge into their being.

Embedding new knowledge to the habit stage requires repetition of experiences via our five senses, and this involves disciplined effort until the habit stage is reached.

Maybe you can now understand that there is more to investing than just making money. It is an ongoing journey and transition process of acquiring new skills and improving them.

Sure, you could say that the same applies to golf, gardening or stamp collection but few other environments provide the magnified pressure cauldron such as the markets in which to execute learned mental skills under the pressure of losing money. The pressure is self induced by magnifying the perceived importance of money. Perceived or not, when you mix people and money the pressure is on.

One of the most satisfying outcomes of providing trading methodologies to and coaching active investors for many years is the feedback that has been provided by many that have successfully transitioned their active investing paradigm. Just about every person that comes to the markets does so to make more money, their primary motivation is growing their money.

However, when I have long discussions with customers that have become and then remained mechanical active investors for many years the most important things to them in hindsight is not the making of money through outperforming the market indices, the important things to them are:

• overcoming fear through trust (in an edge),
• creating investment processes and then surrendering to those processes,
• accepting and being at peace with outcomes of individual trades through focussing on the process,
• having no expectations for individual trades,
• believing in probabilities and thereby overcoming the uncertainty of individual trades,
• overcoming their biases that are harmful to investing in the markets, instilled through many years of living    in society,
• overcoming the “noise” that surrounds the markets propagated through newspapers, newsletters, TV shows,    radio shows, advertising, spruiking and many other sources.

These investors have learnt that you cannot trust and fear at the same time. If you are fearing you are not trusting and if you are trusting you are not fearing.

There is more to it than just money. The benefits of transitioning how you think, feel, say and do go way beyond just making money.

Not everyone knows that a universal philosophy actually exists in the business of trading. Importantly, in order to be successful in the long run, this needs to be clearly understood and firmly burnt into the trader’s psyche.

Anybody can place a few profitable trades—randomness will take of that. But to maintain that run of success requires more. It requires a consistent step-by-step approach and the ability to remain firm and confident in your approach, especially when you are going through tough market periods.

Being ‘successful on an ongoing basis’ means running a portfolio (equities, shares) that continues to rise at a faster rate than the market accumulation indices (managed funds), while experiencing acceptable troughs along the journey.

Depending on your perception of investing in the market, you will have a different view of what it takes to continue to be successful. Whatever it is, it is likely to be encompassed in the following 12 Point Trading Philosophy:

1. Develop well defined trading processes that are part of a plan.
2. Create an edge with a positive mathematical expectancy.
3. Undertake the necessary preparation and research.
4. Become empathetic, especially with the way the market moves.
5. Trust your trading processes and your edge.
6. Resist “noise” outside your processes.
7. Overcome fear, hesitation, indecision and reservation.
8. Execute with confidence.
9. Successfully manage both the euphoria of success and the despair of failure when something does not go the      way you planned.
10. Continue to engage according to your processes, regardless of your outcomes.
11. Transition your processes and your thinking into habits so that they become a natural part of who you are.
12. Become consistent and objective in your decision making.

Importantly, point Number 12, ‘becoming consistent and objective’ is the ultimate aim, the by-product of your processes, your endeavour and how you think.

Along the way you will need to deploy certain techniques, tools and skills to achieve the various parts of the trading philosophy. These may include:

• discipline
• technical analysis
• fundamental analysis
• research capabilities
• money management principles
• risk management principles
• mental, physical and execution exercises

At the end of the day, the trading philosophy can be simplified into this equation:

Edge in the Market + Trader’s Mindset = Consistently Successful Trader

Pretty simple, hey?