Before I discuss my ‘Trading Psychology’ musings for this week, some thoughts on this week’s market action. Markets have been interesting to say the least in recent weeks; an erratic summer rally appears to have been unfolding, I posted an interesting article ‘Sell in May and go away – Except in year with an Election day!’ a few weeks ago alluding to the possibility of this, and it looks as though this summer rally may be continuing to unfold. - First though a big week looms ahead for the markets after last week’s Draghi inspired rally, with pressure now on Draghi to back up his words with actions. The inference from Draghi was that he has ‘a very large Bazooka and that he’s not afraid to use it’, the danger for him is that if his Bazooka turns out to be a 'pea-shooter' then he is in trouble, the Euro is in trouble and the markets will be in trouble. – I’m not finished with metaphors just yet – Mr Draghi has made a big call, he has suggested to the markets that he is holding a very strong hand; a double pair, three of a kind, or even a straight will not suffice, nothing less than a high flush or a full-house is needed when Draghi shows his hand and plays ‘The Draghi Put’. - If this turns out to the case, we could see some significant further strong market action in coming weeks as the market’s ‘pavlovian’ response [a ‘doff of the hat’ to Yasser Dallal at www.rmdfx.com] to major central bank actions kicks into gear, and increased anticipation of likely further action from the Fed into September grows. – Does all this make sense? Will all the central banks merely be throwing more wasted effort onto the bonfire in trying to get the economy going? Sadly I’m a sceptic (not a cynic), and my feeling is to a degree yes, though who knows perhaps they have actually have, and will continue to, averted a far worse economic catastrophe (thus far!).
On to other matters: With the start of the greatest sporting festival in the world on my own doorstep, it would seem remiss not to mention it or to use the Olympic Games to link to my subject for this article. . – So far I have lapped up everything Olympic in the past few days and weeks, and I am delighted to say I have tickets to some great nights of athletics next week. The opening ceremony was a triumph, brilliant, mad, comical and peculiarly British (though I don’t know why we had to celebrate the National Health Service at the Olympics. that was very bizarre.) – By the way how touching also to see my all-time sports hero Muhammad Ali play his part (more about that later),- overall though - nice one Danny. - Day 1 of the Olympics has brought some unbelievable performances already: 5 hours watching a brilliantly frustrating road-race in the cycling yesterday (And a great quote from my 18 year old daughter – ‘Kazakhstan, is that a real place? I thought they just made that up for the Borat movie’ – (Woe is us – we have the Facebook generation to tender our later years)). I thoroughly enjoyed a magnificent archery final between the Italians and US, and some unbelievable performance in the pool already – Looks like the Chinese are coming in the water. 
On to matters a little more about psychology and trading now: This weeks’ ‘quote of the week’ is a simple one by our greatest ever Olympian, Sir Steve Redgrave, who won 5 rowing Gold’s at consecutive Olympic. - "Winning is all in the mind". - Simple, succinct, to the point and as relevant to trading as to any sphere of sport or endeavour. – It is something I hark on about all the time when I work with my trading students and my coaching clients, the one thing I try and in-still into them more than anything else is to work on their ‘self-belief’ and the things that produce ‘self-belief’. Without ‘self-belief’ (which I consider a major part of ‘Appropriate Trading Mindset'), then you’ve already lost. – You may be sitting there with the best system, the right approach to money management and nice pile of capital, but without self-belief you will be nothing more than just another struggling trader at best, and possibly a failed one at worst.
The following is an excerpt from Redgrave’s book; it describes an interview immediate post-race in Sydney. This will tell you a little more about what ‘Self-belief’ is, it also refers to someone who I have already mentioned, Muhammad Ali, someone who I have often used to exemplify the psychological side of trading: Redgrave’s comments about Ali at Atlanta echo my thoughts exactly about seeing him at London.
When we came off the water having just won the gold medal in Sydney, the BBC was waiting to interview us. "When did you know you'd won the race, Steve?"
"After 250 metres." "D'you mean with 250 metres to go," Steve Rider corrected me, clearly thinking I'd be crazy to imagine the race won after only an eighth of the distance. "No, I mean after 250 metres," I said. I wasn't joking.
I know that some people thought I was arrogant. That's a peril of self-belief. It might have appeared arrogant in that exchange with Steve Rider, but it was only the truth.
I genuinely felt that at the time, mainly because the belief doesn't spring from nowhere. It arrives because you work like a dog for years and years and years.
Self-belief is probably the most crucial factor in sporting success. The bodies are roughly equal, the training is similar, the techniques can be copied, what separates the achievers is nothing as tangible as split times or kilograms. It is the iron in the mind, not the supplements, that wins medals.
Poignantly, given the sad disabilities now suffered by a once-colossal athlete, no one embodies this invisible power of self-belief more than Muhammad Ali.
Ali turned sport into theatre, entertainment, comedy, tragedy and the towering influence in his life was his own all-powerful, undaunted self-belief.
I wasn't like him in terms of volume. No one ever called me the 'Marlow Mouth' and I didn't stand up before our race in Sydney and shout, 'I am the greatest', but perhaps it was somewhere in my thoughts as we approached the first 250 metres of the gold medal race.
Otherwise how do you account for the way I felt? The opposing crews were still with us and yet I was sure. In Ali's case, it was part of an act, but at the core was the truth.
Ali's monumental self-belief was at the heart of his barely credible story. He was 22 when he fought Sonny Liston, the malevolent, mafia-backed heavyweight champion of the world.
People laughed. A reporter from the New York Times was told to check out the distance from the ring to the hospital. That's where Ali would be soon enough, they reckoned. Instead, he was on his way to becoming the greatest sportsman of the 20th century.
He said he'd beat George Foreman, the huge, hammer-hitting champion, in their 'Rumble in the Jungle' in Zaire. People were genuinely fearful for his safety. He won. Few expected him to beat Joe Frazier ever again, after his undefeated professional record was taken away by Frazier at Madison Square Garden in 1971.
The fight was so huge that Frank Sinatra only gained entry by masquerading as a Life photographer. It was worth the ringside seat. In a brutal encounter, Ali was knocked down by a 15th-round left hook – 'the punch that blew out all the candles on the cake'. Ali just rebaked the cake and beat Frazier, not once but twice.
His belief in himself was exemplified in Zaire when an hour before the fight against Foreman he looked at his terrified entourage and tried to encourage them to relax. He grinned at them.
"This ain't nothing but another day in the dramatic life of Muhammad Ali," he told them. "Do I look scared? I fear Allah and thunderstorms and bad plane rides, but this is like another day in the gym."
That was self-belief, the stubbornness of mind that acknowledges the physical pain, but discounts it for a higher purpose. God knows, rowing hurts. Not like a left hook, but at least that's over quickly.
The pain of rowing is the scream of lungs, legs, back and muscles. That's just one stroke. Multiply that by 240 strokes in a 2,000-metre race.
I understand pain, but Ali ignored the pain in the interests of regaining his title, stripped from him after refusing the draft to join the US Army and make himself available for Vietnam. He was determined to achieve the destiny he had set for himself and he did so with typical melodrama.
Ali fought way beyond a time that was sensible, but I understand why. It wasn't just that he needed the money or a sop to his ego, it was because he sincerely believed in his powers.
Experience had taught him so. I'm the right man to know how he felt. When I began to realise I was pretty good at rowing, my ambition was an Olympic gold medal. Simple as that. One gold medal was my goal. I achieved that in Los Angeles, ahead of schedule. Why didn't I stop then?
The answer is simple: I thought I could do better and win another one.
By the fourth in Atlanta in 1996 even I'd had enough. That was when I came out with my one and only famous quote. After Matt Pinsent and I had won our gold medal we were interviewed by the BBC. It was just after the race – always a dangerous time when the brain is not fully in gear – and the question arose of whether we were going to Sydney.
At that moment, we were not. "Anyone sees me go anywhere near a boat, you've got my permission to shoot me," I said and immediately entered the sports quotes book market. That makes my one to Ali's thousand.
I have never met Ali to talk to, but I have been close. It was the opening ceremony of the Olympics in Atlanta in 1996. I was carrying the flag for Great Britain and the climax of the evening was Ali igniting the Olympic flame.
There was such a nervous hush in the arena as this revered figure came forward, the torch visibly shaking in his hands from the ravages of his illness, and I for one wasn't sure whether he would be able to perform his role. He seemed so diminished from the great warrior I remembered and it made me feel sad, yet he did light the flame and, as the crowd roared, the sadness was replaced by a different feeling altogether.
The power of the man – call it charisma, nostalgia, whatever it may be – was tangible. I didn't come away sad. I came away with the thought that I'd just witnessed something magical.
I will continue to build upon this theme of self-belief over the coming weeks, I think if anything else is to make a major difference to one's trading - then this is it.
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