Wittgenstein demonstrated that you cannot follow a private rule and you cannot follow rules privately. If you are on your own, you have no clear idea of what the rules are and you have no social environment that can correct you. So in order to have a trading strategy, you also must have a group of people with whom you share that trading strategy so they can correct you and make sure that you don’t start to believe in your own “private rules”.
On top of the inability of humans to follow private rules, there is also the ABC-model. The A stands for Antecedents, the B for Behavior and the C for Consequences. Science has demonstrated that people’s behaviour is for the most part influenced by consequences rather than antecedents. For trading this is particularly important because the ABC-model explains two problems with trading:
- Being rewarded for bad behaviour, as per command $2.
- Being punished for good behaviour.
Situation (1) is way worse than (2) and has it’s own command $2. In the case of being punished for good behaviour, people become fearful of trading and refuse to trade when their trading strategy signals it is time to trade.
Besides financial punishment in the form of losses, our brain also reacts quite well to social rewards like compliments. That is the second reason why trading with a group of people works much better than trading alone. Not only can the group prevent you from doing stupid things, the group can also compensate you for losses that are incurred while doing the right thing by complementing you for following the rules despite the loss. While compliments may sound corny to some people, for most people this is simply how their brain works. That is why most people will make more money if they trade with a group of people rather than alone.
For that reason we have a Discord group where like-minded people come together to help each other be successful in the market. For our long term trading strategy we discuss whether a certain stock is indeed a stock that meets our criteria. For our day trading strategy which only wins 2 out of 3 trades unlike the long term strategy which wins 14 out of 15 trades, it also involves complimenting people for sticking to the rules.