If you’ve read my book, Safe Strategies for Financial Freedom, you should understand that we are still at the early stages of what could be a Super Bear Market.  That bear market started in 2000 and will probably end sometime between 2015 and 2020.  And while it’s difficult to predict what the market will do in a year, we can predict that if you have a long stock position that you just hold, you’ll lose much of those assets by the time this bear is finished with you.

How do we know this occurs?  Basically in the last 200 years, the market has gone through such cycles, repeatedly.  Why should it be different now?  Furthermore, the cycles tend to have a huge psychological component.  At the end of the last secular bull market in 1999, everyone was playing the stock market.  Everyone was a a stock market genius—the waiter at your restaurant, the bartender at the same restaurant, and even the taxicab driver who picked you up.

However, you might be thinking that we already had three rough years in the stock market from 2000-2002, so perhaps the market is now on its way to recovery.  No, that’s not the case at all.  This bear market will be over when everyone is totally afraid of the stock market.  Here’s what you’ll probably see:

1. many mutual funds will close down because they’ve lost heavily;
2. pension funds will no longer be allowed to invest in the stock market because they consider the risk too great;
3. very few of my clients will be equity investors (i.e., they’ll all be into options or futures or Forex.); and
4. most importantly, stocks will be at all time bargain levels.  

Blue chip stocks will be paying dividends of 5-6% and have single digit price earnings ratios.  When you see that you’ll know that the bear market is over.

There is so much involved in developing peak performance, that I recommend that all traders have a business plan. We recommend that the business plan cover all of the following areas.

• Your vision.
• Your purpose.
• Your objectives.
• A thorough self-assessment of your strengths and weakness, based upon real trading logs that you collect (if you haven’t done so already).
• A thorough assessment of the big picture of the fundamentals.
• A complete understanding of your beliefs about the market.
• Procedures for getting empowering beliefs and mental states behind you.
• A documentation of your research procedure for developing new systems and determining how to analyze their effectiveness.
• Your procedures for developing and maintaining discipline.
• Your budget and cashflow systems.
• Other necessary systems such as marketing, back office record keeping, etc.
• Your worst-case contingency plan.
• System 1 – which is compatible with the big picture.
• System 2 – which is also compatible with the big picture.
• System 3 – which might come into play should the big picture change.

I believe the most significant work that anyone can do to increase market returns is self- work. Really understanding yourself and how you think can give you an edge that others in the market don't have.

As part of my training, I give a long questionnaire to each trader to do an evaluation of themselves.  Some of the feedback that I get is that taking the test is like doing a Ph.D. program!  It's that involved. 

I consider the ten questions that I give my Super Traders to be the essence of this self-evaluation process—a minimum starting point for this type of work.

We'll start with just one of the points. My advice to spend at least an hour on each question—a day is even better. These questions are meant for you to really dig deep and come up with responses from your core belief structure.

What are seven key psychological areas that you need to work on or are currently working on?

Don’t say “none” because that answer really suggests that you are totally unaware of what is going on with you.

We basically live in a society in which we are programmed to feel separate and alone from everyone else, programmed to follow the rules of the games that others invent for us to play.  The net result is most people do the exact opposite of what is necessary for success.  As you become aware of this, you’ll also become aware of all your patterns, beliefs, and emotions that you need to work on or clear out to become more successful as a trader.

Here are some examples that might fit some of you:

• I really have a fear problem that enters into my trading.  I want to make trades but I’m afraid to pull the trigger.  And that fear seems to come up in other areas too; I guess I’m really afraid of failure.

• I have some internal conflict when it comes to working on myself.  On one hand I want to, but on the other hand, I’d rather do other things.  Working on myself feels like having a tooth pulled.  For some reason, I just don’t want to do it.

• I don’t have any discipline.  Sometimes I just decide to trade.  I make almost random trades or take recommendations that I’ve been given, but just certain select ones appeal to me.  And the net result is that those trades never seem to work out.  (Note: this is also an incomplete answer.  What is the selection process?  What happens to those trades?  Do you cut losses and let profits run?  Are you compelled by some emotion to trade?)