Welcome back to our discussion on Napoleon Hill’s work The Law of Success in 16 Lessons.

If you’re just joining us or would like a refresher on the Laws of Success, they are:

1. A Definite Chief Aim
2. Self-Confidence
3. Habit of Saving
4. Initiative and Leadership
5. Imagination
6. Enthusiasm
7. Self-Control
8. The Habit of Doing More Than Paid For
9. Pleasing Personality
10. Accurate Thinking
11. Concentration
12. Cooperation
13. Profiting by Failure
14. Tolerance
15. Practising the Golden Rule

Napoleon Hill introduces the lesson on Accurate Thinking by calling it “the most important, the most interesting and the most difficult to present lesson of the entire course, urging the reader to study it with an open mind. Hill states that most people ‘disbelieve that which they cannot understand’, and this was almost the case for me the first time I heard the story of David Bowden and his forecast for the 1989 top of the market. I didn’t understand how David could possibly nominate the exact top of the market in 1989, let alone the date it was going to happen. And I had no idea how he was able to do it a full calendar year in advance, but there it was, published in a trading magazine. Luckily for me, my curiosity got the better of my scepticism and I studied David’s Active Trader Program to see what it was all about. Otherwise, I would still be part of the large majority of people who ‘disbelieve that which they do not understand’ when it comes to financial markets. Now, I’m not asking you to believe anything – just to acquire facts and make up your own mind.

When it comes to Accurate Thinking, there are two key abilities that Hill encourages us to develop. The first is the ability to separate ‘facts’ from ‘information’ and this is especially important when it comes to trading financial markets. ‘Information’ is what you read about in the financial news media or hear about on tv or YouTube. Facts are the actual market movements that occurred on a given day or week or month. ‘Information’ told us in the first quarter of 2022 that  the market was in a strong position with sound fundamentals. ‘Facts’ told us that the Nasdaq index had reached a major top and was currently working out a bear market. So straight away, we can see just how important it is to distinguish facts from information as traders.

It’s very important not to be intimidated by the views of others when it comes to trading. My suggestion to you is to do your own work, your own study and your own research so that you are confident enough to make your own market decisions and ignore the advice of anyone else, whether they are on tv or even at Safety in the Market. An important milestone of every trader’s journey is the moment they learn to trust their own work. You will experience a great deal of satisfaction the first time you make a market call that comes in correctly, and from that point on, you will never rely on anyone else for ‘information’ again. You will simply observe the facts and make decisions based on them.

In addition to being able to distinguish facts from information, Hill says that we must also be able to separate facts into the important and unimportant, or the relevant and irrelevant, because ‘only by doing so can you think clearly’. He goes on to say that ‘all facts which you can use in the attainment of your definite chief aim are important and relevant; all that you cannot use are unimportant and irrelevant. For example, we might hear a news report describe that the market was choppy and volatile today. This is interesting, but we cannot use it to help us bring about our definite chief aim. If, on the other hand, we do our work and determine that a market is in a down trend (as the Nasdaq index was in early 2022), we can use this information to take short trades and make money as the market falls, thus bringing us closer to our definite chief aim (assuming of course that our aim is to make money!)

It is important to be clear that Accurate Thinking in trading does not mean that you are going to be right all of the time, and never have a losing trade. You can do all of your work and make a good trading decision and still see that trade go against you. However, as long as you have focused on the relevant facts and taken a high probability trade with a high Reward to Risk Ratio, you are on track to be a profitable and successful trader and that is the key point here.

In order to become an Accurate Thinker in financial markets, there is a ‘temporary penalty’ as Hill calls it in that you will need to do work to educate yourself to be able to identify and interpret the facts, and for this work, you will initially not be paid (this was discussed in Lesson 8, The Habit of Doing More Than Paid For), however, keep in mind that the rewards for your efforts are “so overwhelmingly greater that you will gladly pay this penalty.” As I have stated in a previous lesson, trading is just like any profession: just like doctors, lawyers and other professionals, we have to learn before we earn.

Action Item:

• For the next few weeks, pick one or two news publications that discuss financial markets. Note how they talk about the market. Do they pay more attention when the market is going up or when it is going down? Determine which parts of their articles or videos are presenting facts, and which parts are presenting ‘information’. To get the most value out of this, you will need to observe it over a period of several weeks.
• For students of the Active Trader Program: pay attention to news announcements when they come out. Then, open a chart of the stock, index, currency or commodity in question and note the TREND of the market as defined in the Active Trader Program. Observe whether the market moves more frequently in the direction of the news announcement (ie up for good news, down for bad news) or whether it continues in the direction of the trend.