In one of blogs that I follow, a discussion has arisen asking the question if trading can be taught or is it reserved for a small group of special individuals that possess some innate ability. My feelings, not surprisingly, fall into the camp that trading is a teachable skill that anyone with the desire can master.
And that desire is really what separates the “successful” traders from the wannabes. As with any laudable skill, playing a musical instrument, performing the perfect layup, executing the perfect golf swing, the talent to perform a skill are only second to the hard work needed to perfect that skill. Talent can take you so far but what separates the truly elite are the hours spent learning their particular craft.
The only exception to the trading world is that unlike the arts or athletics, where the environment doesn’t change, the environment of a trader is constantly changing. For example, I learned to play the saxophone when I was in high school and the notes of the instrument are still in the same place to this day. How I use those notes, or what might inspire me to play one note over another will vary, but the mechanics of what I’m doing haven’t changed and I count on that consistency to be able to play.
I can’t make the same claim about trading. The market environment that I learned to become a trader in 2002 is very different today. And the environment is constantly changing depending upon people’s perceptions. The “tools” that we use as traders; indicators, oscillators and the like, are just feeding us back information that has already happen. The “constant” to a trader’s success is within the trader themselves. Its our ability to adapt ourselves to the market environment. How we are going to use those tools becomes more important than what tool we’re using.
And that’s why it’s even more important to be willing to spend the extra time to practice how we, as traders, are going to react in certain situations. Giving yourself the permission to find your “sweet spot” comes with many hours of, what Christine Carter, PhD from UC Berkeley’s Greater Good Science Center calls “grit.” In her article for Psychology Today entitled A New Theory of Elite Performance, she talks about how deliberate and persistence practice over time is a greater measure of someone’s success than any innate ability.
In this segment of the documentary Floored, we get a glimpse of the dark side of the trader experience. When markets turn and the decisions are all coming up as losers, this high stakes world turns very ugly very quickly.
In this segment, we get a glimpse of the lifestyle of floor traders. When markets work well, they are beautiful. When they don’t, well that’s a different story.
We’ve all heard the phrase, “Where there’s a will, there’s a way.” It’s intended to be an inspirational quote to motivate people to tackle the hurdle that confronts them or overcome an obstacle. It sounds good but I’ve never completely understood how this is supposed to motivate me. Does it mean that if I don’t have a way, I’m without a will? Is my will so weak that I’m incapable of creating ANYTHING to find a way?
These types of phrases are what traders take with them when they sit in front of their charts deciding what they should be doing in the market. I’ve had more than one trader parrot back this phrase to me when they are explaining their trading results. It’s usually a hollow attempt to steel themselves to the incredible task of becoming “successful” traders.
The challenge, as I see it, is that we’re putting the preverbal willful horse behind the cart. We make the mistake of focusing all on the way of doing things rather than the will to do them. To put it another way, we focus all of our attention on how to become successful traders but spend very little time on why we want to become one.
Admittedly, this is really easy to do. A quick Google search on the words, “trading methods” will yield 35,700,000 responses where as “trading psychology” will only net you about 9,570,000. It’s much easier to sell the method, or the “way” of trading in contrast to the “why” or the will of trading.
Solving the puzzle about the “why” of trading is important. It does 2 things for traders. First, it’s what gives traders the will to get up the next day and find new trading opportunities. Many traders begin trading in the hopes of making money easier, faster, less stressfully. When this doesn’t happen, they inevitably give up thinking that making money is just too hard.
Second, it gives focus to traders on the way they are going to trade and narrows down those 35+ million hits on Google to a manageable number of possibilities. With so many different ways of trading, the only way to navigate the method-landscape is by taking stock of your own values and desires. This is, at least, a starting point for discovering how a trader is going to become the next William Buffett.
And there is some scientific evidence for this approach. As Dr. Elliot Berkman, Assistant Professor of Psychology at the University of Oregon writes in Psychology Today, the will and the way are two parts of a goal hierarchy in our brains. The Will is the higher function of this hierarchy and the Way are the particulars of getting the goal accomplished. If we apply this to trading, knowing what we are trading for, the bigger purpose, gives us a clearer picture of how we’re going to get there. That will, minimally, give us a better chance of achieving our trading goals.
In this first excerpt from the documentary Floored we’re given a brief description of how this chaotic world works. What some of the challenges are and the allure of this very high stakes world. One of the best quotes from this excerpt, “It’s not what you make, it’s what you don’t lose.”
The characteristics of the Revenge Trader Syndrome painted a picture that many traders have experienced. That sense of being alone and that the market is out to get them is a common sensation amongst traders. Since most retail traders are physically isolated from other traders, the burden of making the “right” decision is exaggerated by feelings of aloneness, defiance or revenge.
The need to create awareness of these feelings, as we did in the Defeated Trader Syndrome Empowered, is even more important for the Revenge Trader Syndrome. The reason is that unlike the Defeated Trader Syndrome, which can mire a trader is inactivity and indecisiveness, the Revenge Trader is more likely to act on their feelings. The core feeling here is anger. Anger can motivate people to take action, in some cases, any action, to change a situation. Taking action is good. The challenge becomes to take action that is responding to the market rather than reacting to it.
We are looking to learn to be powerful verses forceful. We want to use this filter to create an inner strength so that your decisions and subsequent actions are conscious rather than unconscious.
As we discussed before, the first step is to be aware. Being angry, unfortunately, can be somewhat blinding. Have you ever been in an argument with someone and raised your voice without being aware of it? That’s the challenge to us as traders.
So awareness starts with the word “STOP.” Stop what you’re doing; stop chasing the market; stop taking action. This is one of the hardest things to do, especially if you have a little gremlin on your shoulder telling you, “Get back in! Don’t stop now, you’re going to lose!”
So this is how you take back the power of The Revenge Trader. Instead of letting that gremlin tell you what you should be doing, use that voice as your own personal indicator. Let the gremlin be the awareness that you need to begin making a change in your trading decisions.
Then, acknowledge the gremlin. Acknowledge the fact that, at that particular moment, you’re not trading at your best. You may be reacting to the trading situation instead of responding. Acknowledge that your decisions might be based in fear and not in the best interest of your trading account and certainly not in alignment with your larger trading goals.
The simplest action – STOP! Stop trading, stop risking money in the market and stop trying to prove you’re right!
These actions sound good on the surface, but they can be incredibly difficult to implement. After all, if it were as easy as I’ve just outlined, there would be no need for these types of conversations. Everyone’s version of the Revenge Trader is unique and therefore calming the trader is also unique. Your job is to understand how the Revenge Trader might be showing up for you and what the best course of action is to calm it.
If you would like to talk about your particular brand of the Revenge Trader, sign up for a complementary exploratory coaching call.Click this link to find an available time to meet. Be sure to give a brief description of how the Revenge Trader shows up in your trading results.
The next condition we’ll examine is The Good Enough Trader.
*The educational material contained is gratefully adapted from the training received at the Institute for Professional Excellence in Coaching (iPEC), its founder Bruce D Schneider, and his bestselling book Energy Leadership.
In 1997, 10,000 people traded on the floors…Today, about 10% remain. Thus begins James Allen Smith’s movie “Floored,” which will premiere on Futuresmag.com Sept. 6. As we see in this sometimes harrowing, occasionally funny, often sad documentary…