“I don’t get it. I know there is good money to be made in trading (I see people doing it) and I’ve known success before. It’s not like I don’t know what a winning mindset is. I’ve proven myself before. Yet trading success still eludes me after a number of years, and I don’t know why. I’ve made success happen in other areas of my life, I work hard, I’m goal-oriented, I’m motivated, have a great attitude, have a good analytical mind, I’m a proven leader, and I know how to win. So, what’s wrong? What is it I am missing?”
SUCCESS IN OTHER FIELDS DOES NOT TRANSLATE INTO TRADING PERFORMANCE
If you hang around traders talking shop very long (and being honest), you will hear this story repeated endlessly. Many people who have devoted themselves to becoming a professional trader have experienced success in other fields before they came to trading. They know how to trade when the pressure of risking capital is not part of the equation of trading success.
In fact, one of the first flaws they bring to their new (or not so new) career in trading is that they assume the same psychological skills that aided them in their past career could also be leveraged to produce the same kind of success in trading without modification for the rigors of trading.
This is a misguided, and often an account damaging, flaw. Somehow this aspect of risking capital in real time makes for a completely different calculus of performance. Success in many other fields is rooted in pushing your will upon the world and, by sheer hard work, will power, and ignoring fear, conquering the world “out there.” The skills of setting goals and assertively making those goals happen by taking personal control of fear are honed into powerful tools for shaping the future. And with this kind of thinking, if you don’t succeed, you just push even harder to make things happen. Additionally, you must be in control of the factors that bring forth the envisioned reality.
Success, you are taught in this paradigm, comes by aggressively acting upon the world and making it happen according to your will. This formula for success is at the root of many a successful business and career. And out of that success comes the assumption that the same principles, applied to trading, will continue to produce success.
This is like comparing Newtonian physics with quantum mechanics – the belief that there is a world “out there” that can be known with certainty and manipulated vs. a world “in there” where belief is fluid and is projected upon and shapes the world the observer experiences. At the core of this paradigm is a belief in the certainty that a person can control outcome in the external world. And this is where the struggling trader stays stuck in beliefs that do not function effectively in trading, where there is no certainty.
THE TRADING MINDSET
Trading requires a very different mindset. Trading is more about managing the internal world in your mind than controlling an external world. In trading, the trader has to let go of his or her beliefs about being able to control external outcome by force of will and hard work. And the evolving trader has to let go of his or her illusion of certainty and embrace the management of uncertainty and probability as a way of seeing the world. This is the “quantum leap” that a trader has to make in order to move from the certainty thinking found in the life before trading to the management of probability found in trading.
RE-DEVELOPING THE PSYCHOLOGY OF WORK FOR SUCCESSFUL TRADING
Much of the discipline and confidence that traders bring to the management of trading is based on a history of being certain they are able to control outcome by employing the same aggressive hard work habits that created success in the past. Then they get into trading and discover they cannot control the markets by working hard. This goes against the very grain of the beliefs that created success before trading. And this is the mindset that they bring into trading.
Now in trading, the only control they have is over themselves and the mind they bring to the performance of a trade. This is a huge shock to the historical understanding of both the confidence and discipline that the trader brought to trading. And why not bring this attitude of success into trading? With it, they have been able to force their will onto the stage of the world and “make it happen” by sheer hard work.
The very notion of work ethic that the trader brings to the performance of trading has to be re-examined and reconstructed. Success before trading entailed “doing” something with a sense of urgency. Yet, in generalizing this mindset into trading, traders discover that they are sucked into over-trading and revenge trading. Then they get traumatized by giving back all they won and more, creating a hyper-vigilence leading to hesitation in even acting on good set ups or being able to stay with a trade that is becoming profitable.
The work of trading has to be transformed from the notion of “doing, doing, doing” to the work of observing. This is a shift in the belief that you need to be “doing something” to make money in trading. (After all, this belief holds that you cannot be making money if you are not trading, right?). Thinking that you have to be in the act of physically trading is at the core of much of the pain found in trading. The trader ends up in many trades that a successful professional trader would pass on.
LESS IS MORE
To the experienced professional trader “less is more.” There is not the urgency to get into trades to be trading because “that is the way to make money.” Rather, this urgency mindset is dangerous to the trading account balance. When in an urgent mindset, the observing mind is compromised and is ineffective for trading. No longer is the trader bringing the essential skill of patience to the act of trading. Rather, he or she is biased to jump into trades, and this bias compromises the clear thinking required to trade with a patient mindset.
The trader who has developed patience as a key skill in his trading does not forfeit discipline. He transforms its use. Discipline no longer serves to “chase the trade”, but serves to wait for the trade and then strike. It is this deconstruction of discipline from urgency and the grafting of discipline and patience that is at the crux of developing the mind that the trader brings to trading into the mind that can produce success in trading. What does this look like?
HUNTING STRATEGIES:THE AMERICAN PANTHER VS. THE AFRICAN LION
Let’s compare two different hunting styles found in two very successful predators – the Panther of North America and the African Lion. Both of these predators are successful hunters. Their strategies are different, although both are well developed for the environment in which they hunt. Which strategy do you bring to trading?
The lion chases prey over open plains in a coordinated attack. In trader’s lingo, they chase the trade. There is a lot of “doing” in this kind of hunting and the lion is built for this kind of hunting. This strategy works well in some human endeavors also. In business, marketing, and sales it is vital to develop a disciplined, persistent, and urgent approach to creating success. You learn how to chase success until you obtain your goal.
However, change the environment and the once successful strategy has to be re-examined for continued success.The African Lion would find it difficult to hunt successfully in the forests of North America. This is much like a trader trying to bring the skills that made him successful outside of trading into trading and expecting the same thing.
The American Panther hunts by patient stealth. By hiding and waiting to see what the forest (the market) will give her, much of the “work” of hunting is the patience to wait for the right set-up. The panther knows the patterns of the white tail deer and waits patiently for the set up. Then it strikes. Very little energy is expended and it does require much physical work. The deer rarely sees the panther before its neck is snapped.
A quiet, patient, disciplined, and highly efficient hunter simply acted when the conditions of probable success were there, just like a successful professional trader. He waits to see what the market is willing to give him. And when it sets up, he acts. Patience and discipline have been fused together to produce a formidable hunter.
The comparison of the two hunting styles is not about which is right or wrong. It is about which is effective given the conditions and environment. When trading is the environment and the management of uncertainty is the condition, a patient hunter has the winning formula. Fortunately traders can adapt their style to match the new environment of trading.
GENERALIZING SKILLS LEARNED PREVIOUSLY INTO TRADING
Many people, as they develop their successful habits for trading, discover that they have to tweak their skills that they bring to the psychological management of the trading process. Many skills are transferable with some modification. Other skills simply have to be developed.
The major skills are the development of discipline-patience and the paring down of discipline-urgency. As this is accomplished, there is less impulse to “chase the trade” and more patience to wait for the trade to come to you – and then strike. In the end most traders discover that they held an illusion of control in their life before trading.And with the advent of trading, they come to recognize that the only control they really have is over what mindset they will bring to any particular moment in trading.
It is a matter of adapting to the new and different environment of trading vs. staying stuck in the world from which you came and trying to force a fit. This is the journey of the evolving trader. And fortunately you, the trader, can learn to tweak your psychological methodology to fit the conditions of the environment (the market) where you now hunt.
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