The Trader’s Mindset-ABC

ABC

In the classic play-adapted movie Glengarry Glenn Ross, the successful big shot from Mitch & Murray is called in to pep talk a group of sad-sack real estate salesmen. His immortal manta for sales success is “ABC.: Always Be Closing.”

The trader’s version of this mantra is slightly different. For us it’s not Always Be Closing, butAlways Be Climbing.

What does it mean to “ABC,” or Always Be Climbing?

It means you always want to be in shooting distance of new equity highs. Not just from a cumulative profits standpoint, but from a knowledge standpoint as well.

Half the reason risk management is so important is to keep you in the mix, with new equity highs either currently being exceeded or not a far distance away. And when market conditions are challenging or sluggish, there’s no better time to book new highs on the knowledge and research side. (Many traders say their best research — and their biggest breakthroughs — were achieved in adverse conditions.)

The Climbing Mindset

The other thing you’ll discover, if you don’t intuitively know it already, is that “ABC” is a mindset — a way of life even.

Just as great salesmen can’t help but naturally go for the close, great traders can’t help but constantly be on the lookout for ways to improve: Their edge, their methodology, psychology, information flow, everything.

It gets to be a part of you, to the point where you are constantly turning things over playfully and creatively in your mind (even in the waiting line at ski resorts). It becomes an addictive game (but a good addiction in this case).

So what are some ways to cultivate this ABC mindset, and thus accelerate your path upward as a trader? A few quick suggestions:

  • Be willing to experiment. To a significant degree, you have to “try stuff and see what works.” Take a deliberate attitude of exploration and experimentation at the margins. Set up your experiments so they are small and low cost, providing useful insight or food for thought even if they fail. In trading specifically, a special “beta” account or “R&D” account is ideal for this — a small amount of capital set aside for trying new strategies and techniques on a low risk basis.
  • Journalize your process. There is nothing in the world quite like writing things down — or talking into a digital recorder, which has much the same effect. The important thing is that journalizing your process — using words to describe what you do, why you do it, how and where you need to improve — has a powerful effect on your brain. It helps you become more objective and detached in analyzing strengths and weaknesses. It helps kick in your problem-solving circuits and gets your wheels turning, creating those “a-ha!” flashes that come at odd moments like buying milk at the grocery store. And if you really get into the puzzle solving aspect, it makes the process fun.
  • Interact with colleagues. Over the years we have become convinced of something: Traders need other traders. Not in the day to day necessarily, but at the end of the day. As a source of sharing and camaraderie and support. Traders can benefit hugely from relating their experiences and bouncing ideas off each other — even if the methodologies in question are completely different and not a single “signal” is shared. This is probably so because the human mind is not designed to operate in a vacuum. We benefit from the thoughts and observations of others. They are sparks and catalysts for our own new realizations.
  • Seek wisdom and experience. As Confucius says: “By three methods we may learn wisdom: First by reflection, which is noblest; Second by imitation, which is easiest; and third by experience, which is bitterest.” Experience doesn’t always have to be bitter — sometimes it can be fun — but the process of accumulating it can be tough! Finding yourself in the company of wise and experienced traders, who you can observe and learn from, is often a great way to imitate and reflect — all the while building your own foundation.