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Three Motivations for Traders

  
  Education
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There are three motivations behind taking a trade: monetary reward, educational reward, and/or psychological reward. The first pays the bills, the second will pay the bills, and the last will prevent you from paying the bills.

Whenever I feel the pull of psychological reward, I have the voice saying “do you want to be a trader?” Letting go of the psychological need to take a trade or be right, is hard. Our brain does not know what money is. It listens in terms of chemical releases. Letting go of psychological reward is not easy. It is the most instantaneous form of reward.

The best way I know to give psychological power to money is to make a habit of seeing money as opportunity. Opportunity for financial freedom and opportunity to make another trade. The brain understands opportunity. This needs to be in balance as well.

If you are feeling the psychological pull, take a few seconds and answer the following.

Do I want to be a trader?
Did my last trade affect the thought process in an irrational way for this trade? (Need to be right, need to make my money back, I am invincible, etc.)
Can I get a better price or is this my best opportunity?
Am I seeing the whole picture?
As always, am I willing to accept the consequences of my action or inaction?

Why 95% fail

  
  Education
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When setting a grand goal, (such as total financial freedom via trading world markets) we are mentally prepared at the outset to encounter some kind of difficulty. When we get to it, it can psychologically look something like this:


A large barrier blocks the way to our goal, yet we KNOW that the realization of our goal lies somewhere on the other side if we can surmount this obstacle. With great efforts then we focus our attention and do the necessary work to get over it.

Yet what we then find is another obstacle; the next block. At this, a small percentage might become discouraged and quit, but others tackle this new obstacle with the same determination that they did on the last one. The problem lies in our inability to consider the enormity of the task at hand. If we could look around the wall to see forwards in time, we may see something like this:


If we had the benefit of such insight we might be able to accurately guess at just how far we had to go and how many more difficulties we have to get over, but we don’t. At each wall, a tiny percentage fall by the wayside, exhausted by these seemingly continual fruitless efforts. The only question is at what point do we jack it in at take up some other pursuit? Interestingly no matter how far we got, once we decide to quit and join the 95% we are no different from someone who gave up at the first obstacle, even if we gave up at the very last wall.

Or do we just doggedly keep going over wall after wall? Its obvious that the only option we have is to either quit or keep going at it and never giving up. Which will you be?

Expectations vs Reality

  
  Education
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expecˈtation – noun

1. belief about (or mental picture of) the future
2. anticipating with confidence of fulfillment
3. the feeling that something is about to happen

I think all of us initially come to this subject with expectations (or as stated above, confidence in the fulfillment of our mental pictures of the future). Obviously having goals is one thing, but expectations are another – the problem is the time lines we set and the source of our expectations.

For instance, what if you expect to make money trading in two years, but in actuality (and unknown to you) it will take five? Surely after two years a thought will enter your head such as “this is not working out how I hoped…”

No wonder – your hopes had no connection to reality.

Even more bizarre, considering the above, is that I imagine almost everyone that gets involved in this subject expects to make money immediately. If you expect to make money immediately, but in reality it takes five years to learn to trade with consistency, then of course blown accounts and negative emotions are virtually guaranteed.

Non of us that wash out are smart – we are dumb. If we were smart, we would demo trade (or make use of facilities such as micro accounts) UNTIL we could actually trade profitably, no matter how many years it took.

Are you able to demo trade for five years? I can hear you now – “no freekin’ way!!!”

Why not? Of course, because you have PLANS don’t you? You have OTHER THINGS that you need to press on with that are dependent on your success in trading; in fact these plans of yours are already LATE due to the unexpected delays you hit with this little ‘ole thing called the Stock Market.

What was it? Quit your job, pay off a debt, new car, beach house by the sea, exotic holiday, help your parents in their old age, total financial freedom from the wage slave arena?

These two things combined, unrealistic expectations + unrelated desires are pure poison to any chance of success you have. I can see that now – I have actually looked within and SEEN the cobwebs of unrelated desires and unrealistic expectations that in fact have nothing to do with the reality of trading. Thats the truly amazing thing; these issues are actually NOT CONNECTED to the subject, they are things that are hanging around it in your head like moths around a flame.

So what to do? Somehow, this subject and this practice of trading needs to be mentally separated out into its own space and be unconnected to anything else, otherwise we are dragging all of this dead weight behind us. The term “mental purity” was a phrase coined by the West Coast trading desk by the Enron traders used to describe the state whereby they have nothing unconscious infecting their trading decisions (such as morals and a conscience in their case! See the book Smartest Guys in the Room – a brilliant read).

Its a good term – somehow we need to achieve mental purity (be free from murky motives and unconscious unrealistic expectations).

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