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Typical Symptoms of Egotizing Trading

 . Not putting in stops. The ego doesn’t want to be proven wrong. 
· Hesitating before putting on a trade. The ego wants reassurance before it begins. 
· Overtrading. The ego wants to prove itself big time. 
· Getting stuck in a trade. The ego has intertwined itself with a trade and is holding on for dear life. It cannot cut out. The ego doesn’t want to be wrong. 
· Adding to a losing trade. The ego digs its hole deeper in a massive effort to crawl out. 
· Grabbing a profit too soon. The ego wants a pat on the back.

How do we separate our ego from our trading? How do we keep from personalizing a trade? How do we avoid personalizing all of our trading?

One way to separate your ego from your trading is to build healthy boundaries between yourself and your trading. Not only do good fences make good neighbors, good boundaries make good traders. 

A boundary sets limits, makes distinctions, informs you as to what is you and what is not you, makes clear the distinction between you and others, tells you where one thing ends and another begins. It distinguishes between past, present, and future. It lets you know that another’s ideas, values, and feelings are not necessarily yours. A boundary is flexible and permeable. It lets information flow back and forth. It allows you to listen actively without having to take on someone else’s opinions and without having to force your opinions on another person. In trading it draws a distinction between yourself and your trading, between one trade and another, between one trade and all of your trading.

One trader would see the signal to take a trade and before she could put the trade on, she’d hear a voice saying, “What if I’m wrong?” Immediately she’d feel small and diminished. The next step was simply to let the trade go by as she sat there stalled by her vulnerable ego. She needed a boundary between her self-esteem and the outcome of a trade. She needed a boundary between self worth and being wrong. With such a boundary she could give herself permission to not always have to be right. (more…)

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 (more…)

Discretionary & Systematic Traders

Discretionary Traders…

  • …trade information flow.
  • …are trying to anticipate what the market will do.
  • …are subjective; they read their own opinions and past experiences into the current market action.
  • …trade what they want and have rules to govern their trading.
  • …are usually very emotional in their trading and taking their losses personally because their opinion was wrong and their ego is hurt.
  • …use many different indicators to trade at different times. Sometimes it may be macro economic indicators, chart patterns, or even macroeconomic news. Many discretionary traders are trying to game what they believe the majority of other traders will be doing based on market psychology as if it is one big poker game.. They are trying to form an opinion on what the market will do.
  • … generally have a very small watch list of stocks and markets to trade based on their expertise of the markets they trade.

Systematic Traders…

  • …trade price flow.
  • …are participating in what the market is doing.
  • …are objective. They have no opinion about the market and are following what the market is actually doing, i.e. following that trend.
  • …have few but very strict and defined rules to govern their entries and exits, risk management, and position size.
  • …are unemotional because when they lose it is simply that the market was not conducive to their system. They know that they will win over the long term.
  • …always use the exact same technical indicators for their entries and exits. They never change them.
  • …trade many markets and are trading their technical system based on prices and trends so they do not need to be an expert on the fundamentals. (more…)