1) The amount of time spent on their trading outside of trading hours (preparation, reading, etc.);
2) Dedicated periods to reviewing trading performance and making adjustments to shifting market conditions;
3) The ability to stop trading when not trading well to institute reviews and when conviction is lacking;
4) The ability to become more aggressive and risk taking when trading well and with conviction;
5) A keen awareness of risk management in the sizing of positions and in daily, weekly, and monthly loss limits, as well as loss limits per position;
6) Ongoing ability to learn new skills, markets, and strategies; (more…)
Archives of “motivation” tag
rssOPTIMISTIC & PESSIMISM in Trading
PESSIMISM
Pessimism is defined as a tendency to stress the negative or unfavorable or take the gloomiest possible view. Obviously, the successful trader is not pessimistic. If so, then he would never trade in the first place or if he did, he would only trade short; a “permabear” if you will. A purely pessimistic trader would also doubt his edge, doubt any market direction, only trade after the move has happened, cut his winners short while allowing his losers to run, overtrade, under invest, etc etc. In other words, a purely pessimistic trader would break all the rules.
OPTIMISM
Optimism is defined as the inclination to anticipate the best possible outcome while believing that most situations work out in the end for the best. The unsuccessful trader, especially the beginning trader, is optimistic about getting rich in the stock market. No matter what every trade will eventually make money he reasons. The optimistic trader also loads up on a “sure thing”, seeks to justify every trade via confirmation bias, adds to losers, brags about winners while hiding losers, refuses to develop as a trader, etc etc. Just as with pessimism, the optimistic trader breaks the rules.
Self awareness for Traders
1) the recognition that our thinking and our emotions are intertwined and both influence our perception and judgment that leads to our decisions and actions (this view also happens to be consistent what the leading brain scientists are now saying)
2) much of our motivation – the intertwined thinking/emotion that drives our behavior – is actually subconscious, e.g. we assume we are trading the market but on other levels we are also trading our P&L and our feelings about our P&L (and what our P&L represents to us) is just one example.
3) when we understand (self-awareness) the underlying/subconscious motivation for our behavior we are in a better position to choose an alternative.
Obviously, nothing can guarantee change or improvement (contrary to many claims made by pseudo “experts”), but at least an approach that emphasizes expansion of awareness puts the odds in your favor.
And I have to play the probabilities here. Because more people tend to respond to a change process that includes an emphasis on self-awareness, I choose to use this approach in my own trading and in my coaching….it simply has the highest probability
of actually helping.
Apply Will Power in Trading
Much of successful trading has to do with having the discipline, the willpower, to follow the trading plan. And much of a good trading plan goes counter to a human’s natural reactions to the market. Hence the greater your willpower, i.e. the better you are able to have self-control or self-regulation, the better your trading.
Below are some key points from the article and Roy Baumeister’s YouTube videos, and my thoughts on how they apply to trading.
The Nature of Willpower
- Willpower is a limited resource that gets depleted when you use it.
- I typically find that my trading at the early part of the session is good. I would follow my trading plan well and profits usually follows. However towards the later part of the morning, I start to make mistakes and go counter to my trading plan, that’s when my results suffer.
- Be aware of when you have run out of juice. I find that once I start make a few consecutive trades that violate my trading plan, I recognize that my willpower has been depleted, I am not making good decisions, so I go take a break, or stop trading for the day entirely.
- Some traders recommend not trading for more than 3 hours a day. Yes you may miss a run away market after you stop trading, but recall your experiences when the market trended very well the entire day but yet you lost money. To extract money from the marketsrequires willpower to make the right trading decisions. When you are not able to follow your trading plan, the probabilities favor you giving money to the markets instead, regardless of the market situation.
- When your willpower is depleted, you feel your emotions more intensely (more…)
Three motivations For Traders
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. (more…)
Emotional Resilience & Creativity -Qualities of Successful Traders
Emotional Resilience – The very successful traders have a great attitude about losing. They know it’s going to happen. They don’t take it personally. If anything, they try to find learning experiences from losses. Elsewhere I have written about how good traders view a losing trade as “paying for information”. A trade with an edge that doesn’t go their way either tells them something important about the market, or it tells them something about their execution. Either way, it’s a potential learning experience. Resilience means that the excellent traders trade well out of a hole. They can be down money for day, week, or quarter and continue to make the same good trades they would normally make.
Creativity – We normally think of creativity as a trait that belongs to artists, but it also is quite noticeable among traders who have been successful over many years. They find edges in the most unlikely places. They look at interesting relationships within the market they’re trading, and they find unique relationships from one market to another. One trader very recently told me of a strategy that exploited the way one market was priced related to a similar market at certain time periods. I would have never thought of that idea in a million years. He was making consistent money from the concept.
Psychology by Michael Jordan
Hi,
I like these commercials, because it very similar with trading. Commercials are not new, but i hope, that it can somebody give some more motivation.
1st one: YouTube – Michael Jordan “Simple Math” Nike Commercial
It says – stop looking for holy grail, there is no math formula, there is only training!
2nd one: YouTube – Maybe – New Michael Jordan Commercial
It says – stop looking for excuses!
3rd one: YouTube – Michael Jordan “Failure” Nike Commercial
It says – Success it not about winning, it is about loosing and deal with it!
4th one: YouTube – Look Me In The Eyes – Jordan Commercial – Become Legendary
It says – very nice courage and patience… I am scared what i wont become, you are scared what you could become..
5th one: YouTube – Michael Jordan “Become Legendary #1” Nike Commercial
It says – It is not about indicator/shoes/etc!!
Good luck, goal is closer, than you think..
Is Money The Rationale Or The Motivation For Trading?
| Here’s an interesting thought experiment: Suppose you find a trading system that made money consistently in all market conditions. It was backtested objectively during independent time periods and handily beat your own trading performance. It also took less risk to obtain these results, with minimal drawdowns. The system’s price is quite reasonable. The catch? The system trades four times a year.Would you obtain the system? Would you trade it? Would you buy it and then try to tweak it in various ways? Would you be able to follow its rules faithfully, or would you convince yourself in the middle of trades to take sure gains or limit losses?Such a system would not meet the needs of many traders: needs for action, needs to figure out the market on your own, needs to feel like *you* were beating the market. Money is the rationale for trading, but it is not the only motivation. Traders also trade to make themselves feel good, to validate themselves, to avoid a 9-5 job, and so much more. This is truly the source of most problems with “trading discipline”: what we need to do to make money conflicts with the other needs that we impose upon trading. If we bring a host of unmet emotional needs to the perfect trading method, we will inevitably sabotage that method. A rich and fulfilling life outside of trading might just be the best trading strategy of all. |
Markets Will Be Markets
The stock market is bipolar creature, driven by sentiment and irrational expectations. One day, it is an ingenious forward-looking mechanism that anticipates and discounts future events beautifully. Another day, it is a stubborn schizophrenic that can’t see further than its nose.
Markets constantly overreact to both, identified risks and opportunities. It is in the nature of financial markets to exaggerate, to magnify. This is why they are not always discounting the future. Sometimes, they are correcting previously incorrect view. Sometimes, they just go bonkers and send prices to levels that cannot possibly be justified by any future scenario. Boys will be boys. Markets will be markets. They’ll fluctuate violently, up and down and to levels that will seem incomprehensible to many. Indexing, robo-advising and social media won’t change that. The Internet might have made people smarter; but it hasn’t made financial markets more efficient. You could complain and whine about financial markets’ irrationality or you could find a way to take advantage of it. Or don’t. It’s your choice.
If you understand people’s incentives, you are very likely to predict correctly their future behavior and sometimes even influence it. Most incentives have expiration date. What is important today, might not be as important tomorrow. This applies perfectly to life, but not always in financial markets that live in their own world. Incentives require the existence of rationality. We have already made the point that more often than not, markets are not rational, but emotional, at least in a short-term perspective. As Howard Marks eloquently puts it: (more…)
Persistence -Self Discipline
Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “Press On” has solved and always will solve the problems of the human race.
– Calvin Coolidge
Persistence is the fifth and final pillar of self-discipline.
What Is Persistence?
Persistence is the ability to maintain action regardless of your feelings. You press on even when you feel like quitting.
When you work on any big goal, your motivation will wax and wane like waves hitting the shore. Sometimes you’ll feel motivated; sometimes you won’t. But it’s not your motivation that will produce results — it’s your action. Persistence allows you to keep taking action even when you don’t feel motivated to do so, and therefore you keep accumulating results.
Persistence will ultimately provide its own motivation. If you simply keep taking action, you’ll eventually get results, and results can be very motivating. (more…)