Perfectionism: Many traders try very hard to always be right. If the market shows that they are wrong with a loss, they work very hard to turn that loss into a profit. They may average down on a losing position or just hold the stock after their stop price has been exceeded with the hope that the market will turn around and turn their loser into a winner. It is the pursuit of perfectionism that causes us to ignore that trading stocks is a matter of probability. Trying to always be right leads to failure, for eventually, one of those losers fails to turn around and gives the trader a portfolio crushing loss. |
Archives of “perfectionism” tag
rss15 Types of Traders-Challenges Specific to Each one
1)Strategic Trader :This type of trader has a great chance of success but is (a ) likely not to recognize emotional mistakes ,(b ) lean toward perfectionism ,and (c ) have a strong desire to be right
2)Planning Trader :Again ,this type of trader has an excellent chance of success.Your major challenge is the desire for excitement and the need to be right.You easily could become bored with trading and do things to lessen the boredom and thus limit your profits.
3)Detailed Trader :The detailed trader has a good chance of success,but you could be so into details of what you are doing that your miss the big profits.
4)Administrative Trader :You may be overly critical of yourself but not recognize mistakes that are right in front of your eyes.Furthermore ,under stress your may question your commitment to trading because your don’t find it satisfying.An administrative trader also has a good chance of success.
5)Facilitative Trader :This kind of trader has an above average chance of success.However ,you could have a problem with logic and ideas because you are always finding something new.Furthermore ,you may need external confirmation of your ideas ,beliefs ,and systems.
6)Innovative Trader :You have an above -average chance of success.However ,you probably want external confirmation for everything you do and have a strong need for a mentor.Furthermore ,you may tend to abandon a good system prematurely if it goes against you because of your emotional reactions.
7 )Value-driven Trader :You have an above -average chance of success in trading but find that you must do things your way.In addition ,discipline ,follow -through ,and attention to details will always be a problem for you.You also may find trading boring and do things to fulfill your need for excitement.
8)Independent Trader :You are driven by logic and could easily reject systems that work well because you don’t understand them logically.Furthermore ,your trading could dominate your time and leave you socially isolated.That said ,you have a good chance of success if you apply yourself.
The remaning 7 types have a much more difficult time becoming successful in trading arena. (more…)
Perfectionism
Trading is not about perfection. It is about probability and progress. All charts, analyses (fundamental and technical) and trading plans are built on probabilities.
Why then, do so many traders strive for perfection? Why do so many traders miss trades, waiting for exactly the right entry and then beat up on themselves when it doesn’t come and the position runs away while they sit there scratching their heads and condemning themselves?
Why are so many traders trying to turn a game of probability into one of 100% certainty?
The answer lies in one of the cardinal sins of trading which is PERFECTIONISM.
Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the Holy Grail of trading go from one service to another, from one system to another, looking for a way that they can be right all the time. YES! Now, I found it. It’s this trading room, or this service, or this indicator! Wait… something is wrong here. Not all of these trades are working and I have draw downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES. (more…)
Be Imperfect
As a trader – or an investor – you will not be right all of the time. If you can accept your imperfection, and work within it, you will be much more successful:
If you have a perfectionist mentality when trading, you are setting yourself up for failure, because it is a “given” that you will experience losses along the way. You must begin to think of trading as a game of probability. Your losses ( that you hope will return to breakeven) will kill you. If you cannot take a loss when it is small ( because of the need to be perfect), then you will watch that small loss grow into a larger loss and so on into a vicious cycle of more and more pain for the perfectionist. Trading on hope does not work. The markets can remain irrational for a lot longer than you can remain solvent.
The object should be excellence in trading, not perfection. Moreover, it is essential to strive for excellence over a sustained period, as opposed to judging that each trade must be excellent. This is a marathon…not a sprint.
The greatest traders know how to take cut losses and let winning positions run. Perfectionists often do exactly the opposite. They get in at the wrong time, stay in too long and then get out the wrong time. Perfectionists are always striving and never arriving. The market will find the flaw in a perfectionistic trader and exploit it day after day.
7 Deadly Sins of Trading
Perfectionism: There is no perfection in trading as far as making money on every trade or having a perfect system. All you can hope to be perfect at, is following your system, rules, and trading plan. A winning trade should be measured as one in which you followed all your preset guidelines. Even the best traders only average about a 50%-60% win rate at best over long periods of time. The key is having bigger winners than losers, not being perfect. Like in baseball where a .300 hitter can get into the hall of fame. A .500 trader in the market can become wealthy if his wins outpace his losses.
Fear: Faith in your system is the only way to overcome your fear of trading. You must complete enoughback testing on your system until you know that you have a valid edge over the market in the long term. You must see opportunity in trading not possible losses. You must take your systems trade signals each time and if you can’t overcome your fear of loss and failure then perhaps trading is not the best profession for you.
Pride: We are not our trading account and staring at our profit and loss too much is a major detriment in one’s trading. Traders must cut losses at their predetermined stop, not pridefully hang on trying to prove they are right. We must separate ourselves from the trading. A person’s value is not tied to a trade or performance record. If we followed our system then we can’t view that as a personal loss. Our system failed us. (more…)
Perfectionism:
There is no perfection in trading as far as making money on every trade or having a perfect system. All you can hope to be perfect at, is following your system, rules, and trading plan. A winning trade should be measured as one in which you followed all your preset guidelines. Even the best traders only average about a 50%-60% win rate at best over long periods of time. The key is having bigger winners than losers, not being perfect. Like in baseball where a .300 hitter can get into the hall of fame. A .500 trader in the market can become wealthy if his wins outpace his losses.
OVERCONFIDENCE
It is common for traders to complain of a lack of confidence in their trading, but very often it is overconfidence that does them in. Overconfidence results from a lack of appreciation of the complexity of markets and an underestimation of the challenges of trading them successfully. In a sense, overconfident traders lack respect for the markets. They think that reading about a few setups or buying the newest software will prepare them to make money. Overconfident traders don’t want to work their way up the trading ladder: they resist the idea that screen time is the best teacher. They also chafe at the idea of growing their account. Rather than start with one contract and wait until they’re profitable before trading larger size, they want big positions—and profits—right away. Because they’re so eager to make money—and so sure they can make it—overconfident traders generally trade impulsively. They won’t wait for the setup to form; they’ll jump the gun—and get whipsawed in the process. Instead of being patient and waiting for short-term patterns to align with longer-term patterns, they will take every trade, enriching their brokers in the process. (more…)
Perfectionism
Trading is not about perfection. It is about probability and progress. All charts, analyses (fundamental and technical) and trading plans are built on probabilities.
Why then, do so many traders strive for perfection? Why do so many traders miss trades, waiting for exactly the right entry and then beat up on themselves when it doesn’t come and the position runs away while they sit there scratching their heads and condemning themselves?
Why are so many traders trying to turn a game of probability into one of 100% certainty?
The answer lies in one of the cardinal sins of trading which is PERFECTIONISM.
Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the Holy Grail of trading go from one service to another, from one system to another, looking for a way that they can be right all the time. YES! Now, I found it. It’s this trading room, or this service, or this indicator! Wait… something is wrong here. Not all of these trades are working and I have draw downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES. (more…)
Dr.Elizabeth Lombardo, Better Than Perfect-Book REVIEW
Perfectionism as it is usually understood can be a terrible curse, especially for a trader. It leads a person to act out of fear rather than passion—and sometimes not to act at all (why bother? I’ll botch it anyway). The perfectionist has both an “incessant drive to control the future” and “the unsatisfying feeling that, no matter how hard [he tries, he] will always come up short.” (p. 7)
In Better Than Perfect: 7 Strategies to Crush Your Inner Critic and Create a Life You Love (Seal Press, forthcoming September 23) Elizabeth Lombardo, a clinical psychologist and author of the national bestseller A Happy You, tackles the problems perfectionists create for themselves and suggests ways to overcome them.
For the most part Lombardo’s solutions involve reframing attitudes and motivations. Take the fear/passion dichotomy. “When you are fueled by fear, you focus on what you don’t want. Your goal is to do everything in your power to reduce the possibility of an undesired outcome. … Just by switching your perspective from one of fear to one of passion—working toward a desired outcome instead of avoiding an unwanted result—you can begin to feel more motivated, engaged, positive, and hopeful.” (p. 50)
Perfectionists are inclined to compare themselves to others and to judge themselves negatively. Of course, it’s not only perfectionists who do this; they are simply more intensely competitive. As Lombardo says, “Perfectionists don’t just want to ‘keep up with the Joneses,’ they want to kick the Joneses’ butts!” (p. 185) Well, that sounds more like trader talk; maybe a dose of perfectionism is actually a good thing, at least professionally. Lombardo admits that “many champion athletes, prominent scientists, and celebrities demonstrate perfectionist traits.” (p. 6)
Trading Wisdom – Perfectionism
Trading is not about perfection. It is about probability and progress. All charts, analyses (fundamental and technical) and trading plans are built on probabilities.
Why then, do so many traders strive for perfection? Why do so many traders miss trades, waiting for exactly the right entry and then beat up on themselves when it doesn’t come and the position runs away while they sit there scratching their heads and condemning themselves?
Why are so many traders trying to turn a game of probability into one of 100% certainty?
The answer lies in one of the cardinal sins of trading which is PERFECTIONISM.
Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the Holy Grail of trading go from one service to another, from one system to another, looking for a way that they can be right all the time. YES! Now, I found it. It’s this trading room, or this service, or this indicator! Wait… something is wrong here. Not all of these trades are working and I have draw downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES.
This is perfectionism in action. Not only does this type of irrational behavior and belief undermine and demoralize a trader, but it takes away all the enjoyment and fun of being in the markets. It leads to depression with depletion of psychic and physical energy, and leaves the perfectionist to confront his basic and overriding fear— fear of failure. In the extreme, it leads to physical and mental illness, including addiction to prescription drugs, alcohol, or illegal substances as well as other addictions. The pain of failure or the haunting fear of failure is simply overwhelming, and one turns to whatever works to medicate the pain.
“Life can be lived forwards, but can only be understood backwards” ~Soren Kierkegaard (more…)