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Self-awareness

  
  Education
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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. (more…)

Characteristics of Profitable Traders

  
  Education
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They are experienced – Probably the most horrifying and worst myth shot out to anyone considering trading for a living is that you will compound millions in an extremely short amount of time. The only true way to make every day profitable comes through experience, and countless hours learning is crucial to longevity of success.

They know the damage they are capable of – Notice I didn’t say potential or profits here. The best traders I know of understand their limits, and seem to focus more on what can go wrong than what can go right. They are not easily convinced of lucrative outcomes, and have a very high sense of self-awareness.

They trade to make money, not to be right – They understand the strengths and possible pitfalls of what it is they do for a living, and use that knowledge to curb their emotional output.

They have an edge and know how to use it – They understand that without it they wouldn’t last long

They have a gameplan, and follow it explicitly – Each trade is planned and opportunities are scouted for before any trading takes place. They steer away from the killer of all killers: overtrading.

They manage risk – Regardless of how much conviction they have on a trade, they will still do what they can to avoid the potential of any losses and understand rule #1 about trading: anything can happen.

They work obsessively – They follow each turn, each piece of info that comes out in regards to their trade, and follow any underlying information relevant to failure or success.

They only access the best information – Information rules in trading, and having some of the best translates to money. Using the wrong information leads to failure.

They think about the trade, not the money behind it – Focusing on money can destroy your means to objectively assess the trade itself.

They are constantly learning – Just when you think you know it all about trading, a new curveball gets thrown your way, not to mention there are continued means and methods to be learned about making money. Even the most highly successful trader I ever knew, a multi-billion dollar portfolio manager, has a team of fundamentalists and technicians come in to train and retrain himself and his traders.

They are active – Activity sparks creativity, a very crucial part of trading.

They have patience – They understand that the money will come, but everything needs to be in place, first.

Self awareness for Traders

  
  Education
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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.

Zero is Bottom

  
  Education
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The markets have a clearly defined Zero-value. This has several important implications. First, traders often discount the possibility of something becoming absolutely worthless (i.e. going to zero), so the more the price goes down, the greater the traders’ tendency is to believe that it has a higher probability of going up again; therefore the temptation to catch the bottom and go long becomes compelling (despite its irrationality). Traders must realize that how they are hardwired to think as people is not necessarily the way they should think as a trader. There is a reason why 90% of people who attempt to make a living as a trader end up failing and it is not because of intelligence, information, technology or effort. In a nutshell, I believe failure in trading is because of a lack of self-awareness. The solution is to compartmentalize your thinking. When you are interacting in society or at home, let yourself think like a person; but when you sit down to trade, you need to think objectively by evaluating risk/reward as a trader should.

Positive awareness trumps negative self talk

  
  Education
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The language you use as a trader can provide either positive reinforcement through honest self awareness or negative results through demeaning self talk.  In other words, when discussing your trading with others or in your journal become aware of how you view yourself.  Do you see yourself as an amateur, a whipping post, a loser?  Do you blame an indicator or the market or an advisor for your failures and lack of discipline?  When you are with others do you brag about your winners and hide your losers?  All of this talk is based on fear:  fear of being wrong, fear of what others might think of you and your decisions; fear of the market; fear of being afraid.  When you practice positive self awareness  you create a fertile learning environment that allows you to grow and progress as a BETTER trader, not focus on BECOMING a GOOD trader (implying that you are a bad one).  When I work with individuals I often hear the following:  “If I would just do this I would become a good trader” or “If I had your discipline I would be a able to make money.”  These statements are grounded in a sense of doubt and fear.  Instead, these statements should be replaced with “I am becoming a BETTER trader because I know the market cannot hurt me” AND “I am becoming a BETTER trader the more I stick with my rules.”  See the difference between the two?  One is focused on the joy of progress; the other on the fear of not being good enough.  Are you focused on progress or failure? Listen to yourself and you will quickly figure it out.  It is EASY to get down on yourself and much HARDER to remain positive in the face of adversity.

Three most important elements that all great traders share

  
  Education
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  1. Self Awareness:  They know their personality and how they are hardwired as a person. They then develop a trading style that is in-line with their personality.

  2. Know your edge:  They know what their ideal set-up looks like. They trade only when they have an edge and they vary the size of their trades based on how much edge they have: Big Edge = Big Trade; Small Edge= Small Trade; No Edge = No Trade.

  3. Accountability:  They keep a daily trading journal so they can review what they are doing well/poorly, game plans, trade sizes, etc.

 

For many traders, promising to follow rules doesn’t work for long

  
  Education
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How many times have you broken the rules?

For many traders, promising to follow rules doesn’t work for long. One reason is willpower fatigue, a well-documented phenomenon.  I regularly receive emails from traders who are very bright and hard working – often with a degree from a top school or a successful prior career– and they are so frustrated with themselves about ‘breaking rules’ in trading.

For most traders, the work required to succeed is not what was expected. Trading discipline is not about willpower to follow rules. It seems like that on the surface, and it sort of is in the beginning of one’s trading career, but there are three reasons why simple willpower is not the answer for long-term success:

First, discretionary trading means by its very definition that we must use our judgment to make a decision – not simply use willpower to follow a rule. (more…)

Positive awareness trumps negative self talk

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

The language you use as a trader can provide either positive reinforcement through honest self awareness or negative results through demeaning self talk.  In other words, when discussing your trading with others or in your journal become aware of how you view yourself.  Do you see yourself as an amateur, a whipping post, a loser?  Do you blame an indicator or the market or an advisor for your failures and lack of discipline?  When you are with others do you brag about your winners and hide your losers?  All of this talk is based on fear:  fear of being wrong, fear of what others might think of you and your decisions; fear of the market; fear of being afraid.  When you practice positive self awareness  you create a fertile learning environment that allows you to grow and progress as a BETTER trader, not focus on BECOMING a GOOD trader (implying that you are a bad one).  When I work with individuals I often hear the following:  “If I would just do this I would become a good trader” or “If I had your discipline I would be a able to make money.”  These statements are grounded in a sense of doubt and fear.  Instead, these statements should be replaced with “I am becoming a BETTER trader because I know the market cannot hurt me” AND “I am becoming a BETTER trader the more I stick with my rules.”  See the difference between the two?  One is focused on the joy of progress; the other on the fear of not being good enough.  Are you focused on progress or failure? Listen to yourself and you will quickly figure it out.  It is EASY to get down on yourself and much HARDER to remain positive in the face of adversity. 

The Probability of Self-awareness

  
  Education
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With 20 years of trying different things and hearing from others I made an important discovery that has shaped me as a trader and a coach.  What I found is that more people will improve using an approach to change that emphasizes expanding self-awareness and emotional intelligence.

(With so many different approaches advertised as a ‘change process’, I think its important to share what I’ve found to work. That’s really what we have to do, right?  Doing more of what works and less of what doesn’t.)

Very briefly, what I mean by expanded self-awareness is:

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. (more…)

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