Enhancing Trader Performance: Instant Gratification Vs Delayed Satisfaction

smbcapitalDavid Blair, Trader DevelopmentLeave a Comment

*****David Blair, The Crosshairs Trader, is a blogger/trader/educator who does a wonderful job of sharing research on elite performance and how it relates to trading. Below is his latest post for the SMB trading community.***** — Editor’s Note

Let’s face it, we feel better about ourselves when we see positive results from our actions.  We most often want to experience the pleasure associated with positive results sooner than later, oftentimes settling for less than the most favorable results.  Instant gratification is often used to label pleasures gained by impulsive behaviors: we want it now, not tomorrow.  Walter Mischel is well known for hismarshmallow experiment where he tested the gratification patterns of four year olds, finding that those children who chose to wait for two marshmallows later instead of one now were much more likely to succeed later in life.  In other words, instant gratification would prove to be much less beneficial than delayed satisfaction.

A trader can suffer from various forms of instant gratification such as taking a trade off quickly (with a small gain) before a profit target is met (for a larger gain); when attempting to make up for recent losses by searching for a new edge to trade now instead of waiting for his trading edge to develop later; or when taking on multiple trades outside her risk parameters (i.e., overtrading) in order to find something, anything, to work now while waiting on the other trades that have yet to meet positive expectations.

Self-serving “gurus” with their “instant winners strategy” headlines to sell services and software are acutely aware of the weaknesses associated with those looking for instant gratification. They have and will continue to take advantage of those who suffer from this inherent weakness to fall for anything that promises to save them from their consistent losses…NOW.

Understanding and accepting that instant gratification can and will adversely affect our trading performance can help us develop the habits to fight the urge to win small now instead of holding on to the possibility to win big later.  Ultimately, it boils down to the ego’s desire to feel good now versus the possibility to feel better later. It is about instant gratification versus delayed (and longer term) satisfaction.

The following articles can help us begin our understanding and acceptance of instant gratification:

A new book on a society managed by impulse.

There is nothing quite as empowering as the feeling that arises from within when we stand toe-to-toe with our own dragons of lethargy and slay them.

The initial goal of the experiment was to identify the mental processes that allowed some people todelay gratification while others simply surrendered.

The intensity of our self-centeredness is now being determined not by conscious decision but by the market.

Perhaps the two most common psychological concerns of traders are impulsivity–doing things without clearly thinking through the rationale–and procrastination, failing to act upon our plans and intentions.

For impulsive individuals who repeatedly make decisions that satisfy their current desires at the expense of their future needs, the negative effects on their health can be significant.

We pursue immediate gratification in a way that we ourselves do not appreciate in the long run.

When we turn to actual human beings, we find, instead of robot-like logic, all manner of irrational, self-sabotaging, and even altruistic behavior.

David Blair


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