On the couch, wife out of town, a full container of perfectly ripe cantaloupe, what is a young man to do? I found a killer documentary, not via NFLX, The Back Nine that has left me with a day full of thoughts on trader performance. First should we teach traders to work through their psychological hurdles before we talk set ups?
I am not Roger Ebert so please forgive me for skipping to the parts of this documentary that are important to us and not necessarily those which best describe the movie. A 40 year old, father of a little girl, husband, 14 handicap, and small business owner attempts to become a scratch/tournament player. Can he do it?
Well he is strapped for time, isn’t really that good, not financially secure, and recognizes a great team must be put together to succeed. First comes the yoga instructor to improve his flexibility. Then comes the swing coach to develop his best swing plane. Then comes the beefy physical trainer who lays out the lifting routine. As he gets to about an 8 handicap the most interesting thought is offered. Should he have started this whole process first working on his mind?
In comes the golf shrink and down goes his handicap to a four. Apparently the guy needs to make peace with his dad and step dad before he can truly take the next big leap of progress forward. But for us as traders don’t we face this same question. Should we first start with ourselves? Should our trader development start with a psychological analysis and maintenance repair program for ourselves? More specifically are we in the proper mindset to find joy in the learning process as a trader?
Trading is not the place to come and work out your personal demons. Well it could be but there will be a sizable cash deposit Mother Market will deposit for your therapy. It would be considerably cheaper to just go to therapy. And then spend two weeks at the St. Regis in Kauai. For all of us there is something that could hold us back as traders. I lost my mother this Christmas Eve and cannot honestly tell you I have come close to getting over this trauma since. Should we make sure we get that right first, the proper mental mindset, before we work on our trading development?
Mike Bellafiore
Author, One Good Trade
10 Comments on “The Back Nine- You First”
As important as psychology in trading is, I think the issue is within each student more than the way his education is presented to him. If the developing trader doesnt truly understand how important the psychological aspects of trading are, through experiencing real time it in a small account or demo account, then the initial education on psychology may not be taken and applied as seriously as it should.
Dear Mike,
my deepest sympathy!
Your post is an eye-opener.
Cheers,
Markus
This is now in my journal. Great post on a Sunday to reflect.
Great article Bella, I think there is really one main reason why people are psychologically unprepared for trading as a profession…young traders (and even experienced traders) are too attached to the value of the dollar. As a trader, you have to realize that money is only a means of keeping score in the market. If you are solid fundamentally (i.e. the fundamentals in One Good Trade), you don’t have to worry about the results. Simply make good decisions over and over again, and the money will follow. If you get ripped up in a trade, who cares! We are playing a risk/reward game here. If you are getting your money in when the odds are in your favor, in the end you will come out on top, regardless of how bad a few trades go. I’m not saying you should feel absolutely nothing emotionally, I’m just saying that your P/L box shouldn’t piss you off when things aren’t going your way, there by affecting the way you trade. Trading is extremely exciting and adrenaline filled, but don’t let the downside get the best of you.
As a professional online poker player for many years, money desensitization is 100% necessary to be successful…and I think its true for traders as well. The formula was simple, make the right decision enough times when the odds are in your favor. I normally played 24 tables at at time at a rate of 1,400 hands per hour for 8-10 hours straight. Most people’s heads would spin when they saw me playing a 24 table session, but its all about processing information extremely fast (like reading the tape) and making the right decision every single time (like entry and exit points). I was ranked among the best cash game players in the world and still was only up in 65% of my sessions. This means about 2-3 days per week I had a losing day and statistically, I was making the right decisions virtually every single time, but it didn’t bother me in the least, because I knew it was just the nature of the profession I chose….even when your’re right, your bankroll can still suffer.
Sorry for the ramble, but I think this single hard-wired trait I learned from years of poker has contributed significantly to my success as a young trader. If you got nothing else out of the post, just don’t worry about the results….worry about the process of getting better fundamentally. Hide your daily P/L, or cover it with a post-it note if you have to. Do whatever you have to do to get over worrying about the money.
Just as an aside, away from work I’m the biggest tight wad ever and don’t like to blow money. Desensitize yourself, but also learn to manage your wealth away from work…
Amen, as a developing trader myself I can say my emotions get the best out of me when on winning/losing streak. When it happens, I try to catch myself in that state of mind. I find it easier to stabilize myself by knowing the source of my emotion.
Great points
Thats still a fresh wound that was cut to the bone. Unfortunately I don’t think theres a way to speed up the healing process. I think the real mental mindset comes back one day at a time. How many days varies from person to person. Thanks for showing us you’re not a trading robot like Steve. He’s a true freak of nature.
good stuff mike. watched the movie and a lot traders can learn for sure. its about mentoring and a team around you to spped the process. there are definitely some shortcuts with technology
Howard you golf prowess is well known. You thinking now of turning pro?