Does your self-esteem rise and fall with your account equity? If so, your probably in for some difficult times ahead with your trading. For some traders, a trade is more than a trade, it can represent how successful they are as a person, how much status they feel, etc.
When your self-concept is closely tied to your trading outcomes the result is a yo-yo effect in terms of your self-esteem and your internal state. And our internal state has a lot to do with how well we trade.
Trading already involves a lot of uncertainty, and tying one’s sense of self-worth to the ups and downs of trading is unnecessarily adding emotional volatility to the picture and is usually not a good idea.
Most traders need to work on being more resilient in the face of disappointment. Trading will always involve disappointments, its part of the territory. A delicate balance between being fully engaged in the trade with a ‘watchful curiosity’ and without being overly attached to the outcome, is how many successful traders describe their internal state.
[…] or good run. As the account swells, so does the ego; or the dream of easy money takes hold. And for those who are able to manage ego and keep it in check, complacency may be the […]
[…] run, but when that run is over, what they thought was confidence is no longer there. And that is a sure sign that the ‘confidence’ during the run was really not true self-confidence. It reminds me of where the saying, ‘con artist’ comes from. A con artist is someone who […]
[…] Andrew: “Although we’ve talked about not being attached to outcomes and not looking at your P&L while trading, the reality is that when you enter a trade you think you are making a statement that you hope your judgment will be correct. And if you spend most of your trading time existing in that mental space, hoping that you will be right… […]
[…] there is temporary confidence, which is conditional on recent performance. This is the person whose self-esteem is tied to their account equity or P&L. When on a good run, they feel confident and take larger risks (often the prelude to […]