As we see markets do things they haven’t done in a while such as 2 or 3 standard deviation moves in a variety of time-frames, my work as a trading psychologist and coach has changed.
I noticed it but didn’t completely acknowledge it to myself until recently when my wife asked me how things are going in my coaching practice.
As I thought about how to answer her question I realized a new phenomenon has occurred that has never happened for me before. Currently, over two thirds of my 1:1 coaching clients are traders that I’ve worked with previously. After I told her she said I should write a blog about it because it might help others.
I always have some returning clients who want a tune up – whether its due to changes in the market, changes in them, or some combination, I have long-term relationships with many of my clients. And many of my clients are top performers, like Ed Vasta.
So, how can this information help you?
The first thing I want to convey is that whether you’re successful or not, trading ultimately leaves us feeling less than satisfied. When you’re on the downside, the lack of satisfaction is painfully obvious. But surprisingly there is a lack of satisfaction even on the upside. We leave money on the table, we could have been bigger, gotten out sooner, if we were smaller we could have held on longer, someone you know is doing better than you, etc.
I’ve previously blogged about the problem of trading being your main source of satisfaction (or hope for satisfaction) and how that leads to riding the trade tick by tick, where each tick in your direction brings a sense of hope or relief and each tick against you feels personal and brings a sense of anxiety or anger. Riding a trade tick-by-tick often leads to decisions we later regret.
When we don’t experience much satisfaction in our life outside of trading, we ride the trade tick-by-tick and also tend to place too much emphasis on our P&L, and it becomes the primary measure of our overall satisfaction in life. Most of my clients have learned ways to deal with this such as increasing the satisfaction in life outside of trading; and what I call an active gratitude practice.
But I want to highlight another related issue in this blog post. This morning I spoke with a client whom I’ve known for several years and recently returned to coaching, Ed Vasta, a successful veteran trader. Ed is a very successful trader with an annual seven figure personal P&L and in the top 10% of his highly respected prop firm.
Ed feels good about making great money, but being the competitive guy that he is, he wants to be #1 in his firm, not just in the top 10%.
In many ways, Ed is a great example of how successful traders are different from the rest of the pack. In his entire life, ever since he was a kid he’s been a very competitive person. That’s probably not much of a surprise though; trading often does attract competitive people.
It’s not just the competitive aspect per se, what’s unique about Ed and other successful traders I work with, they are engaged in continuous efforts around self-improvement. Ed is certainly not complacent.
Complacency kills traders. And the best traders, like Ed, know it. Complacency can manifest in so many different ways.
One of the things I do with my coaching clients is help them to continuously identify where they are on what I call the risk scale. One end is extreme risk aversion (getting out too early, hesitating and not entering, staying small when it’s time to move up, etc) and the other end is extreme risk seeking (being over aggressive, ignoring stops, getting too big, impulse trades, etc).
Risk seeking behavior can easily appear when we feel pressured, frustrated, or angry. Over sizing or getting involved in a sequence of revenge trades to get our money back are classic examples. And risk-seeking behavior can also appear rather innocuously where it often begins with feeling confident and that morphs into overconfidence, which left unchecked becomes reckless behavior.
The big take-away here is that one of the biggest differences between successful traders like Ed and the rest is that Ed never allows himself to be complacent.
Some of you may notice a potential conflict here: complacency kills but gratitude is an antidote to the inevitable lack of ultimate satisfaction in trading. How can that be reconciled? I’ll address that in a future blog post.
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