One of the most common things I hear from new coaching clients, and in emails I receive from other traders asking for advice is often some variation of:
“My need to be right is getting in the way of improving my performance”
Although this is a very tempting explanation, I’ve found something else, something deeper than the need to be right.
Once a client gets comfortable with me and feels ‘safe’ to really tell me how they feel and what’s really going on in their trading – when they drop their guard – what I usually find is that this ‘need to be right’ is often not the problem. The problem is usually a symptom of something deeper. Often something in the realm of a deep seated (usually subconscious to a degree) fear of not being good enough on some level, such as not feeling accepted enough or respected enough by others. Prince Alwaleed is a nice example…..he so desperately wants to be respected by others.
The key takeaway for you – my blog readers – is that these deeper reasons underlying the ‘need to be right’ are usually subconscious to varying degrees. When people finally understand how this dynamic operates for them – each of us is a little different due to genetics, family upbringing, cultural differences, etc – it is only then the repetition of mistakes (doubling down on losers, impulsive entries, revenge trading, etc) remits.
How do I know this is to be the case? Well, I’ve seen it in my own trading – Chapter 14 in this book is about me – Traders At Work: How the Worlds Most successful Traders Make Their Living in the Markets and in my work with other traders…including some of the top traders in the world. Yes, even those traders are human.
I just finished co-authoring a chapter with Denise Shull and Ken Celiano for an upcoming textbook, “Investor Behavior” – our chapter is basically about the surprising reality of what really happens deep inside a trader’s mind. I contributed a case study of one of my current clients who is a former Morningstar fund mgr of the year award recipient who’s new fund is not performing as well as his past performance.
I’ve always found this one rather funny. Assuming bets with fairly constant terms (say, win $X or lose $X/4) then the trader does indeed need to be right if they want to profit. In this case, at least one time in five. The righter you are, the richer you get.
In your example, yes. I can’t argue with that.
The problem with writing a blog is that it is short and often doesn’t explain the context of the idea. What I really meant is that so many traders have a hard time being wrong in terms of taking a loss, or missing out on a move and they often like to say that their problem is they have a strong need to be right, so they double down on losers, etc.
As I understand the key word in Andrew’s article is “right” it is “need.” Someone tossing a coin will be right ~50% of the time, but if they “need” to be right more than the probabilities suggest, that is a problem and will cause them to take self destructive actions in order to FEEL right more often the the circumstances allow.
As I understand the key word in Andrew’s article is “right” it is “need.” Someone tossing a coin will be right ~50% of the time, but if they “need” to be right more than the probabilities suggest, that is a problem and will cause them to take self destructive actions in order to FEEL right more often the the circumstances allow.
Jon, thanks for clarifying what I meant. Perhaps next time I write about this, I’ll put ‘need’ in italics……
Andrew
Jon, thanks for clarifying what I meant. Perhaps next time I write about this, I’ll put ‘need’ in italics……
Andrew
Jon, thanks for clarifying what I meant. Perhaps next time I write about this, I’ll put ‘need’ in italics……
Andrew