Sunday, May 24, 2009

Four Pillars of Psychological Well-Being

As background for this post, check out the earlier entry on subjective well-being and trading--including the self-assessment questionnaire and its interpretation.

One of the most important insights that I gained from working with traders is that lasting success in the markets is most likely to occur when one's positive emotional experiences from trading outweigh one's negative experiences.

Because all traders undergo drawdowns during their learning curve, as well as periodic slumps in performance, that means that a key skill is sustaining emotional well-being even when you are losing money.

One way to do this is to have a diversified emotional portfolio, so that all of your self-esteem eggs are not in the trading basket.

Another way to do this is to focus on making steady improvements in your trading processes, thereby focusing on what you *can* control.

There are four pillars to emotional well-being:

Joy - The happiness that results from exercising one's strengths and competencies;

Contentment - The inner peace that comes from knowing that you've done your best;

Energy - The excitement and enthusiasm that spring from focusing on opportunity;

Affection - The bond that results from sharing your life with others of like values and visions.

It's not an excess of stress that overwhelms traders; it's the lack of well-being from these four sources to balance trading's stresses.

I know of successful traders who are grossly lacking in one or more of those four sources of well-being. I've never known traders to sustain their success, however, when those are lacking. Without joy, affection, and contentment, we pursue trades for the wrong reasons. Without energy, we cannot withstand the rigors of risk and uncertainty.

The wise trader structures his or her day to maximize experiences of well-being: that is what sustains motivation, concentration, and the ongoing learning needed to adapt to ever-changing markets.