When I talk with traders who are having problems, I often find that the root problem is that they have pursued work in the financial markets for the wrong reasons. Here are three of the most common problematic reasons that draw people to trading:
1) The Thrill of Gain - While this often masquerades as a passion for markets, a little observation reveals that these traders have little interest either in markets that they don't trade or in markets while they are not trading. The interest in market action often reveals addictive patterns, in which the roller coaster rides of gains and losses become more valued than the achievement of a smooth, upward sloping equity curve. This leads to overtrading and painful emotional ups and downs.
2) The Need for Independence - These traders are drawn to markets because they don't want to have to answer to someone else in a structured job. The problem with this pattern is that the very need for independence that leads people away from structured careers also leads them away from the kind of structured practice and preparation that are necessary for trading success. Just as these traders don't want to be tethered to a 9-to-5 career, they rebel against being tethered to markets. This shows up as poor discipline, poor preparation, and difficulty sustaining even modest efforts at performance development (such as keeping daily journals).
3) The Need to Make It Big - Many traders try to use performance in the markets, not as an expression of their competence, but as a desperate attempt to prove it. They don't feel successful in other endeavors and are using markets to try to be a success in life. As a result, most of their self-esteem eggs are in the trading basket. That becomes threatening and stressful when inevitable trading slumps occur. Worse still, such traders often feel a need to make more and more to fill the hole of lacking self worth, eventually leading them to take too much risk and blow up.
What is the common theme among the three groups of traders? They are using trading to act out (and try to resolve) personal issues that are separate from risk/reward and opportunity in markets. Their needs lead them to place trades more for psychological reasons than logical ones.
Counseling and therapy can be expensive, but they are far more affordable--and promising--than acting out personal conflicts and unmet needs in financial markets. All too often, traders are looking for magic bullets for their trading success when they really need to be examining why they're trading in the first place.