Thursday, September 17, 2009

Cross-Talk: Perfectionism and Trading

I've written on the topic of goal setting and what the research says works best when setting goals. Surprisingly, many traders go from day to day without structuring goals for their trading. They don't review what they've done, so they have no ongoing way of learning from their experience.

One powerful prod to development is turning setbacks into goals. Each time you trade poorly, you structure a learning experience that can move you forward in the future. By treating your mistakes as opportunities, you can sustain both learning and enthusiasm. "Each bad trade is here to teach me something," is a healthy attitude that accepts fallibility, while not settling for it.

Perhaps the greatest enemy of such an attitude is perfectionism. If traders hold themselves to perfectionistic standards, it is not acceptable to fall short. Shortcomings are treated as failure experiences, not learning ones. Few people appreciate that perfectionism is actually a channeling of anger: self-directed anger. Perfectionism is not directed toward constructive self-improvement. It is designed to yield self-beratement.

Traders can hardly be expected to sustain learning and enthusiasm while filling their heads and hearts with the message: "That's not good enough!"

Abnormal Returns has recently posted on the topic of perfectionism. The post makes clear that perfectionism pushes traders to be right, not necessarily to trade well. So much of traders' success comes from learning to lose money the right way. It is difficult to learn to take losses, however, if those losses are unacceptable.

In accepting that we are less than perfect, we open the door to becoming more than who we are.


ANNE-MARIE said...


The statement on perfectionism is one of the most profound things you've ever written...yielding self-beratement.


3tuckers said...

If perfectionism is a type of self directed anger, what does one "get" out this kind of behavior. I mean, why, psychologically speaking, does one engage in this behavior? Is it a failed coping mechanism? That said, what kinds of things can one do to mitigate tendencies in this direction? (in onesself and ones child). Thanks Dr. Brett, --Chris Tucker

Michelle B said...

I'm with 3tuckers on the following aspect--why do we do this to ourselves? Why is such a maladaptive approach so prevalent?

Is this perfectionist drive common in all cultures? I know I got mine from my religious upbringing, and my husband got his from his father (though his upbringing was secular). My husband's mum states that the reason why was that he wanted his son to succeed. So is this outdated approach being kept on being passed along to the next generation because we still think that it is not outdated, but relevant?

It is similar to some doctors still giving antibiotics for colds and recommending a bland diet for ulcers (instead of giving antibiotic as it is a 'bug' that causes that condition). Once a consensus is reached, even when newer evidence discredits it, it still remains because of inertia?

The way to change this ingrained attitude is slowly and surely teaching ourselves and others the habit of best practices. In this case, the best practice is focusing on the opportunity that making mistakes provides to improve the quality of our life and mental processes.

Fitz said...

Perfectionism is an outcome derived from a negativist view of life. I am by nature a negativist, sub-variety pessimist, so I speak from experience. Perfectionism is the art of finding the empty space in the glass-half-full.

Trading requires a positivist attitude,considering that the trader contemplates the essentially unknowable and takes risks with it. We used to say that takes "stones".. but in reality, you have to be a positivist to even think you can do that.

If you can screw the pooch with serene confidence (using risk management et. al.), and try again at your earliest opportunity, then your head is in the space it needs to be in to trade.