Sunday, May 08, 2016

How To Separate Frustration From Your Trading

A successful developing trader recently wrote to me about a psychological obstacle in his trading.  I'll quote him, so that you can appreciate the problem as he is experiencing it:

"What is the biggest challenge I face after gaining a solid technical knowledge and skill base?  I think it's frustration.  Most often:  1) frustration of not being able to explain to myself what's going on with the market's price action at a given time; 2) frustration driven by understanding what's going on in the market, but not being able to make an execution because of poor risk/reward and/or absence of proper setup to enter; 3) frustration after making a dumb mistake and/or acting wrong while not in 100% mental shape.

Based on the 3 points above, it seems that part of myself is acting as a perfectionist...while another part of me does not have the confidence that will allow me to be more flawless and move to the next level...

I have developed decent self-observation and can relatively quickly determine when I am not 100%.  You know:  the tension, the accelerated breathing...that feeling in the stomach...Although I realize in real time that something is off, that same feeling makes me uncomfortable and is also harming my concentration...Let me add that I do not always feel that way when some of the triggers occur, so I would NOT describe it as a critical and uncontrolled situation.  But, yes, it is a barrier I am struggling with..."

This situation will be familiar to many active traders:  frustration intrudes during the trading process and threatens to interfere with our best decision-making.  As the perceptive reader notices, this can even occur when we are relatively self-aware and in touch with that frustration.  How can we move past frustration?

The key is recognizing that frustration occurs when we have a need and that need is thwarted.  If we eliminate or change the need, the frustration melts away.  If I'm a perfectionist, I create many artificial needs.  Perhaps I feel a need to be 10 minutes early for every appointment on my calendar.  That will create frustration when I am caught in traffic.  If I can accept that I will be just on time or even a bit late once in a while, the traffic is no fun, but it's also no threat.  Frustration is a function of expectation--and perfectionism creates excessive expectations.

So what is our trader's need?  It's the need to trade, the need to make money.  If the market isn't making sense, there's no trade to put on and no money to be made.  If the setup isn't there, the trade isn't there and neither are the profits.  If a bad trade is placed, the fruits of a good trade are erased and there go profits.  That same dynamic can also make it difficult to step away from screens, even though the trader recognizes in real time the signs of frustration.  It's not OK to miss opportunity.

Our trader recognizes that there are occasions in which he finds himself thwarted but is not dominated by frustration.  Those solution occasions are important to figure out.  The capacity to tolerate frustration as an observer and not act on the frustration is true self-control.  It is also true self-confidence to recognize that one doesn't always have to trade and make money to be a successful trader.  The need to trade and make money, ironically, *feeds* a lack of confidence because it reinforces the notion that we're never good enough, we always have to do more and better.

I suspect those exception situations where the triggers occur but the frustrated trading does not are occasions in which there is a degree of genuine contentment and peace with oneself.  That is the antidote to frustration.  If you can accept where you're at now and accept that it's OK to not be trading or to make a mistake, you eliminate the expectation that drives the frustration.  "I know my best setups, I know how to make money, I'll know what to do when the opportunities present themselves"--that is real confidence.  You no longer have to *make* things happen; you have the confidence that, if you do the right things, they will happen over time.

Imagine starting each trading day with a meditation that emphasizes imagery based on peace, contentment, and gratitude for where one is at in trading--and in life.  Imagine taking a trading break midday to clear one's head (fatigue is a great breeding ground for frustration) and come back to markets refreshed.  Imagine stepping away from the screens each time frustration appears and returning to a few deep, slow breaths and the images from the meditation.  Frustrations will always be part of our experience, but they don't have to become drivers of our actions.  The capacity to step away from self-demands gives us control and expresses genuine confidence.

Further Reading:  Overcoming Frustration in Trading