Friday, May 07, 2010

Core Ideas in Trading Psychology: Trading and Self Development

This is the final post in the series summarizing core themes running through the TraderFeed blog. The other posts in the series are:

We develop as people by recognizing and modifying patterns in thought and behavior that limit our ability to act upon our ideals and reach desired goals. We also develop by recognizing and building upon those patterns that define who we are at our best. Self-development is thus a continuous quest for self-mastery: replacing randomness with intent, so that we are living life by design, not default.

Markets, too, trace out patterns at various time frames. Our development as traders hinges upon our ability to recognize those early and act upon them decisively, thoughtfully maximizing reward relative to risk. The skills we need for self-development, at a psychological level, are very similar to those required for our development as discretionary traders. Ultimately, we are trying to replace trading patterns that are outside of our control--and ones that are more poorly informed--with ways of processing and acting upon information that consistently draw upon our strengths.

People are neither wholly determined and conditioned by their environments, nor fully free, self-determined agents. Our peculiar makeup psychologically is that we have partially free wills: at times we are masters of our fates; at times, we are reactive and robotic, lost in routine and habit. Our evolution, personally and as a species, is defined by expanding free will: over time, if we are developing as people and traders, we become more intentional, more self-determined. Our lives are based more on values than needs; our thoughts, feelings, and behaviors reflect where we are going, not trapped in where we have been.

The value of trading, properly conceived and exercised, is that it can become a vehicle for self-development. If not properly conceived and executed, trading can become an addictive and destructive activity. Good trading is trading that is self-determined, self-enhancing, and rewarding in terms of personal and financial development; bad trading reinforces and repeats the negative patterns that hold us back in life.

It is rare to find activities that reward you financially for your growth and development as a human being. That is one of the great appeals of trading.