Sunday, March 16, 2014

Optimism and Trading Performance

Harry Truman defined pessimists as those who make difficulties of their opportunities, whereas optimists make opportunities of their difficulties.

It turns out that optimism is an important variable in the response to stress.

This post points to research suggesting that people who are optimistic have more stable levels of cortisol (stress hormone) than pessimists.  Interestingly, optimists with high pressure jobs start their morning with higher cortisol levels.  This suggests that stress hormones can produce distress--and they can get us going.  High pressure might not imply high stress if we feel optimistic about what we're doing.

Here's an excellent article summarizing evidence that optimism is the most important predictor of emotional resilience:  the ability to weather adversity.  Summarizing the research of Barbara Fredrickson, the author makes the point that, in a positive mind state, you're more primed to notice positive things and act on them.  In a negative state, you're more likely to be defensive and narrow your field of vision.

Seeing the whole market field is not just a matter of looking at more charts and indicators; it's also a function of the cognitive set with which we process the information. 

The answer to successful performance is not to simply don rose-colored lenses.  Optimism does not mean ignoring challenges--that is denial.  Rather, an optimist finds opportunity in challenge.  We can't always feel good about outcomes, but we can find meaning and value in the process of learning and developing from those outcomes. 

Further Reading:  Optimism and Motivation