Thursday, July 24, 2014

Abraham Maslow and the Ultimate Trading Edge

The recent post describing the single best predictor of sustained trading success emphasized the difference between being drawn to markets because of personal strengths vs. pursuing markets to mask personal deficiencies.  The psychologist Abraham Maslow distinguished between basic--or deficit--needs and being--or growth--needs.  Among the deficit needs are physiological needs, needs for safety, social needs, and esteem needs.  A cardinal principle of Maslow's thinking was that deficit needs grow stronger when they are unfulfilled.  They need to be fulfilled, he observed, in order for people to focus on being, or self-actualization, needs.  

In other words, gifted people fail to open their packages when more basic (unmet) needs trump the pursuit of their (self-actualization) gifts.  Can we really build and sustain career success if our more basic physical, social, and self-esteem needs are not being met?  Can we truly expect to succeed if we burden our work with the demand that it compensate for all our unmet basic needs?

If our self-worth and social status hinge upon our trading success, how can we remain objective and dispassionate during times of drawdown?

When we overtrade or bail out of positions at the worst possible times, violating our planned exits, is it really that we lack discipline, or could it be that our trading is carrying too great an emotional burden?

When basic needs are met, you can feel good about yourself, good about your connections to others, and secure in your finances even during periods of market loss.  Drawdowns in our trading accounts don't have to become emotional drawdowns.  

To pursue markets in the drive to actualize skills and interests and not to fill deficit needs:  that is the ultimate market edge.

Further Reading:  Greatness in Life and Trading