Monday, March 16, 2015

Revisioning Trading Psychology: Building on Your Best

I completed the manuscript for my new book this past weekend and sent it to the publisher.  As has been the case with all my books, the final version is different from what I planned.  Researching and writing has a way of not only expressing ideas but developing and deepening them.  Part of the joy of writing is discovering what comes out of the process.

It was my hope that the book would help move trading psychology beyond the usual themes ("You have to be disciplined to succeed"; "Successful traders control their emotions") by drawing upon new research in psychology that is relevant to elite performance.  

The main themes of the text follow an A-B-C-D mnemonic:

*  A - Adapting to changing markets;
*  B - Building on your strengths
*  C - Cultivating creativity
*  D - Developing best practices and turning them into best processes

Years of working with traders and portfolio managers have taught me that it is not enough to find an edge in markets and stick to that edge unswervingly.  Markets are ever-changing, which means that long-term success depends upon finding ever new sources of edge.  That is not so different from succeeding in fast-paced industries, such as technology.  The edge that the laptop once shared vis a vis desktop computers is no longer a distinctive edge in the world of tablets and smartphones; the advantages of big box retailing are no longer as compelling in a world of online commerce.  In a competitive world, edges never remain static; the winners are those that can adapt.

That means that successful traders not only need to handle the stresses of trading, but also build on their cognitive and personality strengths to creatively find opportunities within markets.  Traders need research and development processes every bit as much as pharmaceutical and tech firms.  But we can't look at fresh things or view old things in fresh ways if we ourselves are not fresh.  Creativity is the new discipline:  success requires that having processes to stick to our edges always must coexist with rigorous processes for discovering new sources of edge.

Reverse engineering our successes enables us to identify best practices at each phase of the trading process.  It is when we link those best practices that we develop best processes that guide decision making.  Yes, it is important to learn from and correct mistakes.  Success also requires that we identify and leverage what we do well in markets.   

How many traders truly understand their distinctive strengths and have specific methods for applying those strengths to markets?  At times it seems as though half the trading world doesn't so much as keep a journal; the other half keeps a journal and writes down all the problems they're having.  Who systematically studies their successes and develops processes for learning from them and extending them?  That's where tomorrow's edge lies.

There are many exciting frontiers in trading psychology.  Once you realize that success comes from growth and adaptation, then it's easy to see that developing yourself as a trader and developing yourself as a person are one and the same.  We need routine to stay consistent as traders; we need to cultivate new routines to stay profitable as traders. 

Further Reading:  Solution Focused Links