Saturday, March 19, 2016

Passion, Purpose, And Why Traders Fail

There are four overarching themes in the Trading Psychology 2.0 book that account for success in financial markets: 

*  Adapting to changing markets;
*  Building on strengths
*  Cultivating creativity
*  Developing best practices and processes

These ABCD themes are interwoven:  we adapt to changing markets by becoming more creative and generating new and better trade ideas.  We build on our strengths and channel those into best practices.  By continually learning from our trading successes and setbacks, we refine our best practices, build on our strengths, and adapt to market conditions.

Many traders fail because they are playing the wrong game.  They pursue trading by following others, not by exercising their strengths.  They insist that trading is their interest and passion, but there is little energy in their attitude and no creative spark.  We experience excitement and interest when we play to our strengths: the exercise of strengths is intrinsically rewarding.  When traders veer from their strengths and attempt to make money in ways that don't match their personality or cognitive styles, trading becomes inherently frustrating.

What is our life's purpose?  We don't always know what we're meant to be doing during our time on this earth, but our passions--the deep, intrinsic fulfillments that come from exercising strengths--point the way to our purposes.  In previous writing, I shared that I pursued full time trading a little over a decade ago.  I made progress, I made money--and I was wholly unfulfilled.  Indeed, I found myself chatting with traders more than trading, and I missed quite a few trades that way!  Why?  Because my greatest passion--and my greatest strengths--lie in working with people.  I became a psychologist for a reason.  Doing well in markets is rewarding, but--for me--couldn't replace the deep reward of becoming a valuable resource in another person's development.

I've met longer time frame traders who came to shops where risk was managed quite tightly.  The risk management constraints nudged them to shorter holding periods and turned them from investors to traders.  But their strengths were analytical and thematic, not based in rapid pattern recognition and decision-making.  Slowly, they stopped enjoying their work; they stopped working as hard; and they lost the energy and drive that had experienced in their earlier trading.  They were playing the wrong game.

If you're not finding fulfillment in your trading, consider the possibility that you are trying to fit into trading rather than make trading an exercise of your deepest interests, talents, and skills.  Consider, too, the possibility that your greatest fulfillment and exercise of strengths may lie outside financial markets.  If you are honest with yourself and follow your true passions--your deepest gratification--you're most likely to find your purpose.  You're meant to be the person you are when you're truly at your best.

Further Reading:  Our Struggles Develop Our Strengths

Note:  Throughout my writing of this post, Mia has been on my desk, at my side, nuzzling and licking my left hand.  It is difficult to type when a cat is rubbing against your hand, but the ideas flow much more quickly.  It's yet another way that our passions fuel our creativity--and our happiness.