Monday, December 26, 2016

Embracing the Dark Side of Personality to Discover Our Best Trading

Each of us has a dark side to our personality that has the potential to undercut our trading.  Much of trading psychology is devoted to minimizing our vulnerabilities--steering clear of that dark side--and pushing ourselves to do the right things.

But what if our dark sides contain energy and passion?  What if our greatest vulnerabilities in trading come, not from weaknesses, but from strengths that we fail to channel properly?  The disciplined trader becomes rigid and unable to adapt to shifting markets.  The aggressive trader easily crosses the line from confidence to overconfidence.  The risk-aware trader finds it difficult to pounce on great trades with size and settles for returns that fall short of their potential.  In each case, a strength--taken to an extreme--becomes a weakness.

If that is the case, much of trading psychology is misguided.  The idea is not to push ourselves to stay in the light and steer clear of our dark sides, but to recognize that our worst trading comes from the misuse of our strengths.  When we try to steer clear of our vulnerabilities we cannot maximize the best of who we are: the vulnerabilities and strengths spring from the same source.

My current article in Forbes lays out an end-of-year exercise that can keep us strengths-focused in a constructive manner.  Our worst trading comes from our greatest talents.  Once we can identify and embrace the strengths that underlie our performance shortcomings, we place ourselves in a situation in which we can become more flexible in the expression of our greatest qualities.

There are few ideas in trading psychology that I view as potential game changers.  This is one of them.

Happy holidays!