Monday, December 19, 2016

How to Trade With Peace of Mind

I love the idea of success as peace of mind.  It's being able to look yourself in the mirror and know that you've done the best you can, that you're not perfect, but that you're continually learning and improving.

Some traders trade to not lose and so they never really win.  Other traders cannot accept the wins they achieve and have to keep trading and keep trading until they eventually lose.  Neither group achieves the peace of mind that comes from focusing on the process of development rather than the recent outcome of performance.

Thanks to a savvy trader for passing along this Harvard Business Review article on goal-setting.  The article makes clear that the way in which we set goals greatly impacts the probability of our success and the mindset we're likely to come away with.  For example, research suggests that 41% of items on people's to-do lists never get done.  The average professional has 150 tasks to accomplish at any one time.  It's difficult to reach a point of peace of mind when you're continually trying to keep up with expanding demands.

The article stresses the importance of keeping goal-setting flexible and doable.  Flexible means revising goals at intervals: for example, setting monthly goals rather than annual ones.  Doable means that both the number of goals and their difficulty be set in such a way as to set us up for success rather than frustration.  Many big goals can be broken down into a sequence of smaller ones that create an ongoing sense of progress and momentum.

One exercise I recently discussed with traders is to define each day one thing in two categories that will be accomplished to make the day a productive, successful one.  Those categories include your most important goal for your trading and your most important goal for your personal life.  The trading goal is taken from your most recent performance and involves either building on a recent strength/success or correcting a recent mistake or shortcoming.  The personal goal involves building into your day some activity that generates happiness, fulfillment, energy, and/or closeness to others.  

So each day, you're exercising some function to become better in your work and to become better as a person.  Over time, the accumulation of small goals creates large changes.  The idea is to make each day a win, regardless of the P/L of the moment.  That creates peace of mind, and peace of mind frees us up to trade with open minds.

Further Reading:  What I See Among the Best Traders