Friday, February 17, 2017

When Trading Problems Are More Than Trading Problems

Consider the following situations that I've encountered recently:

*  A trader was concerned about his inconsistent performance.  He asked for help with sticking to a set routine.  When I gathered background information, it turned out that he had significant symptoms of depression and a family history of depression.  Because he did not have a full-blown major depressive disorder, he assumed that his inconsistencies of mood and energy level were simple lapses of discipline.

*  A trader asked for help with overtrading.  He took too many trades, especially when he became frustrated.  His impulsive decision making was costing him money.  He wanted to find a way to achieve greater discipline in his trading.  His history documented a lifelong pattern of attention-related problems and poor frustration tolerance.  He had been diagnosed with attention deficit disorder in grade school but stopped taking medication and assumed he had outgrown the problem.

*  A trader showed good trading results, with superior risk-adjusted returns.  He did not take meaningful risk, however, and as a result never made much money.  Despite encouragement from his manager, he found it difficult to increase the size of his trades.  His early adult history included episodes of social anxiety and psychosomatic problems related to anxiety.

In each of these cases, the trading problem was the result of a larger problem.  The trader approached the problem as if it was a trading issue when in fact it required professional attention.

Not every problem that impacts trading can be solved by goal setting, writing in journals, and placing motivational post-it notes on a computer monitor.  Sometimes a trading problem is a manifestation of a much broader problem.  No amount of talking with a trading coach can properly address issues of depression, ADHD, or anxiety.  If you examine your history and find problems that have occurred outside of your trading, perhaps those need to be considered as possible causes of your trading concerns.  The right diagnosis and the proper help can be the best thing you could do for your trading.

Further Reading:  Best Practices for Dealing With Drawdowns