Wednesday, September 09, 2020

What Goes Into A Perfect Trading Psychology?

What ingredients go into an ideal trading psychology?  Here are a few that stand out in my experience:

1)  Planning - Think of an elite boxer going into the ring with a plan; a football or basketball team that plans for an opponent; a surgeon that plans the procedure; a military unit with a battle plan.  Wherever we see high level performance, we see evidence of extensive, detailed planning.  The ideal mindset for the trader, like for the entrepreneur, is focused on a plan and its execution.

2)  Focus - Without a plan, there is nothing to focus upon that is within our control.  It's not enough to have a plan; we also have to be laser-focused on that plan so that we can implement it automatically, as the result of considerable repetition.  The analogy I often use is that of the military sniper.  All focus is directed to the target and the execution of the plan.

3)  Calm - An excited mindset is a distracted one.  No sniper, no surgeon, no chess grandmaster emotes during a performance.  The intense focus on the plan creates a flow state, a sense of being in the zone:  total absorption in the task at hand.  It is in this flow state that we are best able to discern what markets are doing and respond.

4)  Purpose - Before the performance there is a sense of challenge, opportunity, and enthusiasm.  The focus is on doing something special, something meaningful, something important.  After the performance, there is a sense of accomplishment, appreciation, fulfillment.  The elite performer is motivated by purpose and that drives an energized mindset that motivates the calm, focused planning.

Think of the Broadway actor or actress before going on stage.  There is anticipation and enthusiasm and the desire to connect with the audience and provide an amazing experience for all.  And that drives a complete absorption in the role and on everything that has been rehearsed.  It's all about calm focus and being that person you've rehearsed so often in practice.  Preparation for trading and going live each day in markets is not so different.

Resources for Trading Psychology