Sunday, February 26, 2023

The Most Common Weakness I Observe Among Traders

There is a myth among developing traders that all you need to do for success is find a style of trading that fits your personality and then stick to that style with discipline and consistency.

What nonsense.

Consider other performance domains, such as basketball or surgery or opera singing.  Does a basketball team stick with a single defensive style regardless of the competition?  Do surgeons follow techniques based upon their personalities or based on objective scientific data?  Do professional singers adopt the same style to every composition they perform? 

The reality is that high performance professionals learn to adapt their styles to the conditions of performance.  A tennis player adapts to clay and grass courts.  A football team adapts to changing defensive alignments.  Actors adapt to their roles.

The most common weakness I observe among traders is that they seek a style of trading and attempt to fit that style into all market conditions.  For example, a trader may seek to profit from trend or momentum, only to become frustrated when markets are "choppy"  A trader may seek to trade one time frame when market cycles operate on very different scales.

My favorite analogy for this situation is the dancer who has a single style of dancing regardless of the music playing.  While everyone else is slow-dancing to a waltz, they are thrashing about, mosh-pit style.  Then they wonder why no one will dance with them...

The first question a trader must ask is not about "setups" and what is moving.  The first question is:  How is this market behaving and does that behavior present opportunities that I can exploit?  Before you start dancing, you listen to the music.  Before you begin surgery, you study the patient's condition.

Having a single style that you impose across all markets is not discipline; it is inflexibility.  Some of the best market opportunities come from occasions when trades that had been working suddenly don't work.  That can be a wonderful heads-up that conditions have changed and that it's time to adapt.

Further Reading:

The Challenge of Adapting to Changing Markets


Sunday, February 19, 2023

Reaching Your Goals Through Gentle Power


In her remarkable book Gentle Power, Emilia Elisabet Lahti describes how true leadership requires an integration of strength and power on one hand and love and gentleness on the other.  The combination of these qualities creates a trait known in Finland as sisu.  It is through sisu that we are able to persevere under challenging conditions, transcending fatigue and frustration to find our emotional and spiritual second wind.  A while back, I wrote an article pertinent to sisu, citing the mixed martial arts accomplishments of Kyle Maynard, who was born without arms and legs.  Interestingly, Maynard practiced for his bouts by mentally rehearsing all his anxieties and fears in advance.  By training himself to face his greatest fears, he built his mental strength.

Lahti would view this as an excellent example of gentle power:  facing adversity, but in a manner that is supportive and constructive.  In the Gentle Power book, she describes her incredible 50-day running journey across New Zealand, in which she ran the equivalent of a marathon each day.  She was accompanied by a single trainer and otherwise faced each day in solitary contemplation.  On the twelfth day of the journey, she was overcome with pain and swelling.  As she ran, the insight came to her, "The pain ends when you make it end".  She realized that, all her life, it had been easier for her to be hard on herself than merciful.  That insight led her to take a break from the run, allow herself to heal, and ultimately finish the route.  She found a way to persevere:  by supporting herself.

How relevant this idea is for all of us who participate in performance activities.  Our very achievement orientation and desire to win make it easier for us to be hard on ourselves than supportive.  The idea is not to give up on our quest; nor is it to allow our quest to drive ourselves into the ground.  Only through the sisu of gentle power can we find ways to move forward that also take care of us.  As Lahti points out, this is tremendously important for leadership.  As a team, we must push ourselves, but in ways that preserve teamwork and the bonds of mutual support.

Our life is our ultramarathon quest.  Whether and how we finish will depend upon our power--and our gentleness.

Further Reading:


Sunday, February 12, 2023

Our Physical Experience Shapes Our Mindset

In a recent post, I highlighted the role of physical experience in our psychological states.  That post raised a fascinating possibility:

Could it be the case that, just as we read others through their "body language", we process our experiences of ourselves through our bodily states?  What if we are continuously reading our own body language and internalizing what we're reading as our self-image, self-concept, and self-esteem? 

Most of us are familiar with the cognitive framework in which what we think influences how we feel.  There is undeniable importance to this perspective.  If we immerse ourselves in negative self-talk, it's inevitable that we will feel anxious, depressed, frustrated, and resentful.  Equally important is the observation that we are much more likely to lapse into negative self-talk when we lack energy and vitality.  

Suppose we are trying to grow a beautiful garden.  We could select the best flowers and plants and plant the best seeds we can find.  Ultimately, however, the garden will not thrive unless we attend to the soil and water.  What is good for the roots ultimately shapes the beauty of the flowers.

Most psychology is "top-down":  change your behavior by changing your mind.

What if, however, we are more like the garden and need to grow from "bottom-up"?

The important insight in the above quote is that "we are continuously reading our own body language and internalizing" our experience.  Is there a relationship between how we move our bodies and our mood?  Our energy level?  Is there a relationship between how we breathe and how we experience the world?  Is there a relationship between the strength and flexibility of our bodies and our overall energy level and life perspective?

When we are trapped in negative habit patterns, might those be the result of our imprisonment in routine physical states?

Can we expect to have a fresh and energized trading psychology when our bodies are sitting inertly for hours at a time, staring at screens?

If we want to change our mindset, perhaps the most important question is, "What can I be doing right here, right now, to produce the mindset I want?"  We change by doing.  We become our experience:  that is our water and soil.

Further Reading:

Using Our Bodies to Program Our Minds

Body as Gateway to Mind

Renewing Mind by Renewing Body


Sunday, February 05, 2023

What is the Path to Your Greatness?


Many traders long for great profits.  How many do truly great things to achieve those profits?  If you were to do the things that would earn unusually positive returns, you would be doing unique things--you would be far from consensus.  You would have unique ways of generating ideas and managing the positions based on those ideas. You would have an ongoing pipeline of projects to get better and better and exploit new and different market conditions.  You would not be a one-trick pony making money in bull or bear markets or in conditions of volatility.  You would cultivate ways of succeeding across many market conditions.

Most importantly, great people don't magically achieve their status.  Their greatness comes from doing unique and special things each day, each week.  I invite you to read this older post:  It asks the important question, "How can people experience themselves greatly if there's no single thing during the day that they undertake in an exemplary way?"

Greatness does not come from working harder at routine activities.  It comes from expanding ourselves beyond those routines.  Creative geniuses by definition operate outside the box in much of what they do.  Because they pursue what speaks to them, they are able to achieve unusual levels of absorption and productivity, fueling the development of expertise

What speaks to you?  What are the little things you do greatly?  You will find your greatest success by building upon the exemplary things you already do with passion and uniqueness.

Further Reading:

The Role of Creative Insight in Trading