I am a fan of Dr. Menaker's ideas and the clarity in which he presents them at his blog www.andrewmenaker.com. If you are like me and have a grasp of the technical/chart analysis portion of trading but just can't reach the "brass ring" of succesful trading, you will find his site a treasure chest of concepts related to the emotional and psychological aspects of working the markets.
This post really made me ponder... I read it three times and so closely identified with it that I had to repost it here. I am most certainly a perfectionist. I absolutely want to do things right the first time and strive for it. I am uncomfortable with failure, which has led me to the following behaviors through much of my life, often to my detriment: over-competitiveness, self-critical thoughts when I do not win, failure to honor effort but instead focusing on achievement/outcome, to name a few. Quite frankly, I don't like the feeling of failure and it manifests itself in negative behaviors both in my private life and in my attempts to trade. It has become clear through my study of human behavior and trading psychology that this is at the root of much of my struggle to trade. I think the fear of criticism and embarassment is likely to blame, and I have always thought that doing things right will prevent it. I see it in other parts of my life: discomfort with public speaking in front of groups of my peers is the one that comes to mind first. I have worked over the past few years to face this down. Back when I still owned my business, I took part in a marketing group of about 20 of my peers that required a brief weekly stand-up synopsis of my business and also a lengthy presentation a few times per year. I also volunteer as an instructor for firearms education and safety, in front of a class of 15-25 students. These have helped tremendously, putting me in positions where I have to confront my insecurities related to public embarasment or criticism; bringing my perfectionism into the light of day. It is important to face emotional walls by repeatedly trying to scale them. The walls become smaller and easier to hurdle by continually meeting them head-on. But how do I transition to doing the same for trading? Unlike acting as an instructor where I make a commitment that I cannot dodge, trading is just me and the computer with nothing other than personal willpower to make me face the challenge. If I run from a commitment that involves other people, the embarassment or criticism is greater than that which comes from the actual public speaking. That same sort of motivation is not present here alone in my office when facing the markets. And that is why I think learning to trade from home is so incredibly difficult.
Here is the blog post and it is followed by a link to the original at his site.
A Question You Need to Ask
May 31st, 2011 Leave a comment Go to comments
Taking a pre-defined loss is part of the business. Exiting a winning trade and watching it continue to work without you is part of the business. Missing an opportunity is part of the business. Many traders cannot accept these realities of the trading business because they have a need for perfection and a need to be right.
Consider the following: You aren’t sure if you should scale your last unit at your target because you notice that momentum has increased and it looks like it could keep going beyond your target – do you hold it? Flatten at your target?
To know what to do, you need to answer the following questions for yourself. First, which is more painful to you…..exiting at your target and watching it run further? Or not exiting at your target and watching it come back in? You also need to know what your default action is when you experience different types of discomfort. Is that typical response of yours adaptive or is it emotionally reactive? Only you know the answer to this question; and it behooves you to know.
http://www.andrewmenaker.com/a-question-you-need-to-ask/
