A few weeks ago I was having trouble getting in tune with the market in early going. So I started listing all the factors which seemed to be inhibiting my optimal performance. I realize that those factors are probably highly specific to me, but I offer a discussion of them for whatever good it may do others. As with all my threads, talking to you helps me to clarify my own thoughts. First a note on perspective. There is a popular school of trading thought that likens trading to athletics, or heaven forfend, recommends that you actually engage in sport. I call this Jock Strap Psych, and it makes me itch. That impulse is best dealt with, if it arises in me at all, by drinking champagne or taking a nap. So be assured I will not recommend anything heroic or strenuous here. My plan is to address the following beneficial states to achieve before trading. If you find them foolish, fatuous or flatulent, then by all means move on. In order of priority, they are: sobriety health satisfaction alertness calm confidence patience humility open-mindedness detachment focus determinism persistence. When all are achieved, then in my opinion, you are prepared to trade. Thoughtful comments are welcome.
Sobriety. Perhaps not your issue, but surely some here resonate. My experience is that even moderate alcohol consumption the night before trading inhibits achievement of the other desired states. I have no doubt that recreational drug use is as bad, if not worse, but I fried my brain so hard in my wasted (in more ways than one) youth that I cannot even remember how bad it must have been. So booze it up only on Friday and Saturday night, if you must, as I do, and pray that you can dry out sufficiently over Sunday to trade well Monday. But don't obsess about it, I manage to be a part-time drunk and still trade OK. I think the main deficit of trading with a hangover, or worse, buzzed, is that it makes you impulsive. And just as there are mean drunks, amorous drunks, and soppy drunks, there are equivalents in trading. Vengeful traders, reckless traders, self-pitying traders.
As an aside, Warbird is not me, although Warbird in various current and previous incarnations and I often find ourselves on the same side of trading issues. So thanks, Birdie, for that one. I had briefly considered Cleanliness (but not Godliness), and discarded it because often I will not clean up for three days, and it has never adversely affected my trading. The shit, however, I do recommend, although it possibly could be subsumed under the heading of Satisfaction, as you shall see later on.
I agree sobriety is a must for me... the other night I had a few beers (watching a hockey) and the next day trading I was very undisciplined it was as if I had a trading block in my head. Made several mistakes I wouldn't normally make, like jumping the gun several times because I felt impatient, not being able to focus/concentrate on the market signals as well as I normally do, and making several keystorke errors when placing orders. I was lucky to breakeven for the day but the commissions made me a net lose.
Thank you for posting, TM. I couldn't have said it better! Let me note some key words in your post: undisciplined, mistakes, impatient. I wanted to author this thread in a positive tone, but the simple fact is that we are talking about impairments. Trading well is incredibly difficult without handicapping yourself.
Health. Remember what it was like to trade with a cold? The flu? Intestinal problems? Even a general low level malaise? Not good. Anything that slows your mental processes or reduces your concentration is bad. Sobriety (pursued in moderation, of course) is a good first step to health. My advice? Don't trade if you are sick. Watch, if you must, but otherwise sit the day out. Take a brief impairment survey each morning like I do. Decide which you want more, trading well or living a dissipated lifestyle. And remember, if you trade well now, you can still chose to be a sybarite later! Why do such a high percentage of traders lose? IMO it is to a great extent because they trade impaired. One day sick. The next hung-over. Another day taking a wee nip. Or they didn't get laid. Or the wife is off and home. Or they stayed up all night studying SCT. Or they woke up with a brain fart of a brilliant new system (yes, THAT's an impairment, too). Remember. You are trading against computers that can't GET impaired. They are automata. Your job is to prove that you are smarter than their algorithm designers and maintainers are, and take away not just their money but their self-confidence. Man against machine? Man wins! It ain't chess! It's TOUGHER!
It's a good list to be sure. At first glance some of the key words appear redundant and some seem conflicting but upon further examination they go hand-in-hand and compliment one another with a depth that is far reaching in many ways. For example detachment and focus. Detachment at first conjures up negative connotations and focus is generally equated with a discipline of mind. When used together, however, the focus of the trader and the task at hand, is critical for his or her success. Detachment is necessary to avoid the pitfalls of emotional trading. Thus in this example, detachment and focus are not opposites but mirror images and important components of one another.
Thank you, Infolode. Kindly do continue to contribute your own observations. I would not go to the trouble to create this thread if I did not feel so strongly about the issue of impairment.
Agreed. I have always thought that a great trader exhibits both supreme confidence and abject humility.
Bingo! Especially the last paragraph. When you play a video game over and over you pretty much get to know the patterns after a while. Same with the markets, the computers with deep pockets are in control. They cannot be beat. You must detect the patterns and play along with their game. When enough funds have detected the pattern, it reaches equilibrium. It's the job of the quants to develop new algos to trick the general public. Really, that last paragraph is golden.