Trading Without Ego

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Books that will also give you a good understanding on the subject are

Trading in the zone

Trader Vic - Psychology section

 

Article: Trading Without Ego
by Ruth Barrons Roosevelt

http://www.ruthroosevelt.com/withoutego.htm

Make no mistake about it. A trader's self concept has to be separate from the trading. Who you are as a person began before you ever thought of trading and who you will be as a person will extend beyond your trading. When personal self-worth entwines with trading, it not only damages self esteem, it sabotages the trading.

You hear about it. You read about it. Don't be misled. Traders tell stories. They write stories. They tell how great they are. Big trades. Big numbers. Big egos. Hubris. And sooner or later, big downfalls. It goes with the territory.

Consider the outsized egos of certain traders who brought themselves and those associated with them to ruin. Nicholas Leeson brought down the Barings Bank. Victor Niederhoffer ran his fund into deficit. John Merriweather threatened the health of our banking system by betting more than fifty times his capital that his strategies were certain to work, that he could forecast with impunity the direction of various bond markets. There's a pattern here of seeming or real success for a while and then collapse for themselves and for those caught up in blindly following them.

As Wayne Dyer said, Authentic freedom cannot be experienced until one learns to tame the ego and move out of self-absorption.

In his wonderful book, Pit Bull , Marty Schwartz tells several stories of the times he lost money because his ego got in the way. In the end he has this to say about ego:

I've said it before, and I'm going to say it again, because it cannot be overemphasized: the most important change in my trading career occurred when I learned to DIVORCE MY EGO FROM THE TRADE. Trading is a psychological game. Most people think that they're playing against the market, but the market doesn't care. You're really playing against yourself. You have to stop trying to will things to happen in order to prove that you're right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago. The sole objective of trading is not to prove you're right, but to hear the cash register ring.

Because trading is an uncertain game of probabilities filled with uncertain vagaries, an overly inflated ego or a fragile ego can easily get smashed. Defending the ego uses up unnecessary energy, distorts perception, and sooner or later, will destroy the trading. If your self esteem rises and falls with your trading results, you and your trading are in trouble. Self concept has to be strong and durable and not at the mercy of the current, last, or next trade.

We need to check our egos at the door when we start to trade. Uncertainty is central to trading. If we add the uncertainty of our own self image into the mix of the unknowable endemic to trading, we're in for certain trouble sooner or later.

Some typical symptoms of egotizing trading would be the following:


· Not putting in stops. The ego doesn't want to be proven wrong.
· Hesitating before putting on a trade. The ego wants reassurance before it begins.
· Overtrading. The ego wants to prove itself big time.
· Getting stuck in a trade. The ego has intertwined itself with a trade and is holding on for dear life. It cannot cut out. The ego doesn't want to be wrong.
· Adding to a losing trade. The ego digs its hole deeper in a massive effort to crawl out.
· Grabbing a profit too soon. The ego wants a pat on the back.

How do we separate our ego from our trading? How do we keep from personalizing a trade? How do we avoid personalizing all of our trading?

One way to separate your ego from your trading is to build healthy boundaries between yourself and your trading. Not only do good fences make good neighbors, good boundaries make good traders.

A boundary sets limits, makes distinctions, informs you as to what is you and what is not you, makes clear the distinction between you and others, tells you where one thing ends and another begins. It distinguishes between past, present, and future. It lets you know that another's ideas, values, and feelings are not necessarily yours. A boundary is flexible and permeable. It lets information flow back and forth. It allows you to listen actively without having to take on someone else's opinions and without having to force your opinions on another person. In trading it draws a distinction between yourself and your trading, between one trade and another, between one trade and all of your trading.

One trader would see the signal to take a trade and before she could put the trade on, she'd hear a voice saying, "What if I'm wrong?" Immediately she'd feel small and diminished. The next step was simply to let the trade go by as she sat there stalled by her vulnerable ego. She needed a boundary between her self-esteem and the outcome of a trade. She needed a boundary between self worth and being wrong. With such a boundary she could give herself permission to not always have to be right.

Another trader had had nineteen winning trades in a row. The tension was building and he was strung tighter than a drum when he came to see me. I congratulated him on his recent success and asked him what would be so awful if the next trade was a loser. He said, "I'd lose my self-esteem, and without self-esteem you're nothing. What an untenable state of affairs! His self concept was riding on the results of the next trade. John needed a boundary between himself and his trading. He needed to know that his ego would be intact regardless of what happened to his trading.

A healthy boundary lets you know the difference between your business and yourself, between your trading and yourself. You are more than your business. You are more than your trading. A boundary also informs you that the results of one trade are not to be confused with the results of all of your trading. Boundaries guide you as to the difference between the past, the present, and the future.

Another way to get some distance between yourself and your trading is to look at it from different perspectives. This is also true in your relationships with other people. In most interactions with another person there are three different and separate perceptual positions.

The self position is looking through your own eyes, hearing what you hear, feeling your own feelings, holding your own beliefs, and making your own interpretations. Most of us live our lives in this position. This is the position that gives you passion. It's where the juice is. From this position we have access to some information, but not all of it.

The observer position is that of a neutral observer, a fair witness. This is a dissociated position. Here you watch yourself and the other person. Here you are in the role of a spectator as you listen to yourself and the other person. As an observer you'll have a third party's commentary. This gives you an impartial view, but if you stay here too long, you could end up playing the role of the cold fish.

The other position gives you the other person's point of view. Here you look at things through the eyes of the other, hold the other's feelings, walk and stand in the other's shoes. This position gives you the ability to identify with and through another person. Here you see the world through another person's eyes and get a sense of what they're feeling. If you live too much in this position, you could be in danger of living in the doormat position.

By going to the observer position, you can gain perspective and neutrality. Some successful traders move to the observer position when they put on a trade. If you're getting too involved in a trade, move to the observer position and look at it from that perspective. At the end of a given trade or at the end of a trading day, take a look at your trading from the fair witness position.

You can also look at your trading through the eyes of another person, for example, a trading buddy, a trading coach, or a trader you admire. What would this person say? What would they think? What, if any, advice would they give you?

Ego involves a separateness from all else. Let me recommend an exercise that will help you experience your oneness with the universe and release egocentricity. Go for a walk, or you can even do it inside. I prefer to do it walking down by the New York harbor. Look carefully at a tree, a plant, a cloud, a wave, or a flower or any other object such as a rock, a sidewalk, or a bench. Notice it's shape and the space it occupies. Become the object and experience yourself as filling that space. Keep doing this with different forms. After a while you'll experience wonderful freedom and energy.

 

Spoiler alert: This is footage from the movie Revolver



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Trading is a magnet for ego. It is full of promise and challenge and all egos relish a good scrap, especially when the odds are stacked against them and they have a sniff of heroism in the sweetened air. Statistics that regularly confirm that only 10-20% of traders are consistent net winners are music to the ego's ears. No self respecting ego could countenance the prospect of being in the realm of those poor, impoverished, less able 80-90%.
link

 

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Excellent article. Thanks!

 

Excellent EON, thank you.

 

very very detail post. Thanks for interesting post, keep on doing that

 

Thanks guys

Here is some quotes from the movie Revolver, I recommend you watch it.

1. The only way to get smarter, is to play a smarter opponent.

2. The more sophisticated the game, the more sophisticated the opponent.

In every game and con there's always an opponent, and there's always a victim. The trick is to know when you're the latter, so you can become the former.

“The greatest enemy will hide in the last place you would ever look.”

—Julius Caesar 75 BC

“The only way to get smarter is by playing a smarter opponent.”

—Fundamentals of Chess 1883

“First rule of business, protect your investment.”

—Etiquette of the Banker 1775

“There is no avoiding war, it can only be postponed to the advantage of your enemy.”

—Niccolo Machiavelli 1502


“The only real enemy to have ever existed, is an eternal one.”

—The Road to Suicide, pg 1, line 1

“Your friends are close, but your enemy is closer.”

—The Road to Suicide, pg 1, line 2


Avi: The greatest con, that he ever pulled... was making you believe... that he is you.


Avi tells him one of the rules again, the art is for the opponent to feed pieces to the victim to make them believe they took those pieces because they are smarter and you are dumber.


In the end its a story about realizing that the prison is the mind and the ego is the master of that environment. The only real enemy to have ever existed is within; it is fear. The external world is determined, to great degree, by ones fear. Fear is the opponent in life, and as you get smarter so does he. Once it's recognized for what it is, it can be mastered, but without recognition of this situation, you are simply an unconscious slave and the game hasn't gone full circle.



Taken from revolver

Beauty is a destructive angel,
how could anything that looks so good be so bad?
But there is no angel as destructive as their greed,
in the end she gets them all
They think they can handle her,
but greed is the only snake that can not be charmed,

 

Finally got around to seeing Revolver recently. Good movie and Thanks for the recommendation. It is refreshing when an action movie has deeper meaning and this is one of the better movies about recognizing and taming your ego I have ever seen. Very powerful scene at the end and a lot of applications to trading.