Peak Performance
Many traders quickly come to acknowledge that despite being familiar with winning strategies, systems, and money management techniques, trading success is dependent on one’s psychological state of mind. If you’re a trader just starting out, where do you find the initial confidence to pull the trigger? How do you deal with down times without digging yourself deeper into a hole? If you are in a hole, how do you work your way out of it? How do experienced traders push through the ceiling of profitability that caps their initial trading years and make a truly fabulous living?
Trading is a performance-oriented discipline. Stress and mental pressures can affect your ability to function and impact your bottom line. Much of what has been learned about achieving peak performance in both business and sports can be applied to trading. But before looking at some of these factors, let’s first examine the ways that trading differs from other businesses.
- Intellect has nothing to do with your ability as a trader. Success is not a function of how smart you are or of how much you applied yourself in school. This is hard to accept in a society that puts such a premium on intellect and academic achievement.
- There is no customer or client good will built up each day in your business. Customer relationships, traditionally important in American business, have little to do with a trader’s profitability. Each day is a clean slate.
- The traditional 8-to-5 work ethic doesn’t apply in this business. A trader could sit in front of a screen all day waiting for a recognizable pattern to occur and have nothing happen. There is a temptation for the trader to take marginal trades just so he can feel like he’s doing something. That sort of “make-work” can be very expensive. There’s also the dilemma of putting in constant hours of research, having nothing to show for it, and not getting paid for the work done. If a trader works too hard, he risks burn-out. And what about those months where 19 out of 20 days are profitable, but the trader gives it all back in one or two bad days? How can a trader account for his productivity in these situations?
- If you invested time, energy, and emotion into developing a business venture and then backed out at the last minute, that venture would be considered a failure. However, you should be able to invest time and energy into researching a trading idea, and yet still be able to change your mind at the last minute. Market conditions change and we cannot be expected to predict all the variables with 20-20 foresight. Getting out of a bad trade with only a small loss should be considered a big success!
Principles Of Peak Performance
What is the definition of a successful trader? He should feel good about himself and enjoy playing the game. You can make a few small trades a year as a hobby, generate some very modest profits, and be quite successful because you had fun. There are also aggressive traders who have had big years, but ultimately blow-out, ruin their health or lead miserable lives from all the stress they put themselves through. There’s a happy medium, and each trader must find it for himself.
The first principle of peak performance is to put fun and passion first. Get the performance pressure out of your head. Forget about statistics, percentage returns, win/loss ratios, etc. Successful floor traders scratch dozens of trades during the course of a day, but all that matters is whether they’re up at the end of the month.
Don’t think about trying so hard to win. Just stay involved in the process, the technique, the moment, the proverbial here and now! That goes for any sport or performance-oriented discipline. A trader must concentrate on the present price action of the market. A good analogue is the professional tennis player who focuses only on the point at hand. He doesn’t worry about whether or not he’s down a set. He must have confidence that by concentrating on the techniques he’s worked on in practice, the strength of his game will allow him to prevail.
Just as you put winning out of your mind, so should you put losing out of your mind–and quickly! A bad trade doesn’t mean you are a bad trader or that you’ve blown your day. Get rid of the problem quickly and start making the money back. A loss is like cheating on a diet. You can’t undo the damage that’s been done, but it doesn’t mean you’ve blown your whole diet. Just get back on track, and you’ll do fine.
The second principle of peak performance is confidence–in yourself, your methods and in your ultimate success. Some people are naturally confident. Others are able to translate success from another area in their life to their trading. Perhaps they were good in sports, music, or academics growing up. But there’s also the old fashioned “hard work” way of gaining confidence. Begin by developing your trading skill through research and practice. Test your methods, and find the tools you are are most comfortable using. Make the methods you have learned your own. Study the charts until you have memorized every swing high and low. Ultimately, confidence comes from mastering an approach you trust. Have a clear game plan. Don’t listen to CNBC or rely on your broker or a friend. Do your own work, and trust yourself.
The third principle of peak performance is attitude. Attitude comes down to how you deal not only with your success, but, more importantly, with the inevitable setbacks you will experience. Good trades don’t always work out. In a football game, not every play is going to gain yardage. What percentage of plays over a season must show a gain in order to make the playoffs? It’s a number much smaller than most of us are willing to accept as our win/loss ratio. Every professional has gone through long flat times. Slumps are inevitable. It’s impossible to stay on top of your game 100% of the time. But once you’ve dug yourself out of a hole, you know that you can do it again. Success is a repeatable act. Knowing that you can come back makes you a much stronger trader.
Here is a checklist for peak performance:
- Be loyal to yourself. Never get down on yourself for a bad trade.
- Keep a positive attitude, especially when you are losing.
- Believe you will accomplish your goals, no matter how long it takes.
- Don’t expect yourself to be perfect. You can’t and you won’t.
- Don’t fear mistakes.
- Always make the correct trade, even if it turns out to be a loser.
- Don’t second-guess yourself.
- Trading is not an intellectual game. Give me street smarts any day!
- Read your goals every day.
- Play against yourself and you will beat everybody.
- Channel anger. Make it work for you.
- Steady as she goes. That’s where all the money’s going.
- Every day, appreciate the successes you’ve had.
- Every day, appreciate the lessons your failures have taught you.
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