Monday, 21 May 2012

You'd Better Know Yourself

May has been another good month so far, although for the first time in many weeks, I had a bit of a blip for a few days. By that, I don't mean a bad run of variance, I mean that mentally, I lost my way - a few doubts crept in briefly. To be a top trader, it's vital that you are able to know whether you hit a bad spell due to variance or because you are doing the wrong things. That's a skill which I've developed this year and has been important in keeping myself mentally stable. It's so easy to become disheartened during a bad spell and  to start messing around with your strategy, chasing or fearing the market but if you can recognise what the cause of the bad spell is, it leaves you with a much stronger chance of coming out of it relatively unscathed.

Many traders will prematurely blame the strategy for their poor run of reds and that can lead them to ditch it, in the false belief it doesn't work, when in truth, it was just variance. That also goes vice-versa, because some traders will think they are just going through variance, when in fact, they do not recognise that they have slipped into bad habits or that the system is indeed not a good one. A more experienced trader will usually know if it is variance at work because they know themselves better than a novice trader does. By that, I mean that they will understand how their mind reacts to certain situations and what triggers their behavioural patterns. When you begin to notice when and why you start to lose control of your trading, that means you are now working on another level. Once you are aware of  your own flaws, bad habits and mental weaknesses, it means that you are able to analyse yourself and that means you can start to rectify any mistakes you are making, swiftly.

I think the ability to know yourself well, is much under-rated as a trading skill. When we first delve into trading, we all probably think we know ourselves pretty well. But if anything can test that theory, putting yourself in a pressure position where you can rapidly lose money, is the acid test. I have said a few times on this blog in the past, that I didn't trust myself because I didn't know what I was going to do from one day to the next. I never knew which Sultan would turn up - the awful, self-destructive, wreck-head or the one who, when he put it all together, was a pretty decent trader. The truth is, I still don't 100% know which one will turn up! But the difference today, is that when wreck-head turns up (very rare these days), I know the first signs and have plans in place to catch it before any damage is done. Basically, I know myself.

Some days, I'll know as soon as I get out of bed, that my mindset isn't right for trading. Other days, I won't know until I actually start trading but I almost always recognise it early and never, ever let it fester - I take action immediately.  Sometimes, I can overcome it simply by doing something different; going out for a run, blogging for half an hour or having a shower. On other occasions, I might need to do something trading related, such as go through my notes, read some positive affirmations or study past results. If things are really bad, I may have to not trade at all. What I've come to realise over the past few weeks, is that rather than fighting myself constantly, I need to accept who I am. So rather than forcing myself to improve focus whilst trading and getting frustrated when my head isn't in the right place, I just accept that I'm not in the right frame of mind and go and do something else. Sounds simple but it's not so easy to do in reality.

Full-time traders often find this difficult because they feel that they can't afford to miss matches and part-time traders can also find it a challenge because they don't have as much opportunity to trade, so don't want to miss out on the games when they have time. But I believe that the most important trading tool isn't your PC, or your trading software, or your bank size or even your strategy - it's your mind. And just as if you don't look after your PC or your bank, you can end up in a lot of trouble if you don't treat it with care. If you can recognise the first signs of fatigue, boredom, tilt, chasing, fear, anger, lack of focus, over-confidence etc, then you are in a good position to rectify your issues.

Fighting these emotions is a battle most of us are not going to win in that moment. That's why I just accept I can't win and go and do whatever I need to do to sharpen up my 'tool'. Because I know that if I only ever trade at or close to my optimum mindset level (and you start to understand when that is as you get more experienced) I am always going to trade well. And if I'm still in a bad spell after that, I will know for sure that it's either just variance or my strategy is crap and needs an overhaul!

NB. After writing this post, I discovered a blog post by Ian Erskine, who I'm sure most of you will know primarily as a football trader. If you are not sure that what I've been saying is the way to go, then maybe this recent post from Ian (whose been trading a lot longer and more successfully than I have) will convince you:

Habit Forming and Self Control

He also talks about knowing yourself, as well as a lot of the psychological stuff I've been writing about for ages now.

OFF-COURT BEAUTY World number 48, Simona Halep of Romania (post and pre-op pics!):

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