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Clear Perspective

There are times when our judgment is cloudy. Perhaps we want to win so badly that we optimistically see trading opportunities that aren't there. At other times we may be so stressed out, busy, and tired that we can't concentrate, and end up making an impulsive decision or a trading error out of a sense of frustration. As much as we search for a rational, robot-like perspective on the markets, it is hard to come by. We are human, and our natural human tendencies can get in the way of trading calmly and rationally. How can you cultivate a more objective, rational approach to the markets? Here are some useful tips.

First, remember that self-control and self-discipline work like a muscle. If you over-tax your muscles, you feel tired and worn out. Your body needs to rest and rejuvenate before trying to exert more physical energy. Physical stamina isn't built up over night. Similarly, your ability to maintain discipline for long hours, day after day, may also be limited at first. It's necessary to build up this ability over time. And after a few hours of extreme self-control, you must let lose. Take a rest, leave the trading arena for a little while, and do something exciting.

Second, don't underestimate the need for rest and relaxation. Not only does self-control take energy, but concentration takes energy as well. When you are hungry, tired, and frustrated, you'll have difficulty concentrating. You'll be easily distracted and thrown off course by even a minor setback.

Third, don't try to live up to standards you can't reach. If you try to over-leverage your knowledge, you'll feel frustrated and crack under the added pressure. Set modest goals and trade with money that you can afford to lose. Don't pressure yourself. When you put a lot of money on the line, money you can't afford to lose, you will bias your perspective. You'll hold on to losing trades too long, falsely hoping they will turn around, or you will see profitable setups that don't exist. If you trade smaller positions and manage risk, you'll feel more relaxed and you will minimize the need to perform miracles as a trader.

Fourth, don't personify the markets. Stay objective. If you take trading so personally that you act as if a trading setback is a personal affront against you, then you may become obsessed with perfection and feel down on yourself for making a mistake, or you may even become angry with the markets and seek revenge when things don't go your way. Don't think of the markets as a person. View the markets as nothing more than a nameless group of unknown market participants who don't know who you are and don't care about you. It's not personal. It is just business.

It's natural to want to seek out pleasure and avoid pain. But many times, you have to take a good hard look at the facts, no matter how much it bothers you and causes you to feel pain. Don't be afraid to try to look at the markets as objectively as possible. It isn't always easy, but if you feel stress-free, open, and creative, you'll increase your chances of maintaining a crystal-clear view of the markets. 

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Comments 1

Thomas Quest on Friday, 07 February 2020 10:49

true, well written, warm-hearted, just the way a trader needs - thank you!!

true, well written, warm-hearted, just the way a trader needs - thank you!!
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Tuesday, 23 July 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.