The research done by Martin Seligman (Learned Optimism 1990) suggests that individuals with an optimistic explanatory style not only consistently outperform those with a pessimistic explanatory style but are also happier and live longer. An optimistic explanatory style, particularly about bad events, encourages perseverance: pessimistic people are more likely to lose confidence and motivation after a poor performance than optimists, and encouraging optimism in traders can therefore lead to perseverance which is of course a key part of resilience. With pessimistic traders when a negative event occurs - for example, a big loss; a sustained period of drawdown; making an error; and so on - then their explanatory style would promote less perseverance, and may be result in those traders not achieving their full potential.

How do you currently deal with setbacks?

What meaning do you give to mistakes, losses, setbacks?

How could changing your perspective of such events enhance your performance?

Two Other Dimensions To Trading Resilience

Psychological resilience is critical to long term trading success, however I feel that there are two other dimensions to a traders level of resilience that are important and impact on a traders psychological functioning.

• Trading capital

The size of your trading capital is significant because it is not only a determinant of the size that you can trade and the positions that you can take, but also more importantly contributes significantly to how you feel, your level of confidence and composure for example, and subsequently often the decisions you make and the risks you take, or don’t take, as well as your ability to cope with future losses.

• Physical energy

Your physical energy impacts on your ability to mobilise and to sustain high intensity emotional states such as motivation, confidence, enthusiasm and focus, and to maintain composure under duress. When times are tough you often employ significant amounts of mental and emotional energy to cope with the situation and so your physical energy stores are more readily depleted and your resilience lowers.

Focusing on maintaining high energy levels is useful for all traders, and is particularly important during periods of higher stress where interestingly and counter productively you are most likely to give up your good energy habits in order to spend more time focussing on the markets.

There are four key areas to address in order to build and sustain physical resilience:

• Sleep (6-8 hours per night)

• Nutrition and hydration (Avoid excessive sugar and caffeine)

• Exercise (5 x 30 minutes per week of moderate activity)

• Rest and relaxation (recovery and downtime)

(Information in brackets based on UK government health agency guidelines for general health and wellness)

Get Tough!

In trading, ups and downs are the norm not the exception. Having the resilience to deal with the downs and to be able to maintain confidence, composure, focus and discipline is essential to long term trading success.

Resilience is sometimes seen as a trait, however the work of Seligman and the US Military Comprehensive Soldier Fitness program demonstrate that it is also both teachable and learnable.

Complete the resilience assessment, build on your resilience strengths and address the areas where you have answered FALSE, perhaps utilizing the ‘Lens’ concept to change perspectives or by looking at the meaning you are giving to the events and your explanatory style about them.

Steve Ward
High Performance Global


‘Building Resilience; What business can learn from a pioneering army program for fostering post-traumatic growth’, Martin E.P. Seligman, Harvard Business Review, April 2011