- How To Stay Out Of Bad Trades
- 5 Trading Resolutions to Make in 2017
- How time consuming is Forex trading?
- Trade Like A Business
- Trading the Market Zones for a Profit
- Your Guide to Letting Your Profits Run
- Key Points to Accelerate Your Learning Process
- Discipline - Why You Don’t Have It. And How to Get It
- Transitioning from a Demo to a Fully-fledged Trading Account
- Why Traders Overtrade
- Learn to Trade the News Putting the Odds in Your Favour
- Setting Profit Goals: in Pips or Percentage Gain per Day?
- How to Let Profits Run?
- Get Prepared to Beat Your Previous Trading Achievements
- How to Trade the News Effectively
- Create a Trading Battle Plan
- Solution Focused Trading
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Trading Is Not A Game of Perfect
7 Steps To Overcoming Perfectionist Tendencies
Perfectionism – A Trading Vice
There is a great scene from the introduction to the BBC2 TV program ‘Million Dollar Traders’ where Chloe, one of the traders, reaches for her phone to make a trade, she hesitates, reaches again, hesitates, reaches again, hesitates, reaches again, hesitates...and does not make the trade. She fails to pull the trigger on what was a well-researched trade.
Is that something that you can relate too?
What stopped her? Chloe, is trained as a vet, a highly intelligent young lady who has excelled academically and in her career and with strong perfectionist tendencies. This tendency has undoubtedly helped her to excel in her studies but this strength had become her trading weaknesses, her Achilles heel.
There is a great book called ‘Golf is not a game of perfect’ by Dr Bob Rotella – a must read for those of you masochists who are also golfers as well as traders – from which I have taken the title for this article because trading, like golf is also not a game of perfect. It is a game of ifs, buts, nearly’s, maybes.
You can probably think for yourself about times when you have exited a trade too early only to see it rocket to and perhaps beyond your profit target; or that time you got out of the market for a loss only to see it come back and go your way; or maybe the time you didn’t take the trade because the set-up wasn’t quite right, or it wasn’t quite at your level, only to see it go on to be a winner. Likewise maybe there have been times when fortune has favoured you in similar situations. The nature of markets and the nature of humans creates an environment of imperfection. Perfectionism is at heart an admirable quality, but it can often be destructive at it’s extreme and is quite likely to hinder you as a trader.
Brett Steenbarger in ‘The Three Vices of Trading’ (www.brettsteenbarger.com) listed perfectionism as one of three qualities that have the biggest negative impact on a trader – the other two out of interest being ego and overconfidence.
Do You Have Perfectionist Tendencies?
So the big question is do you have perfectionist tendencies?
Here is how Burns in ‘The perfectionists script for self-defeat’ in Psychology Today defined it: Perfectionists are people whose standards are high beyond reach and who strain compulsively and unremittingly toward impossible goals and who measure their own worth entirely in terms of productivity and accomplishment.’
Does that sound like you?
Perfectionists suffer from setting excessively high standards, a fear of failure, procrastination, never being satisfied with their successes and can become emotionally disturbed when their standards are not met, which can be often in trading, fear of competition, not learning, all-or-nothing thinking, being overly self-critical, being intolerant of mistakes and also they can be prone to high levels of performance anxiety.
In your trading fear of loss, hesitation and not pulling the trigger, getting highly frustrated or angry when trades don’t work out or when your timing is out with the market, or being highly self-critical of your trading performance can all be evidence of perfectionist tendencies.
One way of checking on your perfectionist tendencies is to listen for ‘musts’ and ‘shoulds’ in your self-talk/thoughts.
7 Ways To Overcome Perfectionist Tendencies
So, if you do have some perfectionist tendencies what can you do?
1. One of the most useful things and an important principle to remember is that you are a fallible (imperfect) human being and therefore also a fallible (imperfect) trader. Holding this principle as one of your trading beliefs, a part of your mental map, can be very useful in keeping your reactions to events more realistic, and less emotionally intense.
2. As you are operating in an imperfect, uncertain environment learning to think probabilistically is important. Interestingly the research from Behavioural Finance consistently shows that humans are not that effective at judging or thinking in probabilities so it is a skill that many people will need to develop. Mark Douglas covers this topic well in Trading In The Zone where he talks about and defines the concept of having an edge ‘An edge is nothing more than an indication of a higher probability of one thing happening over another’ and that ‘each trade has a non-guaranteed probabilistic outcome’. A shift in thinking from perfection to probabilities will help to shape trading behaviour that allows for greater quality execution and response to events.
3. Strive to do your best, to aim for excellence, rather than obsessing with being the best; aim and focus on becoming a better trader. Focus on learning and improvement including ensuring that you embrace mistakes and learning from them.
4. Focus on your trading process and not just on the outcome. By focusing on your trading process you remove some of the anxiety and frustrations that exist when you get too tied into your results. I remember one particular trader I worked with who was able to make significant shifts in his trading performance once he started to focus on how well he was trading alongside how much money he was making or losing.
5. Learn to embrace the challenge of trading and seek enjoyment in what you do. In the ‘Inner Game’ (see the ‘Inner Game of Tennis’ by Tim Gallwey) enjoyment alongside learning is seen as a foundation to performance. Embracing the challenge also allows you to take a different perspective on the ups and downs of trading and this reframing allows for a different experience of them, creating less frustration and emotional disruption.
6. Importantly, learn to see failures and setbacks as opportunities for learning not self-condemnation. One of the downfalls of the perfectionist can be their adverse reaction to mistakes and errors and a lack of learning from them. Mistakes provide important opportunities for learning and performance improvement but only when they are seen as such.
7. And finally, but critically, learn to accept that your personal worth is not your net worth – that you are a worthy human being irrespective of your trading results at any given time. At a fundamental and deep level this is a key belief for optimal human functioning, happiness and successful trading.
If you have identified yourself as having perfectionist tendencies, then taking on board some of the insights and perspectives in this article will probably be very helpful for you – remember you are a fallible human being in an uncertain environment – perfection is out; probabilities are in.