Three vices of a trader and how to fight against them

Perfectionism often results in a situation when pain from the loss suppresses satisfaction from the win. Desperately trying to feel ‘satisfaction’, perfectionists often aim at unrealistically high ideals. They think that they would finally reach the aimed state of satisfaction if they just reach the point X (point X could be anything, including appeal, wealth, popularity or achievements). Since point X cannot be achieved, perfectionists use their ideals for self-criticism when they cannot achieve the required level of efficiency.

The keynote of the emotional state of a perfectionist is the following phrase: ‘I am not good enough’. Perfectionists have to work more and more since they never feel that they are sufficiently competent, decent and beloved. Thus, even when a perfectionist makes profit from trading, he would always focus on that portion of the market movement, which he missed. When trading doesn’t go well, he tries to find various reasons to fault himself for his mistakes. Focusing their attention on efficiency, which doesn’t correspond with their ideas, perfectionists transform successes into losses and losses into failures in their consciousness. They try to justify their perfectionism with a wish to achieve success but everything they do in reality is undermining their confidence.

Perfectionism manifests itself as an internal dialogue of negative nature and constant self-accusation. You can identify it in the form of disillusionment and rage when trading doesn’t bring desired results. Internal talk of a perfectionist resembles self-punishment. In order to fight perfectionism in yourself, you need to apply efforts and try to establish an internal dialogue and shift it into the positive direction. Speak to yourself as to a close friend. The majority of people treat others with respect and affection but cannot treat themselves similarly. If you understand your friends better than yourself under similar circumstances, it means that you are not a friend to yourself.

If something goes wrong in trading, a positively oriented trader will ask himself a question: “What lesson can I learn in this situation?” rather than “What’s wrong with me?”. The best antidote from perfectionism is the ability to calm yourself down: “I will do better in future trades”. It is important not to miss these better trades while you criticise yourself!

Everybody likes to win in the market. It is only natural to feel satisfaction from closing the day with a profit, since you received a reward for invested efforts. However, when excessive ego is involved in trading things go too far. If trades bring profit, a trader is proud of himself, but as soon as the account goes into a drawdown, a trader experiences an emotional drawdown. It exerts a huge influence on trading in the course of time. In fact, a trader lays the psychological gun, which is ready to shoot at any moment as soon as the market analysis fails, towards himself.

The majority of traders realize the danger of using a high leverage. A trader, who is used to trade 2 lots of S&P 500 with the tick value of USD 25, will be very uncomfortable if he performs trading operations with 100 lots since the minimum price change would be USD 1,250. Psychologically, trading would be completely different at such a high rate. And such a trader would experience serious difficulties in managing positions.

You work with the maximum psychological leverage if you invest your emotions into trading. You trade 100 lots in the self-esteem currency. Thus, a big portion of your emotional account is used in each trade, which inevitably influences your decisions about reduction of losses and timely entry and exit. A successful trader focuses on the trade quality while an egotist trader focuses on their profitability.

Egotism exerts destructive influence on a trader and often makes him perform unjustified actions in order to bring back the recent losses. Constant emotional rollercoasters, caused by a series of profit/loss making trades, equally are the consequences of the ego, which is involved in trading. We already know that such emotions as rage and disillusionment unmask perfectionism of traders. Manifestation of egotism could be identified by such symptoms as euphoria and depression. That is why, if trading causes depression, you should think it over, since the equity fluctuations are not the only reason.

So, what is an efficient way of getting rid of egotism in trading? Direct your self-esteem at other spheres of life: recreation interests, some other than trading activity, personal relations and spiritual life. We often form our self-esteem exclusively on the trading results only due to the fact that other sides of our life are not developed properly. Balanced living makes balanced trading.