Featured Article

Are You Trading to Win?

woodyjohnson
Dr. Woody Johnson
Instructor

Have you ever experienced doubt…or worry, or fear, or any of the other negative emotions that can sideswipe your results?  Of course you have…you are human; and as a human you are an emotional being.  Now, as an emotional being, you cannot take emotions out of the trading equation.  Yes, it is possible to distance yourself from negative emotions that can distort your judgment and distract your thinking through training and consistent effort; but to think you will ever be “totally” in control and/or devoid of emotions is an exercise in futility.  It is far more effective to learn to “manage” emotions in order to maintain focus when you are in the trader trenches.  Managing emotions is not easy, it means that when you get to that fork in the road and you have a choice between going left (falling off the cliff and essentially giving in to ego-driven tendencies while reaching for temporary relief) or choosing right ( doing what is in the highest and best interests of your A-Game).  When you are trading from this proactive position and you are engaging in a mindset that is fiercely focused on what matters most in the trade, you are “trading to win.”  The alternative is to “trade not to lose.”  Let’s examine the differences in these two concepts a little more closely.

Larry Wilson in his book Play to Win asks whether your orientation to life is a play to win strategy or playing not to lose.  A playing not to lose strategy is based on the need to remain in your comfort zone and constantly look for temporary emotional relief by giving in to impulsive behavior and hoping you get the results you want. Things must come easily when playing not to lose. People with this strategy are constantly looking for the magic bullet or the quick fix that will create results out of thin air with no regard for their development.  The philosophy of playing to win on the other hand is about the notion that life is growth, that courage and meeting the challenge are the harbingers of success.  It is about commitment to excellence and a belief that learning (both about the market and your unconscious faulty ego driven beliefs) is critical for both professional and personal effectiveness.  The core maps (your mental models and paradigms that filter perceptions) of playing not to lose are driven by fear, greed and other negative emotions.  These emotions are attached to deep seated limiting beliefs about yourself and out of these limiting beliefs come thoughts.  Thoughts similar to the following; “…I must make this trade, I can’t possibly allow any trades to slip by, that is money lost; and losses are for losers.  Conversely, the core maps of a person playing to win which is trading to win when in the markets reflect a belief that there is an abundance of opportunities, that they don’t have to chase every trade impulsively because there will be another, and another after that – she knows that there is power in patience and stalking the high-probability trade like a hungry lion.  When you are playing not to lose you are trading not to lose and it also means that you are tentative and unwilling to “put it on the line” so-to-speak; making your effort your best effort.

Trading to win also entails the search for objective reality and, holding on as you would a life jacket in a stormy sea.  A trading not to lose strategy is closed with limited alternatives; it blames others or outside influences first and seldom looks inside to identify issues that are negatively affecting results; this strategy promotes irrational thinking.   The trade to win strategy owns all results by using techniques like journaling to find out what is and is not working.  The trade to win trader is prepared to use protocols and effective routines in order to ensure sustainable success.  This strategy is intellectually and emotionally honest along with garnering the enthusiasm and energy necessary to vigorously address trading weaknesses, but you can’t address a weakness that you either don’t know or don’t understand.  Trading not to lose encourages erratic and illogical behaviors, while looking for the easy win often leads to putting large positions at risk and reneging on commitments to established rules – if they have rules at all.  The trade to win strategy recognizes that trading necessitates losses and that effective long-term winning means managing risk, having an iron clad commitment to rules, goal-setting, planning and methodical, smart trading.  The trade to win strategy is winning the psychological war one battle at a time – “going as far as I can with all that I’ve got” in a growth oriented, fun, honest and healthy way.

Your issues, obstacles, and problems that plague your trading must be treated like an infestation in your home, you want to know that the cockroaches are there so you can weed them out and get rid of them.  That’s why documenting your trades and incorporating a feedback loop by using a “Thought Journal” and a trade log are critically important parts of your tool box.  Most of you already know that smart trading means tracking and documenting your trades in order to get data on how well your trade plan is working.  Similarly, you must also gain data on what you are thinking and feeling because this is how you uncover the unconscious issues that act as drivers to bad behaviors that bring on unwanted results.  You’ve got to be willing to dig deeply to find out; you must pull back the layers of the mental onion and face your issues so that with the right mental and emotional tools you can successfully resolve them.  A “don’t bring me no bad news” outlook is going to turn you into a Sisyphus, the Greek mythological character that was doomed to roll a boulder up a mountain only to never reach the top.  You’ll never reach the top of your trading goals but will be doomed to push that boulder (your issues) until you run out of either energy or money and it’s usually the latter first; that is if you are unwilling to look at your ego driven unconscious faulty beliefs.  The smart trader accepts the challenge and realizes that trading to win is about the long haul.

So, you must decide which life strategy you are willing to undertake in the service of your trading.  Will it be the courageous and comfort-zone expanding trading to win, where you are committed to growth and excellence?  Or, will you reach for the easy button with a strategy based on not wanting to get outside of your comfort zone; avoiding challenging yourself and living by default with blinders on.  The choice is always yours.  Remember, trading to win is where you are going as far as you can with all that you’ve got!

Happy Trading

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.