Lessons from the Pros

Specialty Skills

What’s Motivating Your Trade?

Harry heard himself say, “What the heck is happening?” He was watching the YM E-mini price action on the 5 minute chart as it surged upward, appearing about to take him out of his trade and he felt an overwhelming anxiety-driven urge to move his stop-loss. Harry had identified a significant fresh supply zone on the 60 minute chart. Additionally, he had used his odds enhancers to calculate that it was a high-probability opportunity. As the trade was being planned, he felt an excitement come over him due in part to the fact that he had experienced a three trade draw-down recently and something in him felt like this was going to be a profitable trade. A limit bracket order had been placed to enter the trade in the middle of the zone and the stop was automatically inserted two ticks above the distal line of the zone. The trade seemed to be going so well up until this point. Harry gathered that he couldn’t stomach another loss and began to have unconscious conversations about what it means to have four losses in a row. He gripped his mouse hard and found himself identifying where he would place the stop after moving it. Just then Harry remembered the face of his toe-headed toddler grandchild who meant the world to him and for whom he was trading. She was born with a health challenge that required a lot of money to address and his daughter and son-in-law didn’t have enough to cover it. Harry had promised to help them and he had also promised himself that he would trade in the best way that he could which meant that he’d trade his plans, follow all of his rules and keep all of his commitments. Of course, that meant right now. With the vision of his granddaughter seared into his eyes, he knew what he had to do. This was just the amount of motivation that he needed to remain steadfast to what mattered most in the trade. He sat back and watched the price action take him out. Afterwards he felt strangely calm and knew that he had done the right thing.

To be motivated means that you have an adequate incentive and you are moved to take action. Motivation is at the crux of becoming successful in any endeavor and trading is no different. Of course motivation must be focused on the “right” target, objective and goal. That’s because motivation works in both directions. Motivation is energy and we know that energy can both provide life-support and it can take it away. How many times have you been motivated to move a stop, chase a trade or exit a trade prematurely? In each case you were motivated; it’s just that you were motivated towards the “wrong” aims predicated upon limiting beliefs and errant emotions like fear and greed. So, when we talk about motivation or being motivated, we want to be motivated in the direction of success and getting the results that we want. You want to be motivated to do your best and be your best.

Peak performance trading means getting the trading results you want. The most powerful tool you have is right between your ears, as long as you learn the combination to unlock your inner self and unleash this strength. To unlock your inner strength you must be in the “now” of the trade. This means that you are aligned physically, mentally and emotionally; in other words your system is geared to work in the same direction and on the same goals. If your system is aligned, you are accessing and activating your internal resources to bear on the task at hand. But, how do you align your system and overcome all the noise of counterproductive thoughts stemming from limiting beliefs, and erratic unsupportive emotions that ultimately drive behaviors that lead to bone-head trades? One thing for sure is that you’ve got to engage your passion; you’ve got to identify what you are most jazzed about and connect that to your trade plans and keeping your commitments, not unlike Harry. When you are motivated by a deep seated, inner desire, for instance the desire to be a “great” trader as opposed to a “mediocre” trader; you would become driven by a fire-in-the-belly intensity to do only that which is in line with being consistent in your follow-through. When you are intensely focused on raising the bar of your game, it becomes less about whether or not you made a profit in any particular trade and more about the excellence of your execution. A magnificent obsession is developed around the details of the play and being meticulous about your strategy. Wouldn’t it be wonderful to have a magnificent obsession about doing everything that it takes to be consistently successful; where success in the trade is defined as how well you executed your strategy and followed your rules?

Neurologically, when we are totally engaged in purposeful achievement, the neurotransmitter dopamine is released, which sharpens focus and increases performance while creating a profound sense of well being. If you’ve ever learned to play a game or sport very well, then you have experienced the drive to be “better.” It really is about “how you play the game.” John Wooden, the great UCLA basketball coach with a record 88 wins in a row, which only recently was tied; seldom talked about winning but more about preparing. Roy Campanella, the great Brooklyn Dodger said about baseball, “…you’ve got to love it like a boy and play it like a man.” He spoke about that level of childlike focus that is immersed in wanting to do it well so badly you are willing to be uncomfortable in the service of getting better…and love every minute of it. You’ll practice for hours in the rain, cold and through pain because you want it that badly.

The type of motivation is also part and parcel to this conversation. We are not speaking of external motivation, the kind you get from listening to a rousing speech or a riveting trading lecture. This is an outside source. This is a good starting place, but it doesn’t last. It has artificial peaks. The day after the speech, you’re 30 minutes early to your trading desk, doing homework and vowing that you’re going to “do it right.” This may last just long enough for the trade to go against you—then, with one failure to include a stop loss, you’re back in the same boat, and the rules might as well be thrown overboard. This kind of motivation leaves you with a false sense of well-being. You get a shot in the arm, but it wears off.

Then there is the most obvious “fool’s gold” motivation—money. It too is short lived, because money is transient and of itself has no substance; it is only good as a medium of exchange. You can’t eat it, drink it, live in it, drive it or wear it – at least not for very long. Many believe that they want money, but to be specific, what they really want is what money can buy. I would contend that if you had everything that you have ever desired or needed, money would lose its appeal. The literature is replete with studies that support the notion that money is a poor motivator. One of the articles written about this subject was a Forbes.com missive by Charles S. Jacobs, March 6, 2009 entitled, Why Money Isn’t A Motivator. An out-of-proportion fixation on money in any particular trade can be a prescription for greed. Greed distorts reality into a phantom of itself, resulting in decisions based on conjured notions of what you “think” will happen, not what is taking place in the charts.

Then, there is fear: “If I don’t make a profit in this trade then I am screwed!” Fear, like greed, fragments, blurs and moves you to grasp for fading phantoms that leave you as bait in waters teeming with sharks eager to feed on your capital. I’m sure you’ve heard the adage: “Scared money does not win.” The only motivation that moves you to do what is required for consistent long-term results is that which is forged inside where those results are tied to reasons like family security, a fulfilled life, personal pride in doing a good job, and peer recognition. This is where your passion resides.

So, rev up your internal engine around something that you’re jazzed about and connect it to your trading to love it like a child and trade it like an adult; where the child is magnificently obsessed with the joy of doing it masterfully and the adult is focused on what matters most – faultless execution. We teach a number of tools with a specific emphasis on how to engage your passion in the service of power trading in the “Mastering the Mental Game” Online and On-location courses. To find out more ask your Online Trading Academy representative. Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading,

Dr. Woody Johnson


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.

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