Psychology Isn't Just Part of Trading; It Is Trading.
"How Harnessing Psychological Insights and Awareness Supports Consistent Success in the Markets"
They told me how they had recognized that many trading-related issues were psychological and how, in their estimation, the cost to them was in the tens of millions per year.
The thought occurred to me, “they get it.”
Who was “they”? The HR team at a major global investment bank.
This could potentially be a serious piece of work I thought. The bank had around 1,000 traders worldwide.
Who was “I”?
A performance coach who specialised in enhancing trader performance to help traders achieve consistent, high-level performance.
What was I thinking? They might want to try a trial coaching programme in part of the business to see if this has a positive impact.
What did they ask for? Produce and run a half-day workshop for a group of London traders on fixing the psychological challenges of trading?
Somewhat surprised and a bit deflated by their request, I said that they may have been serious in realizing the nature of the problem, but they were far from serious about addressing it if this was their proposed solution.
I suggested exploring various options, such as a more engaging learning programme instead of a mere half-day workshop, or perhaps trialling a performance coaching programme focused on specific areas of the business with a designated group of traders.
It was a pity because soon after that, the head of HR moved on, and other projects became prioritized by the new HR head. However, this individual had been looking in the right direction; mastering the psychological and personal performance challenges of trading is indeed ‘where the game is won’.
The Psychological Challenges
Trading involves various tangible and fundamental aspects. You need a cohesive risk process that encompasses your methods, a strategic approach to executing trades, and a thorough understanding of the associated risks. Accessing and interpreting data, news, and information is essential, as is developing a well-rounded grasp of the challenges within the markets. Acquiring this knowledge takes time. Ultimately, however, success hinges on mastering the psychological battles within you.
In trading, you face psychological blows to the mind, gut, and spirit on a daily basis.
"Everyone has a plan until they get punched in the face”, Mike Tyson famously said. In trading, you face psychological blows to the mind, gut, and spirit on a daily basis. These impacts disrupt your mindset, hinder your ability to execute your risk management process, and compromise your focus on the task at hand—making it even more challenging to sift through the overwhelming amounts of information and noise that bombard you.
The ones who win continue to face the same psychological challenges as everyone else; there is no perfection, and we all remain human. However, they have learned how to navigate these challenges better—not perfectly, but significantly better than others.
When I look back on my coaching, I’ve worked with many incredible traders who’ve taken a serious approach to the psychological and performance challenges of trading. They’ve gone beyond reading about them in a book or understanding them from a website. They’ve realized that this is ‘ground zero’ for them.
The psychological challenges of trading shape your trading in many ways:
How you prepare
How you engage with the markets
How you observe and interpret data and news
How you are triggered into responding to a threat or seeking to capture a potential opportunity
How you make sense of all the information and form views and narratives
How you build your playbook
How you structure a trade
How you size and plan a trade
Then, crucially, as the pressure rises:
How you act
How you deal with the "what-ifs" that enter your mind as you get ready to pull the trigger
How risk affects your mental state once a trade is active
How you cope with the fear and anxiety induced by the act
How you stay the course and don’t panic or get overexcited
How you manage risk
How you decide to de-escalate and exit
How you deal with the aftermath, including the should-haves and could-haves, and the strange desire for revenge
How you let go and move on, accepting what happened and not turning on yourself, thus avoiding becoming the source of your own future problems
How you regain balance when the market has thrown you off so that you can proceed again
Embracing the psychological aspects of trading is crucial for achieving success.
This challenge lies at the heart of our work at AlphaMind. We run programmes both in-house and externally that focus on these aspects. One such programme is our new High Performance Trader Learning Programme, which is being offered through our educational partner, the STA, and is a departure form their usual focus on ‘Price Action Analysis’
This unique live and interactive 10-week course, starting in early March on Zoom, delves into the psychological dynamics of trading in a way that seeks to catalyse awareness of these issues and how they impact trading performance. It also helps participants begin to reshape their trading to be more robust in the face of the psychological challenges of trading performance. Go to this link and scroll down to the 'High Performance Trader' Learning Programme to know more.
Currently there is an early-bird discount on the full price, which will be available for another week after this newsletter is published.
The STA is also launching a new programme this year called ‘Technical to Trading Systems.’ Participants enrolling in both programmes can receive a discounted fee if they purchase them together. For more details about this offer, please contact Katie at the STA at info@technicalanalysts.com.
Thank you, and best wishes!
Steve and Mark - The AlphaMind Team
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