THE CDE OF TRADING
THE CDE OF TRADING
After a 25 year trading career and having retrained as a therapist and executive coach I am now much more aware of the psychological factors that underpin all good traders — how important the inner game is to trading success..
I am sure you all recognise the picture above — Novak Djokavic — arguably the greatest tennis player of all time. But to what do we attribute his remarkable success? Certainly natural talent, discipline and a phenomenal work ethic, but there is something else — his mental edge. Statistically he has won more ‘clutch points’ than any other player — the points that really matter — break points, tie breaks etc. So how does he do it and why is this relevant to traders?
You have probably also have also heard of Sir David Brailsford, performance coach for British cycling who popularised the concept of the ‘aggregation of marginal gains.’ That if you improved everything by just 1%, then these small gains would combine to produce exceptional performance. This concept transformed British cycling to winning 178 world championships and 66 Olympic or Paralympic gold medals over 10 years.
So again, how does this relate to trading? Well firstly, traders, like top athletes, are also working in an elite field. As well as the markets, they are up against some of the smartest people around. Of course they need a technical edge — how they trade, but it’s the internal edge which will take their ‘game’ to the next level.
There are many great books on this topic — Steven Goldstein’s recent book — Mastering The Mental Game of Trading and Brett Steenbarger’s The Daily Trading Coach are both excellent.
So what is the connection between the two stories above? I believe that by applying Brailsford’s principles to his own ‘inner game’, Djokavic was able to build the mental strength which enables him to play his natural game on even the most important points. To ensure that emotions don’t impact his performance by learning to quieten the mind and be able to focus on his process.
In the same way the most successful traders are able to reduce the emotional noise and inevitably outperform.
C D E of Trading.
So what are the steps to achieving the inner game which will allow you to perform at your best, no matter what is happening in the market?
Like all improvements it starts with a Curiosity — having a growth mindset which enables you to look at your performance through a different lens — creating an awareness of why you make the decisions that you do, and how much feelings and emotions impact your process.
How do you start to be able to observe yourself and begin to see the things which are getting in the way of improving your performance?
- Start writing a journal. [See my recent article on journaling for deeper analysis].
· Note what you are thinking and feeling when you trade
· What s different when you trade at your best/worst?
· What gets in the way of what you plan to do and what you actually do?
· Read through it monthly to see patterns emerge.
2. Get a coach! Someone who can help you sift through the data and help you see your blind spots.
3. Start to become familiar with your fears — of missing out, of how others will see you, of the consequences of losing money and most importantly if you want a long career — the need to be right.
THE 3 Ds
There are three key D’s to becoming a successful trader and I will briefly touch on each of them. The three are Diligence, Discipline and Detachment.
Diligence
There are two elements to diligence — how you look after yourself and how you prepare for the markets:-
· How do you ensure that the best version of you shows up for work? Check your energy levels — eat well, hydrate, take breaks.
· How prepared are you for the trading day? What trades are you looking to put on, what is your plan? What are your rules?
Discipline
You are physically and mentally prepared. You have your plan. So how do you ensure that you stick to it? Discipline is difficult when you are embroiled in the markets — there are always feelings in play whether you are winning or losing — tensions over stop losses, waiting for the perfect entry point, the temptation to book a profit early.
Being prepared means that you can navigate these feelings knowing that over the long-term sticking to what you set out to do will give you the optimum chance of success.
Detachment
Don’t take things personally. The market will do what the market will do. It is part of the game. Focus on what you can control. What you can control is your plan, your playbook.
Understand the difference between bad decisions and bad outcomes. Sometimes even the most well thought out trade can go wrong.
Don’t dwell on failures, learn from them. What would you do differently next time? Ensure you give yourself the space to reset yourself each time. The outcome of the previous trade should never impact the next one.
Combining the C and the Ds will create the E which is Excellence. Utilising the concept of ‘the aggregation of marginal gains’ by initially becoming aware of the barriers to success and then improving every aspect of your game you will move towards the flow state necessary to deal with the numerous ‘clutch points’ that you will deal with in your trading life.
If you want to talk more about this or anything else please contact me at phil@philbergman.co.uk
