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Sep 07

How do You Know When Enough is Enough?

Categories:

For the Newbies, General Trading, Trading Psychology

by Rogue Traderette

I could never be a nurse.

It’s not that I can’t deal with blood or anything like that, it’s just that mangled limbs aren’t really my thing.  Watching someone having their spleen removed doesn’t really ring my bells either.  I’m also not very keen on cleaning up ‘accidents’, or jabbing people with needles – although I’m sure that could potentially have its gratifying moments.

A quick look at the general chores nurses are required to do as part of their job quickly lets me know that nursing isn’t a good fit for me, and because I know I’m not really cut out for nursing, I’m not a nurse.  It makes sense.

Trading is different.  Everyone in the world thinks they’re cut out to be a trader.

Why You Might Not Be Cut Out For Trading

When people think about what traders do, the impression is that we make money.  Naturally, everyone thinks they’ll be just fine with that, therefore they assume they’ll be a brilliant trader.

But just like any other career suits certain personality types, trading suits a certain category of people and not others.  It’s possible that despite all your good intentions, you’re just not cut out to be a trader.

There seems to be some kind of shame in admitting you’re not a good trader, and that you hate it and wish it would die.

This shouldn’t be the case, but it is.  The thing is, it hurts our ego to lose money, but it also hurts our ego to fail at trading.  Yep – it’s a conundrum.

So how do we know for sure that trading isn’t for us?

SIgns and Symptoms of Terminal Trader Syndrome

There are a few symptoms a terminal trader will display that can help make the prognosis a little clearer.

  • You can’t sleep.  Even though you’ve done everything right and have position sized correctly, you still lay awake worrying about your positions.  Trading can take up way too much of your mental space, and it’s a symptom that all is not well.  If trading and your open positions are distracting from normal rest, it’s got to go.  Don’t underestimate the far-reaching effect of a lack of sleep.
  • You’re unduly pre-occupied with your losses, to the point you don’t want to check your platform and don’t want to look at your statements.  I’ve even heard of people who actually hid their unopened statements in an effort to make it all go away.  Denial is not a good strategy.
  • You can’t separate trading from real life.  The best trader is a balanced trader, and when trading starts to occupy every corner of your life it’s a sign something is wrong.  If you’ve lost in the market and fighting back starts to become more important than relationships, hobbies, and life in general, it’s not a healthy fascination and it will ultimately end in your failure – not only in trading, but in all areas of your life.

If that sounds like you, don’t be sad about it – it may just be that trading isn’t the best use of your particular skills, or the best career choice for your particular personality type.

So What Kind of Person is Best Suited to Trading?

Great traders have a few personality traits that do give them a natural advantage.  That’s not to say you can’t succeed without them, just that it’ll be an uphill battle and a greater degree of reflection and self-correction will be required.  The trader with the best chance of success will be -

Independent.  Being happy with a good deal of autonomy will allow you to confidently execute your plan without needing 25 people to concur with your analysis.  Trading is a solitary game, and you need to be able to thrive on your own, to a large extent.  Support is great but when it comes down to it, it’s all up to you.

Decisive.  If you take hours to do something simple like choose a burger off a menu, the odds of you being able to see a trade set-up and coolly pull the trigger are greatly diminished.  Especially if you trade short time-frames that can be the difference between success and failure.

Insightful.  If a trader can honestly look at their skills, motivations and short-comings and actively work to rectify them, they have the tools to over-come nearly anything the market throws their way.

Resilient and Optimistic.  These pretty much go hand in hand.  Being optimistic gives you a better chance of being resilient, and being resilient is a pre-requisite when it comes to success in the markets.  If you generally tend to give up at the first hurdle, trading is not for you.

Adaptable and Flexible.  If you struggle with change, you’re going to struggle in a market environment because the markets are characterised by change.  It’s will stress you out no end because just when you’ve finally made some sense of things, the market will shift and you’ll have to adapt all over again.

So if you’re really struggling as a trader and don’t possess any of these traits naturally, you will have a rough time making a go of it.  You might have a decision to make – do you give in gracefully now, recognising that trading isn’t ideally suited to your skill set and move on?  Let’s face it, people drop out of college or university all the time once they realise they’ve chosen the wrong course.

Or will you wait and persist in the hope of success, and risk struggling on and on until the market forces you to quit?

***

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  • Amanda Hudson

    Hi Jess, I love reading your articles and I follow your blog closely. However it will be nice to see you share some of your trades ideas apart from just articles. I am sure doing so will also increase your website readership.

    • http://www.roguetraderette.com/ Jessica Peletier

      Hi Amanda, I don’t share FX trade ideas because my method is mine, and most people will hate it. It loses way more than it wins, which is normal but people don’t like it. I don’t need other people’s negatively about my win/loss, so I choose not to share.

      I also don’t want to call trades for other people when I know the odds are it’s a loser. People would have to follow ALL my trades to win, and most people wouldn’t so all I’d be doing is guaranteeing their failure.

      I’m a system trader, more than discretionary so unless you understand my system and why it works, it won’t be a good fit.

      I trade Aussie equities, but the majority of my readers are US based, so calling those trades is pointless – as well as the fact I trade them on a daily chart and most people want intraday.

      So there you go. I give what I can ;)

  • M&P Hunt

    Jess
    In terms of “best suited to trading” .. I know Van Tharp has done a lot of personality profiling of traders. I remember doing early versions of his test in late 90′s-’00′s?? and recently did them again.
    His research has shown that certain “MB types” are more easily suited to trader (eg INTJ) and that the distribution of these types within trading community he has tested over the years is different to the general population (..might be a bit of surviour bais/ self selection maybe?).

    It’s not to say that other types are not suited to trading, just that each type will have different ‘challenges’ that they need to be aware of and have strategies to deal with these as and when they arise. And that one or two types have it a bit easier in terms of the traits they naturally bring to their trading.

    PS: Really enjoying your postings..keep up the great work.

    • http://www.roguetraderette.com/ Jessica Peletier

      My dad used to run MB courses for companies, so I’m a little bit familiar with the personality types. One Christmas we did it as a family, which despite sounding incredibly un-fun was really very cool.

      If I remember, I was ENFP, which probably doesn’t bode well! :)

  • http://twitter.com/Lynette_Allen Lynette Allen

    Hi Jess!

    Saw in Adam’s newsletter that you were featured in a magazine… great job!

    I agree with all your points, except for the decisive bit :)

    “You can’t separate trading from real life” – We all have a different idea of real life and balance. I spend 12+ hours a day looking at the news, markets and other trading related things because I enjoy it. I don’t have many hobbies and things I enjoy doing can be done on the weekend.

    Most people would think the hours i put in is unbalanced – but I am exercising, eating right, sleeping well, spending time with my fiance (most days he works very early until very late, plus we don’t have kids) and I do the things I love on weekends. What is balanced for me, is probably crazy to someone else.

    Being decisive – Away from the trading world I am one of those people that takes hours to pick a burger off a menu. Simple and normal things like driving a car and going on a plane terrify me and give me really bad anxiety, but when it comes to trading I can leverage and place trades with no fear whatsoever. Plus I can trade short time frames successfully :)

    • http://www.roguetraderette.com/ Jessica Peletier

      “Most people would think the hours i put in is unbalanced – but I am exercising, eating right, sleeping well”
      Sounds pretty balanced to me, Lynette :) I don’t mean that you need to have 3 hours for trading, and 6 hours for family etc, I’m talking more about becoming so preoccupied with fighting back to recover losses – which is negative, and soul destroying – to the exclusion of things that are just more important.

      It’s fine to commit a lot of time to trading – I do too. I’m up at 5.45 to excersise before looking at my trades at 6.30am – doesn’t sound balanced to a lot of people, but it fits perfectly with me and my family. I also don’t switch off from the market until 10 at night. Balance is personal :)

      Like I said in the post, you can be a successful trader without those traits, but it’s just not as easy. It sounds like you’ve conquered regardless, so that’s great!

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  • 1Lot

    I enjoy reading all of your posts Jess but I have to be honest with you on this one and say that I can’t disagree more.

    Of those that I know of that have moved to the top of the game and made it as REAL traders (of which there are few), they tend to have an unhealthy, undying obsession with trading that sees them either burn out completely or move to the top of the game.
    The rest tend to become trading instructors, software sellers, full time blog writers etc.
    That is not a jibe at anyone, just the realities of the situation. Perhaps it is just my reality but as of now I am yet to be convinced otherwise.

    • http://www.roguetraderette.com/ Jessica Peletier

      It depends how you define a the top of your game, I suppose. If it means market wizard, perhaps that single-minded obsession is beneficial at that level – but I would also say it’s very different from worry and stress, which is what I’m talking about here.

      I think there is wisdom in being able to see burning out entirely is on the cards and making moves in advance to avoid that situation.

      .

      • 1Lot

        “The best trader is a balanced trader, and when trading starts to occupy every corner of your life it’s a sign something is wrong. If you’ve lost in the market and fighting back starts to become more important than relationships, hobbies, and life in general, it’s not a healthy fascination and it will ultimately end in your failure”

        It is this which I don’t subscribe to. While it is a nice sentiment for most things in life, i.e. maintaining a good or healthy balance, in scenarios where mass competition is involved, it is in fact the complete opposite type of individual that prevails.

        Trading is a competition amongst a large populace of people, any time you have that situation it is not the balanced well rounded individuals that come out on top. It is more often than not the freaks of nature. People that tend to be outliers on the Bell curve. Why do I say that?

        The same can be seen in many other disciplines, look at the Olympic divers, I watched a documentary on Tom Daly, the British Diver, a young well rounded individual who has been diving from a young age (a diving prodigy really) but has managed to maintain a healthy balance in his career so far, i.e. still go to school, do his A-Levels etc. , when he went to the Olympics, you know what he was aiming for? A Bronze medal. He already had it in his mind the Chinese divers were unbeatable and guess what? they were. The Chinese divers are selected at a young age and put in a diving school from which they are trained like soldiers, day in an day out for hours upon hours with one goal in mind – gold at the Olympics. They eat sleep and breathe diving. Guess who scored the most perfect 10′s at the Olympics? Of course, the Chinese divers.. Is this unhealthy? yes.. very much so.. does that have any effect on the outcome, no unfortunately not .

        Another example, online gaming, most popular games have league tables with top 1000′s etc., this is a scenario where people are not even competing for money or medals just to be at the top of the table for bragging rights. Look up any of the scores in the most popular games and you will see they are at stratospheric levels most people would not believe were achievable. So how do they do it? Well, go and look at their playing time. The majority of guys have hours that you would not dream possible and if you follow it backwards in time means they have spent every waking hour on the game since it came out and more so. Why? who knows, call them freaks whatever, but they exist, the bell curve dictates it and they will obsessively play that game until they are at the top.

        The young guys sitting at the Final table in the World Series of Poker each year, are they the well rounded balanced individuals? No.. they are the guys with bladder problems from sitting at their laptops playing 15hour straight online table sessions without getting up to go to the bathroom – day after day.

        Now we come to trading, the biggest prize of them all, what do you think the competition is going to be like in this arena? Do you think they are balanced individuals that cart the kids off to school in the morning, come home do a bit of cleaning, get 2 hours chart time in for the morning, have some lunch, run out to the gym for a yoga session. Come back for another couple of hours “trading”, make the dinner for the kids and then do a 30 minutes trading review and a half hour blog post before spending some time with the family and getting a good nights sleep?

        The effect of having world wide competitions with such large bases means that somewhere out there, there are guys that do not believe in the word BALANCE. Will they burn out? I’m sure many do, but guess what? There are 10 more in line to fill their shoes. This is why most guys who have made it in trading for the most part advise others not to bother starting. To truly become a successful trader you will have to compete with the best of the best and if you do not think about trading 24hours a day it is very unlikely that you will make the grade, most of these guys sacrifice EVERYTHING.

        Sorry to be so downcast – I am feeling exceptionally grumpy today. Perhaps I should refrain from posting when I do..

        • http://www.roguetraderette.com/ Jessica Peletier

          Not at all, I find your posts interesting and challenging, which is what this is all about :)
          Like I said to Lynette, I’m not talking about the time committed to trading, but more about the fighting back. Trading shouldn’t be a battle, and a constantly anxious or stressed trader is not in the optimal frame of mind to trade. As such will struggle to be successful if fighting back is the primary state they are in.

          There is always a struggle in the learning phase, that’s natural. But once the basic lessons have been learnt, it has to become smoother. I would say if it doesn’t, and it’s constantly stressful and overwhelming for the trader, they are probably not the best personality to trade.

          Obviously that’s not to say success is impossible, but you have to ask, is trading so important that I’m willing to subject myself to ongoing stress/illness/suffering relationships to make it work?

          And if the answer is yes, you kinda have to ask yourself “why?”

          • 1Lot

            Come to think of it – if I was putting together a prop team, that would make a very good first interview question:

            1. Is trading so important that you’re willing to subject yourself to ongoing stress/illness/suffering relationships to make it work?

            If the answer is Yes.. my reply would be – “Welcome to the Team!!”…

            Being anxious and stressed are often part of the game. Whether you learn to deal with it or not I’m not sure has that much of an impact on the final outcome. Personally I believe that the only necessary attribute to be successful at anything is absolute drive and relentless determination that sees one never entertaining the notion of giving up the goal they set out to achieve in the first place.

            You cannot fail if you never give up. Yes you will have to make sacrifices but that is the nature of it.

            The question of why is a much deeper one. Why do we do anything? Why do people risk their lives in war or to go to the Moon? One could spend years examining that line of thought.. I guess in the end we all have our own personal reasons whether we know it or not.

          • http://www.roguetraderette.com/ Jessica Peletier

            “You cannot fail if you never give up” – Sure you can. The market will take your account and then you’re done. Or you can trade around break even forever. Or, you can slowly leak cash forever.

            It can happen.

          • 1Lot

            I guess it very much depends on how you define failure, personally I feel that externalities are just feedback points. Zero account could be failure if you define it as such, for me I would just see it as another step on the journey.

            Perhaps one in which you need to do a serious review of your process but so long as you learn from it and come back a better trader, how can it be failure?

            In my mind giving up without rational reasoning is failure. To give up because your account is zero or you are leaking cash is not rational reasoning. There is generally a solution to most problems, these two are not insurmountable by any means.

            To bring things slightly more back on topic, the idea that a certain personality type is not cut out for something to me is irrational reasoning. People have the ability to change, it just depends on how badly they want it.

            Any case, enough from me on this topic. I’ve taken up my fair share of real estate as is :)