The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success

1.4. SELF-AWARENESS, SELF-CONTROL, AND RESILIENCE

Emotional obstacles such as anxiety and fear are compounded in the daily world of trading because of the uncertainty of the markets. A successful trader therefore needs to be able to notice and separate his emotional responses from the decisions that he is making. He should be able to reach a centered state where he is able to see the movement of the market without becoming reactive to it.

Many people trick themselves into believing false notions about themselves and their abilities. Because of a lack of information or an inability to correctly assess the information they have, they either overvalue their abilities—thinking they are far better at certain tasks than they really are—or undervalue their potential—falling prey to insecurities and poor self-esteem. This is demonstrated very dramatically when I sit down with the risk manager to review a trader's risk statistics and discover how much the trader is in denial about his actual trading performance.

To combat this kind of denial, use trading statistics to provide a snapshot of the underlying behavioral dynamics of the trader's trading patterns, the capacity of the trader to handle and recover from failure, and the ability to turn breakdowns into breakthroughs. The tolerance for failure and the capacity to recover from failure and adversity are major characteristics of the successful trader since most PMs are right only 60 percent of the time and as such must be able to continue ...