Trading Psychology: The 16 Truths about Great Trading
By Dr. Doug Hirschhorn
1) 45-55% (Average winning % of any given trader)
2) Traders do not mind losing money, they mind losing money doing stupid things
3) You can lose money on a Great trade
4) Focus on the Trade, Not the Money
5) Trading is a game of Probabilities, not Perfection
6) Trade to make money, not to be right
7) Nicht Spielen Zum Spass (if it doesn’t make sense, don’t do it)
The market does not know how much you are up or down, so don’t trade that way (Think: “If I had no trade on right now, what would I do”)
9) Learn to endure the pain of your gains
10) There is no ideal trader personality type
11) Fear and Fear drive the markets, not fear and greed
12) Keep it simple: Up-Down-Sideways
13) Make sure the size of your bet matches the level conviction you have in it (No Edge, No Trade; Small Edge, Small Trade; Big Edge, Big Trade)
14) Making money is easy, keeping it is hard
15) H + W + P = E
a. (Hoping + Wishing + Praying = Exit the Trade!)
16) Trading is NOT like sports
a. Before an athlete takes a shot, he or she is NOT supposed to think, “What if I mess up this shot?” ; In trading that is called “risk management”
b. In sports, when you miss a shot, you don’t lose points
c. In sports, the opponent adjusts to what YOU do; In trading, the market does not know or care about YOU
d. In sports, you focus on improving weaknesses; In trading, your strengths are your weaknesses and vice-versa
e. In sports if you get poor results, you need to practice harder, put in more effort; In trading, effort is not positively correlated to improved performance
Tags: dr doug hirschhorn, great traders, investment psychology, trader coaching, Trading Psychology
Am enjoying your book Trading Athlete. Picked it up by coincidence while at the library. While reading it - I was like hey, that’s the book I was gonna write, Hey it’s already been written… duh. Then I checked you guys out- and I was like - oh it’s that guy!
At first glance 9, 15, and 16 are most illuminating.
9. “Learn to endure the pain of your gains.” Not sure if I have it as you intend… but the few big gains on some trades I made were definitely very stressing and not so easy to handle or endure. I had not anticipated this to be an issue - but the emotionality involved for me in learning how to manage and ride a winner - through scaling and integrative charting skills is sill a work in progress. And that’s the good news!
I’m surprised given your sports background as both an athlete then a sports psychologist who has now shifted into trading to read you say #16 that trading is “NOT” like sports…any further comment on that, given your sports background that’s so prevalent in you bio here on the site?
As a former NCAA athlete, and as a 12-year full-time trader, I’ve found many similarities between trading and sports….preparation, discipline, attitude, psychology, etc. Other traders with athletic backgrounds seem to agree.
The biggest sports event this week is the Masters, in which every shot carries the same value (1). Players will wonder “what if I mess up” before a shot (a). A missed putt *is* costly (b). Focused effort in both sports and trading should result in improved performance (e). Don’t you advocate a sound work ethic for traders for that very reason?
Curious to hear your thoughts…
Good ideas…I posted a response to this article here… http://leavittbrothers.com/blog/?p=4164
This is a great list. I have seen lists like this before, they are always insightful and refocus me on the basics of trading.
I like the quote:
“The market does not know how much you are up or down, so don’t trade that way”
In trading(and gambling) people assume the market owes them something when they feed it their money. I think it has to do with how we are all ingrained to believe there is reciprocity coming when we give a gift. With humans this may be true, but the market could care less.
Great post, keep up the amazing work.
Hey Jeff,
The point I am making is that people assume that sports and trading are alike…in some ways they obviously are; but I have found that in a number of ways (as I outlined in #16) they are dramatically different. Years ago, I did my doctoral dissertation on this concept and challenged the long-held assumption that athletes make better traders. My data confirmed that there were no correlations between athletic background and trading success.
Further to the discussion is that I could argue that trading is like any competitive or high performance related endeavor be it music, politics or graduate school.
Thanks for your post.
Dr D