Checklist: Challenges that even the best traders face (part 2/2)
Challenge: Inner Strength - Uncertainty.
Uncertainty is also a weakness that must be eliminated. It is the negation of "inner strength." An investor or trader who is uncertain about himself, his skills or his system is an investor who suffers systematic losses. Remember, however, that both overconfidence and overconfidence lead to losses. Mature traders are in an intermediate state, neither weak nor arrogant - they are attentive and alert, ready to react to the situation.
Challenge: Inner Strength - Learning self-discipline.
Any experienced trader you talk to will tell you that discipline is critical to their performance. I once read a study that traders who return from vacation have trouble disciplining themselves for a short time. This made me think that if self-discipline can be weakened by a vacation, perhaps it can be strengthened? From there it was only a step to looking for methods on how to do it. With help came modern brain research, neurophysiology and, again, special forces methods.
How does a discipline learn the best? Most often through difficult experiences. Severe losses and mental transitions that force them to stick to rules and certain behaviors.
A bank trader who started on his own account when asked how he learned discipline answered:
Thru trial and error, I found whenever traders diverged from their routine they have the tendency to become sloppy and that usually is a sign of an impending losing streak and I have the scars to prove it.
If you lose in three days the earnings you've worked six months for, you won't do certain things again. Meanwhile, difficult experiences are not the only way to learn discipline - just a rather arduous and risky way. I'm not just talking about the financial losses that are the inevitable consequence of a lack of discipline. I'm talking about something more serious - your psyche may not be able to withstand the strain.
After a loss, you may want to trade back and, as a result, lose all your capital. I know traders who lost fortunes and left the markets. For some, the markets have damaged their psyche and they are unable to return. They would like to, but are unable to. That's why it's better to follow the right path, that is, not to expose the psyche to either too much loss or too much gain. Both can put a heavy strain on the psyche.
Challenge: Inner Strength - Resistance to market pressure
After learning self-discipline, we have building resilience to market pressure. The idea is that when entering the market with an order, traders feel different emotions and it is necessary to know what to do with them. For example - soldiers train shooting, but only on the battlefield it turns out whether they can act under pressure or not. That's when emotions and stress turn on, sometimes so great that it prevents action. I remember a story, probably from the Civil War, when it turned out that during a battle soldiers literally didn't know what they were doing.
Back then, rifles were loaded with powder poured through the barrel. After the battle, many rifles were found loaded several times in a row. Soldiers loaded and did not fire. The record holder loaded the weapon more than 21 times! A trader needs mental toughness "in the heat of battle" in the market. Otherwise he won't get far.
Challenge: the glass ceiling
Let's go further. Another important element hitherto inaccurately known was the glass ceiling. This is the level of cash handling at which stress suddenly increases a lot. I have seen this in many traders, for example, one started with very small accounts and had this level at about $1,000. He was not able to break through, he was reaching and losing due to stress. The other, also a beginner had it at about 20 thousand. He felt severe stress, so he came up with his own way of managing cash. He started with a few thousand and when he got to 20 he would withdraw, leaving a few thousand. This gave him a comfortable trade and quite reasonable earnings.
Challenge: Reacting to losses and... profits
The next challenge is the reaction to losses and profits. This is actually one of the central themes in trading, along with stress, the glass ceiling and taming market uncertainty. This is where all the trader's skills come together. What we currently know: we have three areas of dealing with losses. Within them we have 23 methods, including basic and advanced methods, I will cover some of them in the future.
Challenge: Zona
For professional traders, a key element in their success is a state of mind, the so-called "zona." This is a state in which you are, on the one hand, focused and, on the other, fascinated by the subject of what you are doing. "Zona" is not specific to trading, it is specific to the human mind. Recall when you let yourself get caught up in a very interesting movie, book, something you were doing with distinct pleasure and satisfaction. Your senses are then sharpened, your concentration increases and everything goes as it should. It took us quite a while to understand two key things - where it comes from and what hinders it. We will address zonation in more detail later.
Challenge: Correct decision-making process
If you have it then your analytical skills harmonize with your decision-making skills, you make quality decisions. This is the most advanced level, where thoughts, feelings, emotions converge. Here the signal from the system should be made very and well, the execution must be of high quality and it is the product of high quality decisions. This may sound a bit esoteric, the topic originated as part of the management of quality policy in investment funds. An incentive system that does not burn out the best traders can later be based on HQT.
If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
Uncertainty is also a weakness that must be eliminated. It is the negation of "inner strength." An investor or trader who is uncertain about himself, his skills or his system is an investor who suffers systematic losses. Remember, however, that both overconfidence and overconfidence lead to losses. Mature traders are in an intermediate state, neither weak nor arrogant - they are attentive and alert, ready to react to the situation.
Challenge: Inner Strength - Learning self-discipline.
Any experienced trader you talk to will tell you that discipline is critical to their performance. I once read a study that traders who return from vacation have trouble disciplining themselves for a short time. This made me think that if self-discipline can be weakened by a vacation, perhaps it can be strengthened? From there it was only a step to looking for methods on how to do it. With help came modern brain research, neurophysiology and, again, special forces methods.
How does a discipline learn the best? Most often through difficult experiences. Severe losses and mental transitions that force them to stick to rules and certain behaviors.
A bank trader who started on his own account when asked how he learned discipline answered:
Thru trial and error, I found whenever traders diverged from their routine they have the tendency to become sloppy and that usually is a sign of an impending losing streak and I have the scars to prove it.
If you lose in three days the earnings you've worked six months for, you won't do certain things again. Meanwhile, difficult experiences are not the only way to learn discipline - just a rather arduous and risky way. I'm not just talking about the financial losses that are the inevitable consequence of a lack of discipline. I'm talking about something more serious - your psyche may not be able to withstand the strain.
After a loss, you may want to trade back and, as a result, lose all your capital. I know traders who lost fortunes and left the markets. For some, the markets have damaged their psyche and they are unable to return. They would like to, but are unable to. That's why it's better to follow the right path, that is, not to expose the psyche to either too much loss or too much gain. Both can put a heavy strain on the psyche.
Challenge: Inner Strength - Resistance to market pressure
After learning self-discipline, we have building resilience to market pressure. The idea is that when entering the market with an order, traders feel different emotions and it is necessary to know what to do with them. For example - soldiers train shooting, but only on the battlefield it turns out whether they can act under pressure or not. That's when emotions and stress turn on, sometimes so great that it prevents action. I remember a story, probably from the Civil War, when it turned out that during a battle soldiers literally didn't know what they were doing.
Back then, rifles were loaded with powder poured through the barrel. After the battle, many rifles were found loaded several times in a row. Soldiers loaded and did not fire. The record holder loaded the weapon more than 21 times! A trader needs mental toughness "in the heat of battle" in the market. Otherwise he won't get far.
Challenge: the glass ceiling
Let's go further. Another important element hitherto inaccurately known was the glass ceiling. This is the level of cash handling at which stress suddenly increases a lot. I have seen this in many traders, for example, one started with very small accounts and had this level at about $1,000. He was not able to break through, he was reaching and losing due to stress. The other, also a beginner had it at about 20 thousand. He felt severe stress, so he came up with his own way of managing cash. He started with a few thousand and when he got to 20 he would withdraw, leaving a few thousand. This gave him a comfortable trade and quite reasonable earnings.
Challenge: Reacting to losses and... profits
The next challenge is the reaction to losses and profits. This is actually one of the central themes in trading, along with stress, the glass ceiling and taming market uncertainty. This is where all the trader's skills come together. What we currently know: we have three areas of dealing with losses. Within them we have 23 methods, including basic and advanced methods, I will cover some of them in the future.
Challenge: Zona
For professional traders, a key element in their success is a state of mind, the so-called "zona." This is a state in which you are, on the one hand, focused and, on the other, fascinated by the subject of what you are doing. "Zona" is not specific to trading, it is specific to the human mind. Recall when you let yourself get caught up in a very interesting movie, book, something you were doing with distinct pleasure and satisfaction. Your senses are then sharpened, your concentration increases and everything goes as it should. It took us quite a while to understand two key things - where it comes from and what hinders it. We will address zonation in more detail later.
Challenge: Correct decision-making process
If you have it then your analytical skills harmonize with your decision-making skills, you make quality decisions. This is the most advanced level, where thoughts, feelings, emotions converge. Here the signal from the system should be made very and well, the execution must be of high quality and it is the product of high quality decisions. This may sound a bit esoteric, the topic originated as part of the management of quality policy in investment funds. An incentive system that does not burn out the best traders can later be based on HQT.
If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
