Everyone likes winning. Our chemically dependent brains get a measurable shot of adrenaline and dopamine when we exit a winning trade. We feel good. We feel smart. We feel invincible. Our ego is fed. We feel we have mastered this beast called The Market and we can and shall bend it to our Will.
Perversely, in trading, even winning is a two edged sword. The chemicals our brain produces and the euphoria we experience in winning trades can drive us to do things that would have been unthinkable just a short time ago. We skirt the danger of abandoning risk management principles that brought us success because we feel we are unstoppable and can’t lose in our next trades. Along these same lines, we also run the risk of trading indiscriminately (because we can’t lose) or overtrading because we want to feel the joy of success more often. Understanding these dangers allows us as traders to learn to bask in the joy of the win, but also come back down to reality and regain the humility required for longevity and success as professional traders.
Chasing Perfection – The Holy Grail
Throughout a traders long career, there will inevitably be periods of outperformance where it seems like they have “figured it out” and will simply win all the time going forward. Just like in baseball, we all have our baseline numbers (Win/Loss % and Profit Factor) in trading just like batters have career batting averages. In the world of statistics, there will be times where you hit well above your long-term, statistical average where you will be full of confidence. These are dangerous times as we let our guard down and let our discipline slip.
Trade Better with Doc Halliday
Maverick Trading Risk Manager, Corey Halliday, discusses the effects that trading psychology has on trading. While learning the mechanics in trading is important, learning the workings of your own mind can make you a better trader. At Maverick, we’ve been training and managing our traders for over 20 years. During these decades, we know that trading psychology is the MOST IMPORTANT thing to the long-term success of a trader.