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Be Humble

Seasoned traders observed long ago that after a series of wins, a trader is vulnerable to over-confidence and trading errors. It's quite understandable. Trading is a competitive business, and when you win, someone else loses. Market participants trade because they are greedy for profits, but often sell out of a fear of losing. How do many traders deal with the inevitable feelings of uncertainty and fear? They become ecstatically happy when they win and ready to brag about their good fortune. Out of a sense of relief, many traders can't wait to brag about their accomplishments. It's important to reward yourself for a job well done, but we have to be careful to avoid getting carried away. Winning traders are humble. They know they can be on top in one market and down in the next. The markets are fickle. A strategy that works in one set of market conditions can fail completely in another set of market conditions.

What's wrong with feeling proud after making a big win? A little pride doesn't hurt. Trading is difficult. Few people master it, so when you are doing well, it's natural to feel a sense of accomplishment and pride. That said, it is important that you rein in your pride and stay humble, especially when you are on a huge winning streak. When you feel overly proud during a winning streak, you may be prone to making a mistake. You may feel so overly confident that you take risks you should not take. The more humble you are the more open you are to your flaws, and the more astute your perceptions of the markets.

Too much pride often leads to disaster. Those who are especially proud have a burning desire to brag about their accomplishments. But bragging can go too far. When people speak of their successes too often, others often resent them, and can't wait for them to fail. The overly proud trader is likely to cave in to strong social pressure to continue making large financial gains to save face. There's also a risk of becoming stubbornly proud. Stubborn pride often happens when people have spent so much of their life feeling proud of their accomplishments, and trying to feel superior to others, that they have difficulty admitting when they have made mistakes. At an extreme, the overly proud trader becomes afraid to face mistakes and may even deny that they have faults.

Extreme pride has been the downfall of many traders. Trading is hard enough without introducing additional psychological pressures to feel superior to others, maintain social status, or save face. When pride drives trading decisions, a trader is likely to take unnecessary risks in order to make big wins to keep up appearances.

Controlling pride is crucial. It is important to develop internal standards of self-worth. It is useful to trade as if you are running a race with yourself rather than running a race against other traders. Develop your own rules and standards related to your skill as a trader. When you reach your standard, you can feel a little pride, but don't feel the need to tell others about it. If you can feel proud of your accomplishments, without feeling the need to brag about how well you have done, or exaggerate how well you are doing, then you will have learned to feel a true sense of self-worth.

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Saturday, 15 May 2021

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