Trading Performance Psychology

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The greater the difficulty, the more glory in surmounting it. Skillful pilots gain their reputation from storms and tempests.

- Epictetus.

Hey everyone! 👋

This week, we thought it would be interesting to dive into a less-commonly discussed topic: performance psychology - and discuss how it relates to Trading. Specifically, we're going to look at the following question: What actually drives outperformance from one trader to the next?

From a process standpoint, there are lots of things that aspiring traders can take from other performance disciplines (like sports) in order to better understand the necessary steps to get where they would like to be. Let's jump in!

Time is the common element to expertise

Mastery is built over time. First through exploration, then knowledge building, then well-structured practice.

To invest the great amounts of time and effort required for mastery, an individual typically bonds emotionally with the field, creating a long-term relationship.

Present in almost all extremely high performing traders is an inherent, intrinsic love of trading itself. This means a love for analyzing charts, working on strategies, looking at markets, and trying to fit the pieces together in one's head. In this frame - Trading isn't a job, it's a CRAFT. If you just love the status, the lifestyle, or the income, then it's likely that you won't reach the true heights of the profession. The highest performing traders spend hours and hours working on their trading; not because they WANT to, but because they LOVE to.

Finding a niche ❤️

The greats do not become great by working hard; they work hard because they find a great niche: a field that captures their talents, interests, and imagination. The best pitcher in the world might make a terrible hitter.

If you're early on in your journey (or lost), something to consider is trying to find a niche that you truly resonate with. A great deal of importance is placed on niches in other professions and institutionally within finance, as hospitals and banks have rotational programs to expose newcomers to different types of experiences.

Why then, don't individual traders do this? A great way to center your thinking is by constructing a rotational program for yourself. Here's a list of the most popular asset classes & trading styles. Give each a google , or look for ideas here on TradingView, and see what you resonate with most strongly. Set yourself up for long term mastery by actually finding something you love doing day in and day out.

Liquid Asset Classes:
-Fixed Income

Styles (Timeframe):
-Intraday - holding time is seconds to hours
-Swing - holding time is days to weeks
-Position - holding time is weeks to months

Which holding style fits with your temperament? What topics do you like learning about?

The Learning Process

In trading and in life, we often hear that "Practice makes perfect". A better saying may be "Perfect practice makes perfect". How practice time is structured makes the difference between a performer who has five years of experience and someone who has one year of experience repeated five times over. So; how should you structure your practice?

In performance psychology, there's a concept known as a "learning loop". It has three parts.

Performance -> Feedback -> Learning (repeated).

This is crucial because feedback is the key to improvement. Trading is a solo sport, which means that figuring out how to incorporate a feedback process that allows for reflection is absolutely critical.

P/L is feedback, but there can be some problems with it singularly as your feedback mechanism. Even the best traders who execute the best looking trades can be on the opposite side of variance on given days. The process is king. Get feedback from your performance that doesn't have to do with P/L so you can track the inputs to your decision making. Some traders take copious notes, some record their screens, and some record data points that aren't P/L related (hours slept, hydration, mood, etc).

(We have a "notes" feature built into the charts you can use for this purpose.)

If you gather up all of these items together to create a long-term blueprint for building mastery, it should look something like this:

1.) Find out what you truly love about trading
2.) Explore it more deeply
3.) Stick with it through time and allow your intrinsic enjoyment to motivate you through the ups and downs
4.) Structure your performance through that time in such a way that you can generate feedback for yourself
5.) Incorporate that feedback to continually improve your process. Allow learning loops to be your engine of long-term performance.

Hope you enjoyed reading, and stay safe out there!

- Team TradingView

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