In Continuation with How Do Professional Traders Think?
LESS IS MORE
To the experienced professional trader “less is more.” There is not the urgency to get into trades to be trading because “that is the way to make money.” Rather, this urgency mindset is dangerous to the trading account balance. When in an urgent mindset, the observing mind is compromised and is ineffective for trading. No longer is the trader bringing the essential skill of patience to the act of trading. Rather, he or she is biased to jump into trades, and this bias compromises the clear thinking required to trade with a patient mindset.
The trader who has developed patience as a key skill in his trading does not forfeit discipline. He transforms its use. Discipline no longer serves to “chase the trade”, but serves to wait for the trade and then strike. It is this deconstruction of discipline from urgency and the grafting of discipline and patience that is at the crux of developing the mind that the trader brings to trading into the mind that can produce success in trading. What does this look like?
HUNTING STRATEGIES:THE AMERICAN PANTHER VS. THE AFRICAN LION
Let’s compare two different hunting styles found in two very successful predators – the Panther of North America and the African Lion. Both of these predators are successful hunters. Their strategies are different, although both are well developed for the environment in which they hunt. Which strategy do you bring to trading?
The lion chases prey over open plains in a coordinated attack. In trader’s lingo, they chase the trade. There is a lot of “doing” in this kind of hunting and the lion is built for this kind of hunting. This strategy works well in some human endeavors also. In business, marketing, and sales it is vital to develop a disciplined, persistent, and urgent approach to creating success. You learn how to chase success until you obtain your goal.
However, change the environment and the once successful strategy has to be re-examined for continued success.The African Lion would find it difficult to hunt successfully in the forests of North America. This is much like a trader trying to bring the skills that made him successful outside of trading into trading and expecting the same thing.
The American Panther hunts by patient stealth. By hiding and waiting to see what the forest (the market) will give her, much of the “work” of hunting is the patience to wait for the right set-up. The panther knows the patterns of the white tail deer and waits patiently for the set up. Then it strikes. Very little energy is expended and it does require much physical work. The deer rarely sees the panther before its neck is snapped.
A quiet, patient, disciplined, and highly efficient hunter simply acted when the conditions of probable success were there, just like a successful professional trader. He waits to see what the market is willing to give him. And when it sets up, he acts. Patience and discipline have been fused together to produce a formidable hunter.
The comparison of the two hunting styles is not about which is right or wrong. It is about which is effective given the conditions and environment. When trading is the environment and the management of uncertainty is the condition, a patient hunter has the winning formula. Fortunately traders can adapt their style to match the new environment of trading.
GENERALIZING SKILLS LEARNED PREVIOUSLY INTO TRADING
Many people, as they develop their successful habits for trading, discover that they have to tweak their skills that they bring to the psychological management of the trading process. Many skills are transferable with some modification. Other skills simply have to be developed.
The major skills are the development of discipline-patience and the paring down of discipline-urgency. As this is accomplished, there is less impulse to “chase the trade” and more patience to wait for the trade to come to you – and then strike. In the end most traders discover that they held an illusion of control in their life before trading.And with the advent of trading, they come to recognize that the only control they really have is over what mindset they will bring to any particular moment in trading.
It is a matter of adapting to the new and different environment of trading vs. staying stuck in the world from which you came and trying to force a fit. This is the journey of the evolving trader. And fortunately you, the trader, can learn to tweak your psychological methodology to fit the conditions of the environment (the market) where you now hunt.