3 replies to this topic

[Frac_Man]

From Dr. Dorn : Why are so many traders trying to turn a game of probability into one of 100% certainty? The answer lies in one of the cardinal sins of trading which is PERFECTIONISM. Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the “Holy Grail” of trading, go from one service to another, from one system to another, looking for a way that they can be right all the time. They think, “YES! Now, I’ve found it! It’s this trading room, or this service, or this indicator! Wait... something is wrong here. Not all of these trades are working, and I have draw- downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES.” This is perfectionism in action. Not only does this type of irrational behavior and belief undermine and demoralize a trader, but it takes away all the enjoyment and fun of being in the markets. It leads to depression, with depletion of psychic and physical energy, and leaves the perfectionist to confront his/her basic and overriding fear: fear of failure. In the extreme, it leads to physical and mental illness, including addiction to prescription drugs, alcohol, or illegal substances as well as other addictions. The pain of failure or the haunting fear of failure is simply overwhelming, and one turns to whatever works to “medicate” the pain. I want to share something of my personal history with you, as I believe that many of you can identify with me, and learn from some part of this story. (And if you do, please let me hear from you.) My parents were seriously ill from the time that I was born. I truly believed that if I were absolutely “perfect,” scored the highest in school, did the best at music and dancing and elocution and debating that I could make them better. So I did that. I had no life outside of study and learning. I was the “perfect little daughter” and even became the “perfect little doctor” for my sick parents, even though I was only 13. Shortly after this, while I was still in my teens, both of my parents died. I was not “good enough” or “perfect enough” to make them better. So, I tried even harder and studied more and more, to the complete exclusion of any personal or social life whatsoever. This time, I was going to be “perfect” for my dead parents, to show them how wonderful I really was and how much they should be proud of me. This reached absolute culmination when, after receiving two doctorate degrees, I still had to continue with more and more exams and more and more training. Can you imagine anything so ridiculous? Even after my parents died, I was still trying to get their approval by showing them how brilliant and talented I was. Many years later, I suddenly became critically ill, stopped breathing and lapsed into a lengthy coma. This was the culmination of years and years of unrealistic internal demands that I set on myself and which were manifested as addiction to perfection. It was only when I awakened from coma that I started on a new road and a new path. I was not superwoman; never was and never could be. Yes, I would continue to work hard and to achieve, but I could never be “perfect.” I am not and you are not. So, when I tell you to "Get over yourself" I mean that I had to get over myself. I had to address the demons of perfectionism and move past them. I accepted that I am a flawed human being, and acknowledged that I have certain real and wonderful strengths. I chose to concentrate on the strengths, and stop beating myself up for the weaknesses. Life can be lived forwards, but can only be understood backwards... Soren Kierkegaard What does this have to do with trading? This is what happens with perfectionists. Perfectionists are made, not born. We are taught from an early age by demanding (and often well-meaning) parents that we have to be the best in order to win their approval and the approval of others. Unfortunately, this is totally upside down. Perfectionists share a belief that absolute perfection is required in order to be accepted by others. The reality is that acceptance cannot be gained through performance or any other external factors. Self-acceptance is the root of happiness, and the true beginning of personal evolution. If you have a perfectionist mentality when trading, you are setting yourself up for failure, because it is a "given" that you will experience losses along the way. You must begin to think of trading as a game of probability. Your losses (which you hope will return to break even) will kill you. If you cannot take a loss when it is small ( because of the need to be “perfect”), then you will watch that small loss grow into a larger loss, and so on, into a vicious cycle of more and more pain for the perfectionist. Trading on hope does not work. The markets can remain irrational for a lot longer than you can remain solvent. The object should be excellence in trading, not perfection. Moreover, it is essential to strive for excellence over a sustained period, as opposed to judging that each and every trade must be excellent. This is a marathon, not a sprint. The greatest traders know how to take cut losses and let winning positions run. Perfectionists often do exactly the opposite. They get in at the wrong time, stay in too long and then get out the wrong time. Perfectionists are always striving and never arriving. The market will find the flaw in a perfectionist trader and exploit that flaw day after day. The market is your greatest teacher and your most demanding critic, so take this wonderful opportunity every day to learn about yourself and make yourself strong. If you see in yourself this trait of perfectionism rearing its ugly head, it's okay to get angry at it and even yell or curse at it. Do whatever it takes to acknowledge it, and then find a way to fix it. Here are a few suggestions: · Try to appreciate and enjoy the process as well as the outcome. Set more achievable and realistic goals for your trading. · Remember that your self-worth, and your worth as a human being to those who love you, does not fluctuate from day to day, depending on if you win or lose that day. · Focus less on achievement and more on enjoyment. Trading is serious, but it should be fun and not something which one approaches with fear and dread. · Lighten up. Laugh more (especially at yourself). · Learn from your mistakes, and forgive yourself and make peace with your past. Strive to be better, not perfect; just an amazing human work in progress. If we were always to wait for the most favorable combination of circumstances, no enterprise would ever be undertaken. There can be no end without a beginning. There was never an enterprise in which everything fitted into place perfectly, for chance plays a leading part in the affairs of all men. Obedience to rule does not ensure success, but success, on the other hand, furnishes a canon---a rule of conduct...Napoleon Bonaparte.

[thespookyone]

Frac-Are you referring to Janice Dorn? I talk to her fairly frequently, and her knowledge of trading psychology is strictly top shelf! My take is that the real challenge we face is that we trade against ourselves, because of our humanity. The challenge the market presents pales in comparison.

[Frac_Man]

Yes , Janice is brilliant ...

Frac-Are you referring to Janice Dorn? I talk to her fairly frequently, and her knowledge of trading psychology is strictly top shelf! My take is that the real challenge we face is that we trade against ourselves, because of our humanity. The challenge the market presents pales in comparison.

[beta]

Janice Dorn is a frequent contributor to Victor Niederhoffer's website/blog here:

http://www.dailyspec...rdpress/?cat=80

An entertaining read.

Edited by beta, 01 October 2007 - 01:36 AM.