Wednesday, May 27, 2009
Monday, April 30, 2007
Focus in the Face of Adversity
by Doug Hirschhorn, Ph.D.
At the top levels of the trading world, hard-work and intelligence do not differentiate between successful and unsuccessful traders. I believe the same concept applies with elite athletes in any sport. Fact is there are an abundance of guys who can throw in the mid 90’s, but how not many can do it AND hit their spots consistently when the pressure is on. How many golfers, in a pressure situation on the 15th hole, can fly the green, end up buried in the back bunker, and then chip the ball within a foot of the pin on their next shot, saving par? I think you would agree that the answers to both questions are ‘not many.’ So then what really does differentiate the elite from the elite? If you ask me, I think it is their mental game.
For golf legends such as Jack Nicklaus and Arnold Palmer, focusing was a mental skill that moved them from winners to legendary. In reality, it was not that they possessed substantially greater raw talent than others but rather that they had greater FOCUS than most. Over the years, they have revealed their ‘secrets’ to others and while the concepts are simple enough, the consistent application of them is what seems to make the difference. The following are two things that can put you on the path towards Reaching Your Trading Potential: Controlling Distractions and Just Playing the Game.
I know you all have heard this one before, but if you are not doing it on a consistent basis, then you certainly need to hear it again – and listen this time.
Anything and I mean ANYthing that pulls your attention away from what you are working on should be viewed as a distraction.
If it helps, you can think of distractions (no matter how small) as bungee cords holding you back from reaching your potential. You know they are there, you try to block them out, but eventually they reach maximum tension, stopping your forward momentum and sling-shotting you backwards.
I have found that the major mistake people make is they try to block out the distractions. Fact is distractions are always present so accept them as part of your reality. Once you stop fighting with them, you can choose to just IGNORE them. Did you hear what I said? “CHOOSE.” That’s right. As soon as you see a distraction as a choice you can make, it then changes the entire game from out of your control to INTO your control – and that is where the mental game lives. In other words, let distractions become background noise in your game. No need to waste time, energy, and resources on trying to eradicate them because if you refuse to view them as a threat to your focus then they cannot be.
In trading, perhaps the single greatest distraction to a trader’s performance is the money. While money is the final measure of success in a trading career, the way to achieve that success is actually by learning how to view trading as a game.
Focus in the Face of Adversity
Trust me, it is not magic and I have found that the best way to explain this powerful concept is to walk you through an example of how two traders can react to the same setback in totally different ways. The scenario is that the traders have been trading well for the past few days and then unexpectedly get run over by the market because of factors outside of their control. The economic result is that they end up giving back 50% of their profits in one trade.
So much for being on fire. You gotta be kidding me! I knew I was due for loss. I can believe they did this to me. What a joke. This market stinks. It is totally impossible. Just when I get some momentum, they turn around and run me over. I will never get that money back.
Wow, what just happened? Wait a minute. Take a step back. Focus. No point in getting angry. I need to stay in control. I am not happy about what the market just did but I refuse to compound the problem by getting emotional. I had edge in that trade. I followed my plan. It just did not work out. And there was no way I could possibly know the market would turn on a dime. As much as this hurts, it is also the reason why I love this game.
As you can see, Trader A became emotional, erratic and angry while Trader B remained mentally focused, objective and accepting. The cold reality is that this is trading and that means there is always uncertainty and risk. Unexpected set backs are going to happen from time to time. That is the nature of the game. No one is out to sabotage you it is just the cost of doing business. Sometimes you win, sometimes you lose and sometimes it just rains.
Playing the Game
Now, let’s be clear about what I am saying. When I say “game” I mean not getting caught up in the economics or severity of any given situation. The more FUN you can have, the greater your capacity will be to remain focused and objective.
Jack Nicklaus used to talk about golf as a game of ‘amused tolerance’ where one shot makes you feel like a pro while the next shot can make you feel like a hacker. As any elite trader will tell you, success and failure in trading comes down to your ability to stay balanced with your emotions. If you are able to see your world as a game then the highs will never be too high, the lows will never be too low, and you will always have fun experiencing it.
So now that you understand what it takes, you should be asking HOW do you do it. While there is a clear answer, there, unfortunately, are no short-cuts to achieving it. It really comes down to PRACTICE, PERSISTANCE and PATIENCE.
Practice the mental skills you know you need to work on
Be Persistent in working on them
Have Patience with yourself as you develop them
Perhaps the best way I can help you master this is to encourage you to apply this philosophy to a different activity and then have you transfer it to what you do as a trader. What I mean is the next time you play golf, tennis, basketball or any other sport, focus on Seeing it as a Game and work on balancing your competitive intensity with having FUN in engaging in the activity. Be aware of the highest highs and lowest lows by catching yourself from getting giddy when things are going well and boosting yourself out of disappointment when things are not going your way.
So what is a major factor in differentiating good traders from great and great ones from the elite? Well, as you have probably guessed by now, it is not raw talent. Sure some people have a head start because of how they are hard-wired but that does not mean they are destined for success and the rest of us for failure. Remember, few great traders are born that way. In reality, factors such as controlling distractions, focusing in the face of adversity and playing the game are critical to differentiating success from failure and that is why trading is the greatest occupation in the world. The best part about understanding that is anyone can learn how to master them because it is just a choice, and one that we each can make for ourselves.
Doug Hirschhorn, Ph.D.
learning from mistakes and moving on
April 24, 2007
A client of mine asks me the following question ...
"When should a trader know when to say it is enough and I need to get out of the position. More importantly, how do you find a balance between learning from a mistake and not being weighed down by it on your next trading decision."
Here was my advice:
* if you have "edge" in a trade, then winning or losing on a trade will be determined long before you find out the outcome (profit/loss) on the trade.
* important to focus on the process of the trade... making ONLY high quality trades
* your job as a trader is not to determine or decide how much you make or lose...that is up to the market. Your job is to put on trades with "edge."
as far as not being weighed down by the mistakes, my suggestion is to begin a "lessons learned" spreadsheet where you document mistakes you make and the lesson you learned from it.
I also suggest you start a qualitative trading journal that way you can get the emotions out of your head and onto the paper.
this will help you move past your barriers and get some closure on them so you can be focused on the next trade.
Saturday, April 21, 2007
Trader Monthly Magazine...
I just finished writing my next article for Trader Monthly....wont be out for a few months - think @ Hockey Season...
but the article is a winner....as I delve into the notion of Trading for Revenge.
Journey to Greatness articles
I am currently writing a series of articles for the University of Miami Alumni Association. The theme is "Journey to Greatness." The articles are not specific to trading...but the lessons are paralleled.
For those that are interested, here are teh links:
March 22, 2007 http://www6.miami.edu/atmiami/20070322.htm and
April 19, 2007 http://www6.miami.edu/atmiami/drdoug/edition2.htm
Tuesday, March 06, 2007
For More Information on Dr. Doug Hirschhorn
Dr. Doug Hirschhorn, a regular contributor on CNBC, helps great traders deal with all of these so they can become even greater.
For more information on Dr. Doug Hirschhorn and his services, please visit his website at www.TradingDr.com or email him at info@TradingDr.com
Keep your eye on the ball and your head in the game!
Friday, October 06, 2006
Four Common Emotional Pitfalls Traders Face and How to Solve Them
Peak performance in trading is frequently hindered because of the emotions a trader feels and more importantly how their trading behaviors change based on those emotions. I have found that the following four emotional experiences have the greatest, direct impact on a traders ability to achieve higher levels of success.
1) Fear of Missing Out
2) Focusing on the Money and Not the Trade
3) Losing Objectivity in a Trade
4) Taking Risk Because you are Up (or down) Money
Fear of missing out occurs when a trader is more afraid of missing an opportunity than they are of losing money. As a result, traders tend to overtrade in a desperate effort to ensure that they do not miss out on money making situations. This over trading can then potentially trigger an under trading response if the traders experiences a “trading injury” such as a big loss, along the way. They way to solve this is first to accept the reality that you are always going to miss out on something, somewhere. The second step is to establish game plans on paper and be held accountable to executing those plans.
Focusing on the money and not the trade limits performance because the trader quantifies their success based on their profit and loss data. As a result, when he or she is up or down a certain amount of money that they view as significant, then they alter their trading behaviors regardless of what the actual, real trading opportunity is that is presented to them. The way to solve this is to quantify your success based on HOW you traded not HOW much you made on the trade. Did you have edge? Was it your pitch? Did you make a high quality trade?
Losing objectivity in a trade occurs because traders develop emotional ties to their previous entry levels. The trader is no longer making trading decisions based on the trade but rather based on how much they are up or down in the trade. The key to overcoming this is for the trader to continually ask him/herself, “Why am I in this trade?” and “If I was not in this trade right now, would I enter this trade long, short or do nothing?”
Taking bad risk because you are up or down money. People do not like to lose – especially money. Normal solid risk/reward thinking becomes skewed once a trader is up a large sum of money. They begin to experience something called “mental accounting” and they treat money differently based on how they made money or how quickly they earned it. On the flip side, when traders are down money, they tend to be consumed with trading for revenge and trying to make it back, oftentimes as quickly as they lost it. As a result, they may take “shots” or do the “screw it” trade because they feel helpless. To solve this destructive behavior, the trader should use their trading journal to document their emotional highs and lows and what triggered it so they can be in tune with when they are feeling over-confident or angry/frustrated. Once they recognize these emotions, they should immediately call a time out and step away from the computer or reduce the risk they are taking until they can bring themselves back to center court.
-- Dr. Doug
Copyright 2006, Doug Hirschhorn All Rights Reserved
Monday, July 24, 2006
WWW.TRADINGDR.COM is LIVE!!!
I am excited to announce that my my website is live, up and running!
At www.TradingDr.com, you will find:
• digital downloads you can purchase!
• dates and locations of my future speaking events
• peak performance articles
• information on how to sign up for my weekly focus groups
• schedules for my webinars
• sign-up forms for my morning motivator phone calls
• one-on-one coaching services
• and more!
Keep your eye on the ball and your head in the game!
Dr. Doug, The Trading Dr.
Monday, July 17, 2006
Available NOW for Purchase - Live Dr. Doug Presentations!
Focusing on the Trade and Not the Money
Dr. Doug, “The Head Coach,” introduces the idea of how traders should think in terms of probabilities and measure their success by the quality of their trades and not strictly based on their profits and losses. He talks about why traders do this, breaks down the basic differences between successful and unsuccessful traders and, most importantly, offers real solutions on how to overcome this destructive trading behavior.
· Purchase & Download at TradingDr.com
Overcoming Your Trading Fears
In this live presentation, Dr. Doug, “The Head Coach,” maps out the difference between Internal and External confidence. He clearly identifies the psychological impact each has on a trader’s mental attitude, how it impacts trading performance and, as always, Dr. Doug offers insights into how to establish long lasting confidence in any trading situation.
· Purchase and Download at TradingDr.com
*** These products are intended for individual sale. Reproduction in whole or part for re-sale, free distribution or sharing is a violation of intellectual property rights. Group licensing is available for purchase, please email with subject line GROUP LICENSING for more information.
Keep your eye on the ball and your head in the game!
- Dr. Doug, The Trading Dr.