Doug Hirschhorn Interview

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Doug Hirschhorn

04 May, 2006

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Dr Doug "The Head Coach" discusses the psychology of trading and the similarities between coaching the top athletes and the top traders.

How did it all start? (How did you get into trader coaching?)
I played baseball my whole life and through college (I was a catcher). When I graduated, I got a job on trading floor for a proprietary trading firm at the Chicago Mercantile Exchange. They used to hire athletes almost exclusively because they believed athlete’s made better traders. Anyways, I worked there for a few years and then a herniated disc in my lower back forced me to leave the floor and trade equities electronically. I did that for about 9 months and then realized I wanted more out life so I left the trading world to go coach baseball…figuring I would be poor but happy. I went to do my masters degree in sport psychology and as I started to learn more about it, I began to bridge the gap between trading and sports and realized the same strategies I was using with athletes as a sport psychology consultant would work well with traders since the emotions, fears and confidence issues seemed to be similar. I put a book proposal together with my friend Shane Murphy and we submitted it to John Wiley. They loved the idea and picked it up on the spot. The title of the book is The Trading Athlete: Winning the Mental Game of Online Trading. From there I got a job at a trading firm in New York as their in-house performance coach, two years later I went in house with a hedge fund in a similar role. Now I run my own consulting business (Edge Consulting LLC) which, consult to multibillion dollar hedge funds, portfolio managers, trading firms and high net-worth traders. 

Do you think trading and sports are similar?
Not really. In fact, I find I have to deconstruct the athlete mentality from most traders. You see in sports, you are conditioned to believe that if you fail you just need to work more or try harder to get improved results. In trading this is not always the case and sometimes may even create more trading problems and even worse performance. Also, in sports you are taught to always think positive and to visualize the successful shot or throw. In trading, to be successful you have to think about how bad things can get before you do the trade. You have to know, understand and be comfortable with your downside risk. Could you imagine a golfer before hitting a shot thinking about what he is going to do if he ends up hitting it in the water hazard? That is not what you or I or anyone would call a game plan for successful golf. Fact is athletes and weekend athletes spend their time visualizing success whereas successful traders have to spend their time imagining what if scenarios, disaster situations and how to employ solid risk management. Success in sports is about maximizing the upside, while success in trading is oftentimes more about controlling the downside. On the surface sports and trading seem very similar, but go down a few layers and the mental game is quite different for each.

Do you think athletes make better traders?
Absolutely not, and I have the data to back it up. My dissertation examined that exact question. What I found was that there was no relationship between athletic background and success in trading. I did find some personality traits, however, that indicated a higher probability of success in trading. For example my study found that successful traders tended to score lower in the personality trait of openness meaning they were less influenced by outside opinion.

Why do you think the industry assumes athletes are better equipped to be traders?
I think it is because trading requires mental toughness (competitive drive, handling pressure, losing, working hard, discipline). So people assume because sports require mental toughness, then an athlete should be better equipped to trade. But I think making the assumption that all athletes are mentally tough is faulty. Many athletes are not competitive individuals. Surprisingly, some of the most well known athletes actually experience either a fear of success or a fear of failure. You don’t have to dig very deep to realize that many of them play the game praying they don’t get the ball when the game is on the line. My point is that even at the elite levels, they deal with some real fear and it negatively impacts their ability to perform. This became very clear to me as a sport psychology consultant working with professional and elite athletes. If mental toughness actually is important to be successful at trading then why couldn’t a chess player or musician or video game player be considered “mentally tough.” Of course he or she could be but the industry is just so thick headed into thinking one way. It is not much different than how Lewis describes the flawed old scout mentality in Moneyball. The fact is that just because someone looks like a ball player does not mean that they are a ball player. You have to look deeper. Same with trading. Especially with electronic trading.

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though there may not be exact correlation between sports and trading , trading has many similarities with sports. you just have to treat the losses as the points given to the opponent and had to move on and continue to play. your aim is to win the match not necessary that you win by not yielding a single point to the rival just as at the ennd of the day or week or month you have to be consisitently winning losing some money on the way and i strongly feel so long as you are trading treat it as a game which should be well played by updating your technique/yourself

Nov 29, 2008

Newbie (1 post)

interesting stuff.

i found the remark about visulisation with athletes interesting. can visualisation be of use to a trader? i guess it would be kind of dificult to see yourself thinking correctly, thinking in probabilities, thinking objectively etc.

May 06, 2006

Legendary Member (1012 posts)

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