Psychopaths are people who don’t care about social rules and the media has made well known for committing awful crimes. Whilst this is true, it is also the case that many successful businessmen, lawyers, politicians and also traders share the same characteristics.
Of course successful people don’t usually commit crimes but they use the same skills when they deal with some problems in a work environment. For example, they focus on their goal, don’t care what other people think about them and do everything they can to achieve their goal.
Oxford University psychologist, Kevin Dutton explored the similarities between psychopaths and successful people and discovered that many, if not all, successful traders share psychopathic characteristics! In this context a successful trader looks the same after making 1 million dollars and after losing 1 million dollars. If you look at them you don’t know if he or she has just lost money or won. The reason why this helps is because if you don’t care so much if you are losing or winning then you can just be focused on your plan and follow it. Consideration is not given to whether friends will think that you are a loser or wondering if you have deserved taking a loss or not as it simply doesn’t matter and allows a complete focus on goals and do what can be done to achieve them.
For everyday traders it becomes increasingly difficult to follow your trading plan if after first big loss you become depressed and as a result change your strategy. There can also be a tendency to be too excited after making a big profit with the consequence that in future trades you will risk too much.
So just like a psychopath, you should be calm and follow your plan regardless of any of your short term results.
You “Can” Control Your Emotions and Win
Of course achieving this state of mind is not easy and if you approach trading with the same attitude as most people then you will likely take care if you lose your money or win. However, being normal is not a way to be a winning trader and you may have doubts that you can achieve the needed state of mind. I also doubted my ability but I persevered and know from my own experience that it is possible to become successful.
Ten years ago I learned how to be a winning poker player and as I have a masters degree in mathematics and econometrics, I found it relatively easy. Initially, I won some money but after few months I had a losing streak and although I played poker well I still lost a lot of the time. This is all perfectly natural so when you play poker or trade then you must sometimes expect consecutive losses and at the time it was just too much for me. I became depressed even though my losses were much smaller than my previous profits. I found it so difficult emotionally that I had to take a long break and began to think that maybe there was something wrong with me. Maybe I am not born to play poker or trade and I should find some other way of making money. In addition to this I also thought that I was unable to change my emotions.
I believed that I was not born to make money in that way because, with the exception of psychopaths, people who follow their natural emotions can’t make money on financial markets. Although I thought this it was not actually true as there are methods which allow you to control your emotions but it is not easy to find them. I decided that I had to create, or maybe just reinvent, some new ones by myself.
How to Achieve a Successful State of Mind
When you want to change your emotional behaviour you must first accept your current situation. If you are depressed or mad after taking a loss well OK it decreases your results. That said, it is not a reason to blame or punish yourself so just try to accept that fact without judging it.
Traders often think that they should be perfect and trade without any emotion but only robots are able to do this as they have no emotion and always do what you pre order or program them to do. It may seem a strange concept but as you are not a robot you will never be able to trade perfectly and from time to time you will make a mistake and especially when you are learning something new.
So start by accepting your current emotional behaviour. What’s next? Can you change it? Yes! For example, you may feel mad after taking a loss but it doesn’t have to happen automatically. After taking a loss you probably say something in your mind which makes you feel mad, for example “Oh no!”, swear or just scream. It creates an emotion of feeling mad which you later increase when you remind yourself that accident of taking a loss or comment on it.
But you can change it by first observing what you say in your mind after taking a loss and maybe it will be something that I suggested but it can be also something else. Next plan saying something positive and true, which will allow you to perceive your loss in a better way.
Here are a few examples but you can create your own solutions which better you’re your trading style and current situation:
1. “I made another step to make more money in future”
2. “I made another step to be a winning trader”
3. “I will make much more money in future”
4. “I should be happy that I am closer to making more money in future”
5. “I should enjoy my losses because I have to take them to make money”
All the above are positive and if you have a good strategy then you will find that they are also true. In the last step observe yourself and consciously say that sentence whenever you take a loss. Of course when you begin you may sometimes forget about it but it is still not a reason to be sad or punish yourself. You will achieve a faster successful state of mind if you monitor your progress and by this I mean how often you say your positive sentence after taking a loss, how do you feel after that and how it increases your results.
Michael White can be contacted at Decisive Investing