By John Sheridan
Trading can be a microcosm of life. We should all begin our trading journeys with a blank canvas, learn the relevant strategies, master risk and money management, then practise, gain experience and finally become a successful trader.
But we don’t. Instead, we bring to trading elements of our personality, and our individual quirks and foibles. You learn very quickly with trading what will serve you and what won’t. Whether you act on that feedback is another matter.
You can get away with being brash or impulsive in real life - at least some of the time. However, the market will inevitably punish ill-considered action. You either learn quickly from your mistakes, or are doomed to keep repeating the same errors over again.
One thing that many of us do in life is spend time comparing ourselves to others. Your colleague may be getting a promotion, so you feel you should be pursuing promotion. Your friend may have decided to buy a house, so you feel that it’s time for you to get onto the property ladder as well.
Many of us do this to some extent and it is debateable whether or not this behaviour is of any use to us. But one thing we can be certain of, is that comparing yourself to others won’t move you forward when it comes to trading.
You may have friends or read articles about traders who are achieving stratospheric results. But while this may have some value in terms of illuminating what is possible, the only thing that really matter is what you are doing.
If you trade Foreign Exchange, there is no value in comparing yourself to someone who trades treasuries. If you have a fulltime job and trade in your spare time, then being disappointed that you’re not getting the same results as a full-time trader isn’t appropriate.
The important thing in trading is to realise and acknowledge that the only real competition is with yourself. You need to be 100 percent focused on continually improving your performance, not trying to outperform one of the Market Wizards.
Your aim should be to improve on your last month’s performance, or your most recent trade. In the same way that athletes go through recordings of their performance, frame by frame, looking to gain the slightest edge, we need to continually analyse our performance in the same way.
So review your trading logs to identify which markets or setups are most profitable for you, then concentrate on those and cut the underperformers. Keep screenshots of each of your trades along with notes about the logic, so you can review them after the fact to see where there’s room for improvement.
All of this analysis will keep you on the track of continual improvement and focused on you, not the competition.
But above all else you need to be brutally honest with yourself. If something isn’t working for you then you need to acknowledge that and do something about it. Even though you are the competition, you really don’t want to finish second.