If you want to build muscles, you have to work them to the point of failure. If you want to win a race, you can’t hold back; you have to give 100%.
When it comes to trading however, there is a paradoxical relationship between effort and results. In coaching traders, I’ve observed that the harder one tries to win, the less money one is likely to make.
The law of diminishing trading returns is a trap many men fall into, because when men experience resistance or obstruction, we have a natural tendency to force things. That’s what muscles are for. Right?
In sports, however, success requires a combination of conditioning and skill. Of course, some sports emphasize one factor more than the other. In football, for example, size and strength matter a great deal. In tennis, success depends more on skill and finesse.
I play tennis competitively and get weekly coaching. After trying my hardest to put away one of my coach’s shots and hitting it into the net, he commented that “Winners happen; but the more you try to hit one, Ken, the more often you will lose the point.”
His remark reminded me of the guidance Morpheus offers to Neo in the virtual dojo: “Stop trying to hit me and hit me.”
Trading is a sport that requires mental and emotional conditioning in order to stay in good trades because we need to have a good grip on reactive selves. But forcing trades will get us in trouble.
When we try too hard, we depart from our basic trading plan and rely on improvisation to regain our advantage. These tactics include overtrading, chasing, doubling down and impulsively reversing the position. As we scramble not to get stuck with a loss, everything we do to save ourselves increases risk and usually makes the situation worse.
When I tried to smash the tennis ball I tensed up my arm and my mind, which stopped the natural flow that enables my body to execute a coordinated and accurate shot.
Does this happen to you in trading?
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Join Kenneth Reid, a trading coach, each Wednesday on TraderPlanet for his: The Dr. Is In column.
