On my path to become a consistently successful trader I went through many a challenge which eventually led me to appreciate Buddhism as my greatest trading teacher. The challenges were not so much about finding the right system but they were about my trading psychology.
Many years later it still never ceases to amaze me how the emphasis is placed on system and trading discipline as the main requirements for successful trading rather than on your inner game. The insistence of the trading community to continuously look outside of themselves rather than inside is baffling, since every performance coach will tell you how important your mental game is to succeeding. In fact good trading psychology is your greatest trading edge.
In fact as much as 90% of your success comes from your trading psychology, not your system.
I would like to introduce you to three basic pieces of wisdom from Buddhist teachings. If you can fully embrace them I guarantee you that you will have laid the foundation to become a master trader and trade well with effortless ease.
The three wisdoms are:
- Know thyself
- Don’t think
- You are not your thoughts
In this article I am going to examine the first point in more depth: Most people come to trading believing that the same traits that made them successful in another career will also make them successful in their trading career. The psychology of trading cannot be compared to the psychology through which you lived life until now., Trading demands a very different mind set then the one that made you a successful lawyer, doctor manager, husband or wife. There are very few professions which provide you with skills which are also useful in trading. Being a pilot, preferably in the military, is one of them.
Here is your challenge as trader:
We have all been brought up with a set of paradigms about ourselves and what is required of us in order to get on in life. These paradigms make up our identity which we believe to be true.
One of the first things you will learn on the path to trading success is that the old paradigms and reference points you have for success and how you need to think, act and be are absolutely useless in trading. To be a successful trader you have to don an entirely different identity. It will likely be so alien to you that you can’t even begin to imagine who you need to be.
Learning to decouple from the old reference points, and this means predominantly letting go of conditioning, is a big challenge to your trading psychology and your budding trading skills. It is in my opinion one of the main reasons why many traders fail to become consistently successful traders.
Our conditioning is like a heavy blanket covering up a lovely car.
You think you are the blanket when in reality you are the car. Getting to the point of seeing the car underneath the blanket takes courage, as it requires a departure from the confines of your present reality and your self image.
We have all learned to live by reference points. Invariably these reference points are in the past. They cannot be anywhere else. However, the past is nothing but a vacant thought, a focus on something which is not relevant to the present. Yet, we continuously choose from past experiences to define reference points for our future. Your past does never equal your future though, even though it may appear like this on the surface. Just like your last trade has no bearing on your next trade. Unlike in other professionions where you go back to the work you did yesterday, trading demands of you a clean trading mind set. You must wipe off the slate each day before you begin to trade.
This false premise from which we view reality is a costly mistake in trading, and in life in general. Instead of deciding to let the past be the past and embark on a new future from a place of pure awareness and openness to receive new information that might lead us to be great traders we insist on carrying with us all the old sludge and debris from our past conditioning.
Unless you clean the slate of your trading mind, you’ll soon run out of room to write on.
The irony is that most new traders look at finding a suitable trading system as a first port of call, once they decided that trading is for them. How can you possibly find a trading system that is right for your trading personality when you have a flawed view of yourself and therefore a false view of what is required to be a successful trader? This is rather like putting the cart in front of the horse.
Know thyself and work on your Trading psychology first. Trading is a journey of discovering the true you. Every master trader will know that this is a requirement for long term trading success. Being at ease with oneself, knowing one’s perceived weaknesses and one’s strengths and how to use both to one’s advantage are the nucleus of trading mastery. From that vantage point you will develop natural intuition and know when to trade and when to stay out of the markets, and what steps to take next.
