A Trader’s Mindset – Article #9 – March 18, 2022

I’ve mentioned before that trading and athletics have numerous similarities. The most significant among these similarities is the mindset required for success. In both trading and sports, individuals must be able to overcome adversity and find consistency in order to succeed. For athletes and traders alike, falling into a slump can be deadly. A few bad days can affect one’s mentality and compound the bad days into bad weeks or months.

Take Russell Westbrook for example. Westbrook is a nine time NBA all star in the midst of a horrendous slump. He is clearly talented and knowledgeable about the sport of basketball, but lately he can’t get out of his own way. His performance has been so bad that fans have given him the nickname “Westbrick.” How is it possible for a mega star, one of the top 100 humans to ever play the game, to all of a sudden have his performance fall off of a cliff? The answer… mindset. Westbrook’s struggles are being amplified by the mindset he has fallen into. Of course, I can’t read his mind nor will I pretend to know exactly what is going through his mind… but he is clearly in his own head. With all the pressure from his team, his fans and himself, he has not been able to crawl his way out of this slump. The longer these slumps continue, the more doubt and frustration creeps in which only compounds the issue further.

As traders, this may sound quite familiar. Sometimes a great trader has a horrible day/week. It is crucial to prevent these times from sending us into slumps. There are several ways to do this (taking a break, sizing down, focusing on one specific strategy, etc) and it will differ for each trader. The point is, everyone needs a ‘reset’ process to keep our minds focused on objective execution of our strategy. As odd as it may be, a great way to improve in this regard is to study the mindset of professional golfers.

Golf is an individual sport. A professional golfer, identical to a trader, is fully responsible for their success and their failures – there is no team to share the blame. Because of this, golfers are among the mentally toughest athletes. If a professional golfer cannot set aside their most recent mistake and focus on the next shot, they will not be a professional for long. To illustrate this fact, let’s take a look at Cam Smith’s recent win at The Player’s Championship.

For context, Smith entered the final round of the tournament within a few shots of the lead. The winner of the tournament stood to make a whopping $3.6 Million.

After the first 6 holes, Smith had jumped out to a 2 stroke lead. He then proceeded to bogey the next 3 holes, giving up his lead. After 3 bad holes in a row and giving up his lead, Smith very easily could have shut down and allowed his mistakes to compound. Instead, he remained mentally strong. He put the mistakes behind him, focused on one shot a time and went on to birdie the next 4 holes. He ultimately won the tournament and took home $3.6 Million. Smith understood his capabilities, he understood what he needed to do and he found a way to execute. He didn’t become a better golfer between holes 9 and 10, he simply stayed mentally strong and returned to the peak form he knew he was capable of. Cam Smith displayed (literally) a $3.6M mindset.

This is what is required of us as traders. We are all aware of our capabilities as traders. Finding a profitable system is one thing, but having the mindset and discipline to execute the system consistently is a completely separate and much more difficult task. To make matters more complicated, there are no ‘right answers’. Everyone has to find this discipline and consistency in their own way. The only way to do this is through honest introspection. Can you identify your strengths and weaknesses? Can you identify what causes you to trade below your skill level? Can you develop a system to prevent this? These are all things each trader must answer for themself. To be successful, we must be able to set aside the past and focus on the next trade – no fear, no doubt, no arrogance. I challenge you all to take some time this weekend and really evaluate yourself. See if you can answer some of the questions above. Understanding what leads to lapses in discipline can only help in the long run. As I find myself saying nearly every week… small adjustments such as this will compound into massive improvements over time.

1 thought on “A Trader’s Mindset – Article #9 – March 18, 2022

  1. Ron Reply

    Great read! Will def take some time this weekend to ask myself the above questions and make some adjustments!

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