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Trade Management Requires Self-Management

Site Administrator | September 16, 2011

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We would like to thank Dr. Andrew Menaker for taking the time to write a special post for the TradingPub blog and also for agreeing to provide education for our patrons on Thursday, September 22nd.  If you would like to register for this free educational event on Handling Uncertainty, please click HERE.  You can learn more about Dr. Menaker at http://www.andrewmenaker.com/.  We hope you enjoy the guest post as much as we did!

If you stay in the business of trading long enough there comes a point where you realize that, yes the trade entry is important, but what’s even more important is your exit.  I know this from both my own trading and having worked with professional traders for many years.

I hear from traders all the time telling me how they can’t seem to hold onto winners and how they have difficulty letting go of losers. And how frustrated they are when they end up doing the same thing over and over. But what do most traders usually do about it? They spend more time tweaking their set-ups (the search for the holy grail…or some degree of unattainable precision).

Now, before you read any further, I want you to stop for a moment and evaluate whether or not your trading method actually has an edge (be honest with yourself). Okay. Let’s assume you’re still with me and you honestly believe you have an edge. Without an edge, everything I’m going to say after this is moot.

Traders share all kinds of things with me, such as how great their method is. They show me on paper, on sim, or on the chart, while others (such as the professionals) may describe the robustness of their macro strategy. But then they get to the point where they tell me how frustrated they are that they can’t execute consistently.

For most traders, both pros and home gamers, how you handle your exits will have a huge impact on your P&L, often a greater impact than your entries   Yes, trade entry location is important, but it’s the exits that can really act as a drag on your P&L regardless of how good your edge is (trade entry issues such as hesitation or impulsivity are another story).

One of the most important things I teach traders (who have an edge) is how self-management leads to better trade management.  As a psychologist and an active trader myself, the connection between self-management and trade management is abundantly clear. In fact I would go so far as to say that trade management is self-management. But for many traders, self-management is the missing piece of their trading.  And once they begin to earnestly emphasize and actively engage in self-management, their P&L vastly improves. But it’s not as easy as it sounds. It requires constant effort. Just because someone gives you the keys to the Ferrari doesn’t mean you know how to drive it.

The inherent uncertainty involved in trading is for many people too much too handle. One reason is that the brain typically connects fear with uncertainty. And how we respond to fear directs our trading.

I’m going to be brutally honest with you and tell you that self-management is an ongoing process….you never ‘arrive’; there is no ‘cure’.  Positive thinking, affirmations, mindfulness, guided meditations, NLP, etc are helpful tools, but often not enough for most traders due to the constant uncertainty and the fact that fear is associated with uncertainty for most people.  Good trade management requires self-management, and that requires that you manage your response to fear. You can not eliminate fear, but you can manage your response to it. But it takes effort.  That’s what I do in my consulting and coaching. And I will tell you, self-management is a ‘live’ (real-time) constant process.  As Aristotle said, “Excellence is not an act, but a habit” And in trading I can tell you that consistency occurs first in the mind, then in our actions, and finally it shows up in our P&L. There is no way around it.

“One of the most fascinating things about golf  [Trading] is how it reflects the cycle of life. No matter what you shoot – the next day you have to go back to the first tee and begin all over again and make yourself into something.” – Peter Jacobsen, champion golfer.

Special Guest Post by Dr. Andrew Menaker

Be sure to join us this Thursday for an educational session on "Handling Uncertainty".  Click HERE to register.

Cheers,

The TradingPub
"Trade, Talk, Learn- Cheers to Success"

Disclaimer: Article intended for traders and not English majors. Disregard any misplaced commas.

We would like to thank Dr. Andrew Menaker for taking the time to write a special post for the TradingPub blog and also for agreeing to provide education for our patrons on Thursday, September 22nd.  If you would like to register for this free educational event on Handling Uncertainty, please click HERE.  You can learn more about Dr. Menaker at http://www.andrewmenaker.com/.  We hope you enjoy the guest post as much as we did!

If you stay in the business of trading long enough there comes a point where you realize that, yes the trade entry is important, but what’s even more important is your exit.  I know this from both my own trading and having worked with professional traders for many years.

I hear from traders all the time telling me how they can’t seem to hold onto winners and how they have difficulty letting go of losers. And how frustrated they are when they end up doing the same thing over and over. But what do most traders usually do about it? They spend more time tweaking their set-ups (the search for the holy grail…or some degree of unattainable precision).

Now, before you read any further, I want you to stop for a moment and evaluate whether or not your trading method actually has an edge (be honest with yourself). Okay. Let’s assume you’re still with me and you honestly believe you have an edge. Without an edge, everything I’m going to say after this is moot. 

Traders share all kinds of things with me, such as how great their method is. They show me on paper, on sim, or on the chart, while others (such as the professionals) may describe the robustness of their macro strategy. But then they get to the point where they tell me how frustrated they are that they can’t execute consistently.

For most traders, both pros and home gamers, how you handle your exits will have a huge impact on your P&L, often a greater impact than your entries   Yes, trade entry location is important, but it’s the exits that can really act as a drag on your P&L regardless of how good your edge is (trade entry issues such as hesitation or impulsivity are another story).

One of the most important things I teach traders (who have an edge) is how self-management leads to better trade management.  As a psychologist and an active trader myself, the connection between self-management and trade management is abundantly clear. In fact I would go so far as to say that trade management is self-management. But for many traders, self-management is the missing piece of their trading.  And once they begin to earnestly emphasize and actively engage in self-management, their P&L vastly improves. But it’s not as easy as it sounds. It requires constant effort. Just because someone gives you the keys to the Ferrari doesn’t mean you know how to drive it. 

The inherent uncertainty involved in trading is for many people too much too handle. One reason is that the brain typically connects fear with uncertainty. And how we respond to fear directs our trading.

I’m going to be brutally honest with you and tell you that self-management is an ongoing process….you never ‘arrive’; there is no ‘cure’.  Positive thinking, affirmations, mindfulness, guided meditations, NLP, etc are helpful tools, but often not enough for most traders due to the constant uncertainty and the fact that fear is associated with uncertainty for most people.  Good trade management requires self-management, and that requires that you manage your response to fear. You can not eliminate fear, but you can manage your response to it. But it takes effort.  That’s what I do in my consulting and coaching. And I will tell you, self-management is a ‘live’ (real-time) constant process.  As Aristotle said, “Excellence is not an act, but a habit” And in trading I can tell you that consistency occurs first in the mind, then in our actions, and finally it shows up in our P&L. There is no way around it.

“One of the most fascinating things about golf  [Trading] is how it reflects the cycle of life. No matter what you shoot – the next day you have to go back to the first tee and begin all over again and make yourself into something.” – Peter Jacobsen, champion golfer.

Special Guest Post by Dr. Andrew Menaker

Be sure to join us this Thursday for an educational session on "Handling Uncertainty".  Click HERE to register.

Cheers,

The TradingPub
"Trade, Talk, Learn- Cheers to Success"

Disclaimer: Article intended for traders and not English majors. Disregard any misplaced commas.