Why trading shouldn't be exciting

April 7, 2015

 

In An End to the Bull I write how for many retail traders, trading is an exciting occupation or past time. They may not trade too often, perhaps a few times per week and typically they will experience some form of excitement or anxiety when they trade. For some it is the thrill of trading that makes them want to come back for more.

 

However, to develop a career as a trader we actually need to eliminate the excitement - trading should not be a thrill seeking exercise; if you want an adrenalin rush try parachuting. Trading must solely be a means to making money.

 

When I teach traders, whether they are retail or institutional, I make it clear that I want to make trading as boring as possible. I want to strip out the excitement and emotion as well as the large P+L swings. I want to take traders off the roller coaster that most are on and place them on a steadier path.

 

In this regard, scalping can help in a variety of ways and here I will explain just two.

 

Firstly, we trade dozens of times per session and hundreds per week- this will help to desensitise us from the trade. Repetition should help traders overcome excitement  - the more we trade the less of a thrill each trade should be. The first time you drive a car on your own you might well be excited but after hours in the drivers seat the excitement disappears.

 

This is similar to professonal sportsmen who practice for thousands of hours to both improve their skills and to take the excitement out of the key moments. A professional golfer will practice 4 foot putts for hours so that when he has to do so in a tournament it will hopefully be just another putt. However, if I have an important 4 foot putt I know that I will become nervous, excited and my chances of making it will diminish.

 

So trading hundreds of times a week should help to take the excitement out of trading.

 

Second, as scalpers we are only trading for a tick or two per trade so perhaps $10-$30. A bad trade will usually either be scratched or lose a tick or maybe two (note we target 80%+ profitable trades). So we don't have thousands of dollars or even hundreds riding on each decision. For some traders, a couple of losing trades can lose them thousands of dollars - for scalpers we might lose $40 in the same situation. Again this should help to take the adrenalin and anxiety out of our trading.

 

So if you find trading exciting then you need to reexamine what you are doing. Contrary to the films and

 

media views about trading, in order to survice years as a trader we need to strip away the excitement and make each trading day as plain vanilla as possible.

 

 

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