Why Can't Trader Bill Win?

04/04/2017 12:00 pm EST

Focus: STRATEGIES

Jake Bernstein

Publisher, The Jake Bernstein Online Weekly Capital Markets Report and Analysis

Many traders realize that the problems that limit their success are not trading methodologies or strategies but in their minds. In this first of three articles, Jake Bernstein outlines trading discipline. He’s the longtime publisher of The Jake Bernstein Online Weekly Capital Markets Report and Analysis.

Bill fidgets anxiously while waiting in Dr. Mosley’s office. He would rather be trading.  He glances at the numerous diplomas certifying the good doctor as an experienced psychiatrist. He has never seen a shrink before.

What will the doctor do? What will he ask? Will he want to talk about my potty training? Can he actually help? Is there medication for my trading problems? There must be a solution!

Dr. Mosley is the stereotypical psychoanalyst: short beard, mustache, early 60s, salt-and-pepper hair, with probing eyes.

“Bill, what brings you here today?”

Holding back tears, Bill erupts in a long overdue stream of consciousness with an historical overview of his persistent and chronic failures as a trader. Nodding understandably while taking notes, Dr. Mosley interjects occasionally with the standard “uh huh.” After 15 minutes of catharsis Bill finally asks: “Can you help me, doctor?”

“Bill, your trading problems are symptomatic of other problems that are dwelling deep in your subconscious. These problems didn’t begin yesterday--most likely they have plagued you since early childhood and they express themselves in other aspects of your behavior as well. Because these problems are chronic and because they’ve taken many years to develop, they can’t just go away magically overnight.  I would recommend based on these issues, that we meet two or three times a week where we will begin to resolve your problems where they started in early childhood. This will take a financial commitment as well as a time commitment.”

Bill is taken aback. He had no idea things were so bad. What the doctor says is making sense. He understands other problems: his marriage, his children, his personal failures, his relationship with his parents, and with coworkers, are all related, intertwined with discipline. Yes, it is a great deal of work to be done.

He can only hope that it progresses quickly so that he may begin on the slow and steady road to profitable trading.

There is no pill for his ill.

Bill’s problems and potential solutions are typical. Many traders who cannot achieve success face them. Some realize that their issues are not necessarily with their trading methodologies or strategies--but rather in their minds.

Countless books (including some of mine), seminars, webinars, articles, and courses have been offered to traders as solutions. Some individuals hold themselves out to the public to be counselors, or mentors or therapists purporting to have solutions. The most common buzz phrase is centered around the word “discipline.”

Unsuccessful traders are constantly being told that they need to “find discipline” or “develop discipline” or better yet, “get discipline.”

On the surface that sounds reasonable and logical. However, the process of doing so leads to many dead ends, to many questions and to considerable frustration.

Why? To solve the problem, you need first to define it. Defining the term discipline is a considerable task because discipline is a chameleon that takes many forms and shapes. Discipline means different things to different people. How can we catch that tiger by the tail?

This article and the next two will focus on the issue of discipline as well as the most parsimonious, logical, and effective ways I have found to deal with this issue and its many appendages in my 50 years as a trader.

In most cases I do not believe it is necessary to lie on a psychoanalyst’s couch for many hours for many years.  I am not a mental health professional and I offer no advice in that area but I do know trader behavior, how it develops and how to improve it. Discipline derives from confidence. If a trader is confident in their methodology, then they will execute that methodology with discipline.

If their strategy is 100% objective and it back tests profitably, and they execute with discipline, their overall results will be positive. Positive results will reinforce confidence. Confidence will reinforce discipline. More discipline will lead to more profits. More profits will lead to more confidence. More confidence will lead to more discipline. Think it through until the next time we meet.

Best of trading!

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