In his book "Play To Win" Larry Wilson talks about the difference of people who are 'playing life to win' versus 'playing life not to lose'. His approach is similar to Tony Robbin's theory that the two main drivers for why people do what they do are either the avoidance of pain or the pursuit of pleasure. (check out his fabulous TED talk http://www.tradingpsychology.com.au/tradermindvideo/ .
These are two very important concepts that I also see in many traders. Knowing how traders approach their life towards or away from can give us some very good indication if a trader will be successful or if they first have to change their mindset in order to become a profitable trader.
Most 'not so successful' traders apply the 'trading not to lose' (TNTL) strategy and in their attempt to avoid losses they actually make these even worse. A TNTL trader is usually more driven to avoid the discomfort of having a losing trade than by making profits. They have the need to remain in their comfort zone as losing is for the majority of traders connected with uncomfortable if not painful feelings such as fear, despondent, and self-doubt that they will ever be able to achieve their dream of beign a successful trader, constantly looking for relief from these painful emotions after a losing trade.
If you are a trader who is 'trading to win' on the other hand, then you are most probably already successfully on your way to living your dreams. A 'trading to win' trader knows and accept (meaning they don't wish it were any other way but just deal with the facts) that losing is part of trading based on mathematical probabilities. That if their system has a 70/30 win loss ratio, 3 out of 10 trades will inevitably be losers. and that is is not a big deal. They don't expect every trade to be perfect (because they think they have to be perfect in order to be loved and accepted), they don't fall in love with their 'perfect' score after having had a string of profitable trades, as they know this is not the point of trading and no one cares anyway, no, all they care about is if they have performed at the best level possible, what they have learned, if they have improved and if they have generated enough profits at the end of the month to pay the bills and enjoy the lifestyle.
Every human being has mental models or also called paradigms that filter their perception. Someone who is TNTL will have the paradigm that there is scarcity, they are generally mistrusting and lack confidence in their abilities. A trader who experiences life through those paradigms usually has the need to exert control over their life.
Here are some more points;
Trading Not To Lose
Trading To Wn
|Suffers from tunnel vision. All this trader is focused on is not to lose money in any trade.||Sees the big picture of each trade in the context of their last let's say 20 trades or last week.|
|Worries how much money they win or lose in each single trade. See each trade as a single event.||Takes each trade as part of a bigger sample size and looks at any profits / losses in the context of the size of their trading bank., win-loss ratio, expectancy etc.|
|Take their profits too early because their exit strategy is driven by trying to eleviate the emotional pain and the fear of losing the profits they have made.||Let their profits run solely focusing on facts, figures and data, evaluating if the trade his hit the pre-determined stop loss or profit target as per trading plan.|
|Don't take their losses but let them run into the abyss because they are afraid of the painful feelings of having lost more than planned.||Don't have painful feelings around a loss, they might feel annoyed or frustrated, but get past it very quickly. They take their losses based on rational analysis following a pre-determined plan no matter how they feel about the loss. They just do what needs to be done.|
|Believe a loss is a reflection of who they are (I am a loser, I am useless, I will never make it).||A losing trade is a losing trade, it is simply what has happened and maybe could be managed better next time. It is something they did. Who they are is someone who is committed to excellence and becoming a better trader tomorrow than they are today.|
|Are upset and whiny driving their family crazy, focusing solely how much money they could have made, how much they missed out on, wallowing in the past and hence missing out on a bright future.||They might get angry for short period of time but then very quickly move on as they know there are infinite opportunities waiting for them in hte future so they learn what needed to be learned from the past, move on and start focusing on the present again, looking for new trading opportunities.|
I hope this article is useful for you and will help you to progress further on your trading journey.
If you are looking for help with your trading psychology and how to improve your trading performance please feel free to contact me and discuss how coaching could help you to achieve your trading goals faster.
With a toast to your trading profits
Mandi Pour Rafsendjani