OK, so I was reading The Psy-Fi Blog, this post:
Is Your CEO a Psychopath?
You see these sorts of articles around from time-to-time, though they are usually titled “Is Your Boss/Manager a Psychopath?”, which is always good for a giggle or two.
Anyway, so I read the Psy-Fi blog post and I got to thinking, what if there was anything useful a psychopath could teach about trading? What if there were characteristics of psychopaths that could be helpful in trading?
Now, don’t get me wrong, I’m not suggesting doing things that could be harmful to others, like a real psychopath would do (and BTW, where are the articles titled “Is Your Broker a Psychopath?” I digress.) But are there any behaviours a trader could adopt from psychopaths that would benefit his or her trading?
OK, so from the Psy-Fi post:
Psychopaths lack empathy, are pathological liars, have an enormous sense of self-worth, are impulsive, irresponsible and won’t accept responsibility for their own actions. They make up 1% of the total population, 25% of the criminal population and, by some accounts, 4% of corporate boardrooms.
Let’s look at those on by one, starting at the last one:
Won’t accept responsibility for their own actions.
Well, that pretty much won’t work. When its you clicking the ‘Buy” and “Sell” buttons the responsibility is all yours. I suppose you could blame someone else, or a manipulated market … but your account balance aint gonna care who you blame. Nope, gotta take responsibility.
Again, that wont work out real well. By all means trade irresponsibly … see how long your account balance lasts. Nope, that one’s no good for a trader.
I’m taking that to mean they do things without thinking them through. Again, can’t see this as being beneficial (not discounting the notion of sometimes acting in gut instinct, if you are experienced enough to do so – sort of like in Gladwell’s book “Blink”, but this is not what I think of when I think of being ‘impulsive’ … its more ‘intuitive’ … yeah, intuitive, that’s OK).
Have an enormous sense of self-worth.
Well, dunno about this one. A big ego is not a rare thing amongst successful traders. But its not rare amongst unsuccessful traders either. Hmmm, dunno. Moving on.
Are pathological liars.
Again, wont work if you are lying to yourself about your trading. Account balance don’t lie.
Psychopaths lack empathy.
OK, now I think we are getting somewhere … Let me expand a little on this.
Again, from the Psy-Fi article:
someone who believes that the only role of business is to maximise profits, regardless of the human cost …
OK. Now trading is, for many (not all), a solitary endeavour. A lot of the points I have touched on have been about how you treat yourself … taking responsibility, not lying to yourself, as two examples. I think the empathy thing has to be applied here too.
When trading, do not be empathetic to yourself and your feelings.
When the time comes to buy, to sell, to take profit, to take a loss, forget about how you are going to feel and just go ahead and do the deed. Go ahead, take the profit. Sure, it might continue to go your way and you could have made more and you will feel bad about that – tough. Or, its time to stop out, to take the loss. So you do … and then the frikkin’ thing turns around and roars back up. Now you feel bad. Tough. This is business. Its not about feeling good or bad. Its about doing what needs to be done. Sticking to your system, or your method. Regardless of feeling good or bad. You stopped out at the bottom? Feel bad? Allow your inner psychopath out, be non-empathetic. Its just business.
Have a think about what you normally do when you feel things are not going well. Maybe you hit your head on a cupboard door or something. Maybe a loved one got upset with you. Maybe your favourite TV show isn’t on, replaced by the golf or something for today. Its OK to feel a bit sorry for yourself. Do something to make yourself feel better, we all have our escapes … alcohol, cigarettes, chocolate, tea, coffee, French fries … whatever. Its normal. But when we are trading we need to be much better than normal. Much better.
When trading we are going to do things that might make us feel bad. But its business. Put the empathy (for yourself) away. The part of you feeling bad needs to be pulled into line – there is a job to do and its gotta be done. Feeling bad is a luxury you cannot afford, it messes with your responses. You lose focus. That’s not good. Grow up.
Actually, more precisely, its what we do to be empathetic to ourselves when we feel bad that is not helpful:
“If I hold this position a little longer, it might come good”. THAT is just you trying to make yourself feel better. THAT is empathy. Let your inner psychopath out, deal with the issue right now. Disregard how you may or may not feel about it … be a psychopath. Hit the stop out. Your inner psychopath wants to do business, he or she doesn’t care how you feel. Your inner psychopath is right.
“I just got short and now the market is behaving as if its going to go up … but I’ll hold the short just a little longer and see what happens.” THAT is just you trying to make yourself feel better about your shorting decision. DO NOT be empathetic to this response. Let the psychopath out, show no empathy, deal with the issue right now. Switch to long. Your inner psychopath wants to do business, he or she doesn’t care how you feel. Your inner psychopath is right.
(Again, let me separate what we might do to help us feel good from what me might do because we have an instinct, an intuition based on our experience of what is happening in the market).
We are not doing this trading stuff to feel good. We are doing it to do business. Making yourself feel good is for normal times, not market times. During trading hours, let your inner psychopath treat your feelings like he just doesn’t care. It’s the right thing to do. Cruel to be kind.
OK, when trading is done for the day, when you’ve finished, put the psychopath away. Time for some empathy. Stub your toe on the desk chair? That’s awful. There, there. Have a beer/coffee/chocolate/whatever to feel better. Its OK now. The inner psychopath can be set free for tomorrow’s trading.