Trading Psychology: Rewire Your Brain for Maximum Performance in Today’s Markets

By Scott Redler

Chapter 3: Why Rational Traders Don't Exist

Feelings can't be ignored, no matter how unjust or ungrateful they seem.
-Anne Frank

A trader should be like a machine. You have to buy and sell without feeling any stress or excitement. When you have a bad month, you should not want to quit to go live in the woods. And when you nail a big 6 figure trade, you should not have the urge to buy a new Ferrari. Because a good trader is never emotional. 

I’m kidding! Relax!

Here’s the truth: I’ve met thousands of traders, and haven’t met one that lives up to that standard.

Think about trading as a profession. You probably know that many people do not succeed in the markets. It’s also very stressful and you have to put in a lot of time. You compete with the smartest people at the biggest banks and hedge funds in the world, who have access to superior information and technology.

And unlike just about every job on Earth, you have no guaranteed paycheck. If you lose money, your paycheck is negative. Imagine if your boss tapped you on the shoulder and said “you earned a negative $16,843 for the past two weeks."

Become a professional trader, and a negative paycheck might be your new reality. 

So trading is not a field for rational people. Rational people seeking big money pursue things like software engineering and investment banking. They don’t try to make a living speculating on stocks, options, and ETFs 5 days a week.

"Rational people pursue things like software engineering and investment banking. They don’t try to make a living speculating on #stocks, #options, and #ETFs 5 days a week." #tradingpsychology

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If the idea of putting your head down and grinding away really turns you off, you are already disadvantaged from a psychological perspective.

Let me list out some of the things I’ve seen great traders do:

  • Smash keyboards and computers
  • Punch the wall hard enough to break a hand
  • Bet $5,000 on mayonnaise eating contests
  • Make $500,000 and fly to Vegas to play craps for the first time

These were some of the smartest, most hardworking people I’ve ever met in my life. They’ve earned millions and millions of dollars in a difficult field. And many of them were very kind and generous people off the trading floor. But if you watched them trade for 20 minutes, you’d think they need to be locked up. You wouldn’t want to be in the same room with them. 

Am I, Scott Redler, perfect? No.

I have plenty of quirks. Let’s talk about Dunkin’ Donuts. Every morning at 6 a.m., I drive over for my ice coffee. If I don’t get “my” spot, I think I’m about to have a bad day. Sometimes, if I think I need some extra good karma to get through the day, I will pick up trash off the ground and throw it in the garbage can. (if you ever meet me in person, ask me why) 

One time, I was convinced the market went up because I helped a family of ducks get across the street safely! (another story you can ask me about in person) That’s just the stuff related to Dunkin Donuts at 6 am in the morning, so you can only imagine goes on for the rest of the day!

I also have a hard time dealing with the tiniest disruption to my routine. I hate any changes to my tech setup, like getting a new monitor, or dealing with an app update. I once hired an intern because I couldn’t deal with saving videos on my iPhone. Does any of this sound rational to you? No, but what I care about is my P&L. I’m not concerned with how much sense all this stuff makes to other people.

Succeeding as a trader is about doubling down on your strengths, and working around your weaknesses as best you can.

I capitalize on my strengths like my pure enjoyment of the markets and my high energy level. And I use a strict daily routine to offset my weakness, like my limited attention span. I will never be perfect, so I don’t even try to be.

Resist the temptation to be someone you’re not, especially if you’re succeeding. The worst thing you can do is abandon habits because they seem weird to other people. Your particular brand of weirdness might just be what pushes you ahead in life.

"The worst thing you can do is abandon habits because they seem weird to other people. Your particular brand of weirdness might just be what pushes you ahead in life." #tradingpsychology

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And let’s look beyond trading. Some of the greatest athletes in history had some very strange habits.

Wade Boggs was one of the best hitters in baseball history. And every time he got up to the plate, he drew the Jewish word “chai” in the dirt. Chai means good luck and life. He also ate chicken before every single game (earning the nickname “chicken man”) and always ran onto the field at 7:17 p.m.

Not 7:15. 7:17!

Sounds nutty… until you realize he was a 12X All-Star with 5 batting titles.

How about Michael Jordan? He wore his old North Carolina Tar Heels practice shorts under his NBA uniform. Why? Because he thought the shorts brought him good luck.

So since my trading career’s been going so well, I’m gonna keep picking up trash at Dunkin Donuts. And if I see a family of ducks trying to cross the street, I'll drop everything I'm doing to help. 

Action Item: Write Down Your Personal Strengths and Weaknesses

List out your personal strengths and weaknesses. For your strengths, write out how they help you. And for your weaknesses, write what you will do to overcome them, or at least minimize the damage they can cause.

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