What is the right motivation for trading?

Trader's Mindset

Sep 24

Now, on the one hand it is logical that one should only take a trade if they think they have positive expectancy. But, does that mean that the act of trading is about making money or that believing that the goal to make money to a greater degree makes success more or less likely?

This is a good question. And, my view is that a balance is likely required. Traders have intrinsic and extrinsic motivations.

The intrinsic motivation is to do something that we are good at and to excel at something. Extrinsic motivation is certainly to make money.

So, how does balance play in this? Honestly, I doubt anyone who is only concerned with making money will be profitable. Trading is just too difficult to be a serious money making endeavor compared to all the other more realistic endeavors without a drive to succeed based on intrinsic non-monetary motivation.

Let me give a corollary example, professional athletes are among the highest payed professions. But, who’s more likely to be successful as a professional athlete? Someone who has certain physical attributes and a passion for their craft or someone who just goes into it for the money? It would be silly for the average person to try to become a professional athlete just because it pays well or to pick a different sport that doesn’t best fit their capabilities just because it payed more.

As such, I think intrinsic non-monetary factors are more important. Most traders only concerned about money are never likely to learn trading. As such, a performance and non monetary focus is going to benefit many.

However, it becomes a detriment when taken to an extreme. A good example might be a trader who is consistently profitable trading the morning session but insists on trading the evening session to completely master the markets or to get better at his or her craft. And, that trader gives back his or her morning profits then that is an example of off balance thinking and that is where the “performance mindset” actually becomes a detriment to success. That trader could have worked in the simulator or replay or practiced the morning session.

Some traders think the markets are highly competitive. Yes, markets are efficient but it does not mean the same thing as competitive. Again, the “super competitive mindset” is very possibly just another illusionary mindset to protect the ego against the chaos of randomness.

So, yes balance is important. Balance is reflective, also, of the fact that markets are random. Yes, I agree with Mark Melnick that unbridled enthusiasm is a risk– however, I do not think that trading should be an emotionless activity. It can be certainly but emotion is information, quality of information, and elucidates important cognition.

Master trading seems to exist in the space of “balanced enthusiasm”. As an example, I called the first peak to the tick yesterday. But, I did not attempt to “instant reverse” to prove my ego correct. That would be off balance. In fact, I did not even hold the entire position for the first major peak– it was only a portion. I took off a portion at the first high probability targets. So, I think that represented balanced enthusiasm well.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at curtis@beyondbacktesting.com.