The Secret Power of the Guru

Trader's Mindset

Apr 06

Have you ever wondered a possible secret mechanism that underlies how trading psychologist, coaches, and self-help gurus are able to produce positive change? Have you ever found yourself in a “losing” rut or lacking motivation? In this post, I will share an epiphany that I had and that anyone can use to highly energize ones trading and the best part: no guru required.

First, let us consider the trader in a losing rut loop. In a losing rut, whatever a trader is doing is not working and, as such, the trader is not getting rewarded for his or her trading. Do most people want to work more or less on something that is not producing results? Most people will work less when they are not getting positive results. However, the motivated trader will still desire to trade and to win: as such losing trading is likely to keep ongoing. Worse, the losses can lead to negativity which can make it difficult to process and identify market opportunity correctly. The net result is a lot of trading, not a lot of perceiving, and greater then typical losses.

Eventually such a trader is likely to seek out a self-help coach, other traders, or trading psychologists. And, often just that process can lead to changing in processing loops that can setup the stage for success. The trader may switch from an internal processing loop to an external processing.

On internal vs external processing loops, a brief diversion: I have noticed a peculiar pattern that when I have been unable to solve a problem that I have often near instantaneously received the solution by simply asking or posting the question and that is before anyone answers. Of course, it is a very peculiar phenomena. However, an explanation that does not require super-normal information transfer is that people have internal and external processing networks– and that we may gain insights when changing processing modes. My point is that simply by listing and starting to process what others are doing– may allow the trader to tap into deeper creative networks where solutions may be found.

The second factor is that everyone is suggestible to some degree. Some people are suggestible to a lesser degree while others are hyper suggestible. The degree does not seem to a factor that is related to ones education, intelligence, or objectivity. For many, the mere suggestion of positive change can cause one to change their processing mode from a negative outlook to a more positive outlook. Second, everyone has untapped ability in every aspect of their lives. As such, in a positive state one is more likely to be able to perceive opportunity in the market. This change in positive outlook likely leads to increased work. But, not just any kind of work: super focused and inspired work which is time accelerated work. In a nutshell, all of those changes can lead to a positive feedback loop and greater trading success.

As for how you can make these changes. First, you have to be careful about being over;y cynical. Cynicism is a certain orientation toward processing markets that is associated with losing. It is often an excuse that losers use. A better attitude is that one can take any method and make it work regardless of whether it actually works for the one teaching it.

An alternative way of thinking about it, is that in any trading approach there is (1) a skills orientation, (2) a method orientation, and (3) a market orientation. In other words, a trader can work on their trading skills, their methodology, or identifying market opportunity. As a trader, you need a balance in pursuit of skills, methods, and opportunity focus. You may be able to change your orientation by evaluating your skills, method, and market orientations. Most big money traders are more market focused: however, exclusive focus on speculation is more likely to lead one into trouble too. Too much focus on skills may lead one to missing the easier market opportunities. Most professionals have, at least, a few methods that can work well in different market regimes: overly focus on narrow method range can create mismatch between market opportunity and method.

Another way to change your orientation could be to try to share or teach your method or best trades. This may help one to change the market processing loop. Connecting with other traders, sharing trades, or creating educational materials may be helpful. Looking at other holding periods, products, and methods may also help spark the ignition.

On the other side, connecting with other traders to learn from them can be helpful especially if one has the mindset that I had when I started and that mindset was that I could take any method and make it work– even if it did not work for the actual one teaching it (where work for me was defined as making winning quantified predictions). This is a great mindset because you can get new ideas from many sources and use market orientation for the refinement and validation.

Finally, changing ones evaluation yardstick from an overly focus on results toward working on skills, method, and market orientation may help one shift their perspective. It cannot be stressed enough that keeping losses small or even microscopic is paramount to be able to develop consistency because it is the only way that one can stay in the game.

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.

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