Almost every single day of trading, I start
off as a whiz-kid. I make oodles of dough in the AM but way too
many times, like 3-4 days a week, I give most of it back. I
just don’t get it. Clearly I know what I am doing
– or at least I do in the morning. What happens to me?
My CIO/mentor and CRO have about had it. It’s
becoming crystal clear, through their tone and their body
language, that I am on a very short leash.
—The Morning Guy
Ugh! Very very frustrating
problem. But guess what? Believe it or not, this is incredibly
common. And better yet, there are two antidotes you can
Psychological science research recently identified
something called "decision fatigue." It’s now
considered a proven fact that our brains get tired. We
can’t make a bunch of good decisions in a row,
particularly in an environment as fundamentally uncertain as
the global markets.
Most shops think it’s a good idea to
keep their PM’s and traders "fighting for every
tick" but they couldn’t be more
wrong. They are giving up lots of alpha with this
gladiator mentality. The shop that starts encouraging people to
leave, workout and, yes, even nap (!) in the middle of the day
is the shop where returns will go up a few percentage
Alas, I know it won’t be easy
immediately proving this to "the powers that be," so in the
meantime, let’s work the psych angle.
When have you previously, in say college or high
school, snatched defeat from the jaws of victory? How many
interceptions did you throw at the end of games when your team
was about to win? Or maybe your pattern is to say just the wrong thing the moment a new chick is
about to agree to go back to your apartment? What I want you to
do is think about those old, albeit preferably forgotten,
memories. I’d bet your next winning morning that
the feelings you have now when you’ve blown
another day feel exactly like the time(s) you blew the game or
Yeah, yeah I know – every trader is afraid
of this stuff. Don’t be. Matching up the
constellations of emotions from the two seemingly very
different situations and then articulating the fear of a repeat
as it is happening, is fairly close to a
miraculous tonic for circumventing the problem.
So think about what you're afraid will happen
("If I screw up another afternoon, I'll be let go, lose my
apartment, and my wife will leave me...") and write those fears
down. Articulating these fears – in the moment
– will actually give you a path around them. Even just
saying your fears aloud – NO EDITING – can
oftentimes be enough to dissipate
some of the psychological energy that causes our
problems to repeat.
Your Late Game Cheerleader,
Readers are invited to write to
trading coach Denise Shull, a recognized expert in risk
psychology and author of Market Mind Games. Send questions to firstname.lastname@example.org.
Trading coach: Newly-minted PM asks "What’s the