Perfectionism in Trading

There are only a few ways to work to change the habit to a favorable habit to trade successful...
Almost everyone carry over from their life’s knowledge and experience to trading and quickly find out that these don’t work so well in trading. Traits that made these traders in their daily lives successful and respected are little useful. The need to win every trade is a weakness must be addressed.

There are 2 types of perfectionism: one that would work in trading and one that doesn’t. The difference is simple: perfectionism in flawless executing of the rules and trading plans and perfectionism in having all winning trades or perfect record. These two perceptions make important differences in trading. If a perfectionist cannot change, at least he can change in more constructive way to help him succeed.

What is the difference and how does it affect trading? When a trader decides and expects a perfect record in winning trades, this is a setup for failure. Why? Because no trade is perfect and no trade will result in a winner. This is uncertainty and no can predict the next trade will be a winner.

Perfectionist must have complete control and this plays a major conflict with an uncertain outcome of the market. It’s a fact of life. No winningest team ever had a perfect record. Understanding this and accept failure as a process will lead to the second and better part of perfectionism: that is perfecting the execution of entries and exits and in following the rules. Once he has a winning method, it’s only a matter of executing the entry correctly, that is, getting in at the right price and not chasing or not hesitate and let the entry go when the signal is given. Perfect execution also means exiting at the right time and price; not waiting to get one more point due to wanting more or take exit early just to record that profit or not wanting to lose more when the stop has not been touched yet. By deviating from the rules and plans, sloppy execution is sure to follow. Perfectionism requires discipline and for perfectionists, discipline is the major positive attribute to success in trading. So perfectionists in many ways have the right mindset to succeed but he must channel that mindset in a correct way.

There are few ways to work toward channeling the actions properly. Here are a few suggestions:

1) Forget about performance and results numbers (i.e. P/L, Wins vs. Losses). These numbers only blur the plan and increase the anxiety on not losing on next trade. This aggravates the proper mindset to prepare to trade properly. Perfectionists will not execute well and will try to focus on buying low (bargain hunting to win) when the entry is not right.

2) Create the trading plan and write it into details to avoid ambiguity. This helps prevent loosely interpreted actions and end with too much leeway and perfect execution won’t be successful.

3) Focus on the charts and work toward identifying and preparing the entry and exits. Having these numbers in mind will keep the focus on the executing at the right prices.

4) Focus on the Risk:Reward ratio in mind. Having this ratio will keep the execution precise because any miscue will change the ratio in negative way. If the ratio is set, chances of the making the perfect entry and exits are higher.

5) Be picky with trades. Perfectionists love the trade to go right. Waiting for the right setup to come will reinforce good habits: perfect plan and execution.

These are only a few ways to work to change the habit to a favorable habit to trade successful. Exercise it with vigor and the payoff will be seen almost immediately.