Losers Anonymous

“People at the AA meeting talked about how alcohol controlled their lives, and my trading in those days was driven by losses – fearing them and trying to trade my way out. My emotions followed a jagged equity curve – elation at the highs and cold clammy fear at the lows, with fingers trembling above the speed dial button.”

As I am making my way through Dr. Alexander Elder’s book Come Into My Trading Room, I found this comparison he makes between Traders and Alcoholics to be incredibly fascinating. At this point in the book, Elder is describing the frame of mind a successful trader needs to have, including the importance of discipline, maturity, and self-awaredness.

Elder illustrates that many traders, like alcoholics suffer from a compulsion. They break their own rules, knowing full well that the decision is taking them down the wrong road, but they can’t help themselves because of the excitement. He also describes that both traders and alcoholics have an unwillingness to document or analyze their decisions or take responsibility for them. Both groups tend to blame everyone but themselves.

As traders, much like alcoholics, the first step in conquering this loser mentality is admitting that we have a problem.

“Good morning, my name is Alex, and I am a loser. I have it in me to do serious damage to my account. I’ve done it before. My only goal for today is to go home without a loss.”

I like to think that my trading is past the point of needing to recite something like this every morning, but that is exactly the problem. Am I really that accomplished, or is that just my own denial? Much like an alcoholic, I am always only one stupid decision away from wiping out my entire account.

The thing that I think we all need to take from this is that we must constantly keep our egos in check. We must constantly remind ourselves that we are second to our system of rules, and we must establish the discipline to follow them. In my experience, this is the most difficult aspect of trading.