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Passion is Not Enough in Trading

Lately, I’ve been inspired to write about some of the changes I’ve been making in my life to become a better trader.

When I opened my first brokerage account about 12 years ago and put on my first trades, I felt the thrill of the markets for the first time. It was more about the chance to score some extra weekend money back then, or a path to quick riches in my mind. Mr. Market taught me the hard way early that stock prices don’t always go up when most of my trading money was tied up in a bankrupt little Chiquita Banana company $CQB. Looking back, that was just the start of my life in the stock market.

My first year of college I learned how to write professional grade software, and was picked up by a Hedge Fund to write risk/analytics software, portfolio management and scenario based tools to help professional traders manage their trades across a multitude of strategies. I learned a lot over ten years at a hedge fund among some very expert traders and coders. Everything I worked on while I was there, I poured my heart and soul into learning and doing well. The more I learned, the more I wanted to use those strategies. You could see the passion for coding and trading just pouring out of me. I built platforms for RiskArb, GlobalMacro, LongShort, ConvertArb, and even CDO/ABS strategies. I was all over the place and loved it.

Last August (2010), I decided to take the plunge and leave the comforts of the place that treated me very well over the years. Not only did I want to explore work with a new employer and gain the flexibility to work independently remotely, but I also wanted to gain more flexibility to get in and out of trades without holding periods or legal pre-approvals or restrictions on trades.

Although I had a lot of ‘book smarts’ and passion for staying ahead of the market through daily study and research, I quickly learned that passion is not enough. Think about it. The market is built to chew up and spit up those that are not prepared, don’t have the mental stamina and toss aside those that succumb to their own emotions. Therein lies the problem with relying too much on passion. To quote journalist David Allen,

Emotions seem much too unsteady to be associated with anything or anyone I consider truly successful. As fast as they go up, they can come crashing down. Just try to hold only a single feeling for any extended period.

If you rely too much on passion and drive, I’ve found that you may be setting yourself up to fail in ways that you don’t even know until you are more disciplined to become aware of the problem. We are all participants of the market, not directors of the market. Allowing your day to be controlled by the ebbs and flows of a chaotic market may turn your quickly from euphoria to depression.

Not only is it dangerous to allow your mental state / emotions and level of passion for trading to be affected by the day to day gyrations of the market, it’s equally or more dangerous to be making decisions based on that mental state. It takes a strong person to admit when they are wrong and allowing emotions or passion to control their decisions.

To help keep my mental state in check, I have found that it helps to run trade ideas by @gtotoy in daytraderbootcamp.com — a room full of top notch, real-deal traders. They’ll won’t hold back in there and remind emotional traders that there is no room for emotion or regret in trading. Staying disciplined and keeping a level head is more important. “Next!” is a common phrase used by traders who have been around the block a time or two.

Finally, remember that you are not the only one who is passionate. This market is full of very driven individuals, many of whom are working very hard to be more successful than you are. They may be more focused, more disciplined and more experienced than you. Many of the people who don’t have that basic character trait of passion for the markets in their blood, don’t last long. You’re swimming with other passionate sharks.

Don’t get me wrong; it’s important to be passionate in this business, but it’s not the only character trait you need to be successful. Just don’t let your passion get the best of you. I’m taking steps to change, and I’ll share that in my next post.

I hope fellow traders share what they’ve done to get better in the comments section below. The @StockTwits community is all about community, trading and sharing ideas. I hope my ideas help some of you in the days ahead.

Categories: stocks
  1. Tim pham
    July 17, 2011 at 1:34 pm

    Thank you for sharing. I am very passionate with trading. I got everyday at 5:00am and trade until 8:30 am then go to work for 500 fortune company until 6 pm . I believe passionate to trade is required then like you said to find a mentor . I also believe sharing your skill , opinion of your trade to other trader is good. I am looking for partners now so we can share our ideas and trade to together. Have fun together
    Making money together . Be humbo and sharing . I am. A team player . Team always beat sigle person, two brains is better than one. You can be my partner. Please email me to phamoptiomtrader@yahoo. Com

  1. November 16, 2011 at 9:14 am

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