Is Ego a Dirty Word in Trading?
There has been a number of articles written about ego in trading and most of them imply that there is no place for the ego in trading.
If you consider the definition of ego then I would tend to disagree with this line of thinking.
The definition of ego is related to self-esteem, personality, self-image and self worth.
I would argue that all of these things are important with regards to trading.
If you have low or lack a good self-image or self-esteem then I would not have high expectations of you as a trader.
If you consider for a moment some of the people who are successful in trading such as Jesse Livermore, William Gann, Larry Willams, Richard Dennis and George Soros just to name a few then you would have to say that these people have a high level of confidence or self esteem to back their decisions in trading.
So what is the problem with the ego which people write about? I think the underlying problem which is being addressed is the strong desire to be right which is very destructive to good trading.
The need to be right will lead a trader to hang on to a losing position in hope that one day the trade will turn into a profit.
The need to be right will also lead a trader to sell a winning trade early into a profit in fear that it might turn into a loss.
Each of these behaviours is associating the fear of being wrong with having a loss and the desire to be right with having a profit.
These behaviours also operate in conflict with good trading practice of letting your profits run and cutting your losses short.
Is this seemingly illogical behaviour driven by some other underlying desire? Some of the answers are due to the majority of our daily decisions are made based on our emotions or how we feel.
We can also look at the basic human needs identified by Abraham Maslow for some answers.
The basic human needs Maslow talks about are connection, certainty, uncertainty and significance.
Of these we can see that the desire to be right is driven by some of the basic human needs of certainty and significance.
If we are always right we get the human need of certainty met and if we are right with our trades we can boast about it to our friends to give us significance.
The other aspect which affects our trading is when we start making some profits from trading and we see that this money can come a lot easier than it has through any other endeavour we have ever carried out.
We can begin to get carried away by greed and what some term as over confidence.
I see it as taking ones focus off the perfect execution of your trading plan and being more focussed on self and seeing yourself as smarter than the market.
So I don't see ego as the underlying cause but pride or maybe a better word would be egotism or egoism? When you look at the definition of egoism and egotism it is related to being self centred or selfish and putting yourself up above others.
I may be pedantic but I think it comes down to using the wrong word for a particular quality which is being discussed.
I think it is actually egotism rather than ego which is the quality which is undesirable in trading.
So maintain your focus on being humble and having humility and seeing your oneness with everything rather than separate or above those around you to ward off this destructive trading trap.
If you consider the definition of ego then I would tend to disagree with this line of thinking.
The definition of ego is related to self-esteem, personality, self-image and self worth.
I would argue that all of these things are important with regards to trading.
If you have low or lack a good self-image or self-esteem then I would not have high expectations of you as a trader.
If you consider for a moment some of the people who are successful in trading such as Jesse Livermore, William Gann, Larry Willams, Richard Dennis and George Soros just to name a few then you would have to say that these people have a high level of confidence or self esteem to back their decisions in trading.
So what is the problem with the ego which people write about? I think the underlying problem which is being addressed is the strong desire to be right which is very destructive to good trading.
The need to be right will lead a trader to hang on to a losing position in hope that one day the trade will turn into a profit.
The need to be right will also lead a trader to sell a winning trade early into a profit in fear that it might turn into a loss.
Each of these behaviours is associating the fear of being wrong with having a loss and the desire to be right with having a profit.
These behaviours also operate in conflict with good trading practice of letting your profits run and cutting your losses short.
Is this seemingly illogical behaviour driven by some other underlying desire? Some of the answers are due to the majority of our daily decisions are made based on our emotions or how we feel.
We can also look at the basic human needs identified by Abraham Maslow for some answers.
The basic human needs Maslow talks about are connection, certainty, uncertainty and significance.
Of these we can see that the desire to be right is driven by some of the basic human needs of certainty and significance.
If we are always right we get the human need of certainty met and if we are right with our trades we can boast about it to our friends to give us significance.
The other aspect which affects our trading is when we start making some profits from trading and we see that this money can come a lot easier than it has through any other endeavour we have ever carried out.
We can begin to get carried away by greed and what some term as over confidence.
I see it as taking ones focus off the perfect execution of your trading plan and being more focussed on self and seeing yourself as smarter than the market.
So I don't see ego as the underlying cause but pride or maybe a better word would be egotism or egoism? When you look at the definition of egoism and egotism it is related to being self centred or selfish and putting yourself up above others.
I may be pedantic but I think it comes down to using the wrong word for a particular quality which is being discussed.
I think it is actually egotism rather than ego which is the quality which is undesirable in trading.
So maintain your focus on being humble and having humility and seeing your oneness with everything rather than separate or above those around you to ward off this destructive trading trap.
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