Module 12 Innerworth — Mind over markets

Chapter 272

The Big Ego: Knowing When To Control It

A big ego reflects an exaggerated view of one’s abilities. We’ve often said in this column that such a mindset can be fatal for trading, where accurate and realistic perceptions of one’s skill level are crucial. A big ego often reflects low self-esteem. When people feel inadequate, they often tell themselves that they are superior so as to bolster their feelings of incompetence. It’s hard to escape this dynamic process of “ego defence.” Everyone feels inadequate every now and then, and thinking, “I’m doing great” can soothe unpleasant feelings of incompetence. It’s probably not a good idea to do this very often, but doing so from time to time is relatively harmless, and it may even be a useful strategy when used sparingly.

 

Just as with any pleasurable activity, telling yourself that you are a smart and brilliant trader has its time and place. It’s fun occasionally, but if you do it too often, you may never look at your trading skills objectively, and take the necessary steps to build the skills you need to become a successful trader. It is best to restrict such self-enhancing strategies to off-hours rather than during the trading day.

A big ego isn’t entirely bad. Once in a while, it can be used as an effective motivator, especially when you have a severe drawdown and feel like you just want to give up. Sometimes it’s fun to dream of how success as a trader can make life wonderful. If you are motivated by having a nice car or a big house, you will work extra hard to get those things. For many people, it is quite motivating to dream of how the big money you will make trading can help you achieve important life goals.

But at the same time, you need to put these goals in the proper perspective: It’s fun to dream, but it’s dangerous to be solely motivated by big money and bragging rights. If you allow yourself to be motivated to seek out these goals to build yourself up, you will be putting too much of your identity and self-worth on the line with every trade. This approach will fail in the end. You will put too much pressure on yourself to succeed. You’ll put yourself under extra stress and may “choke” at critical decision points while trading. So when you are trading, keep your big ego under control.

How do you control a big ego? It’s not easy. It requires brutal honesty when assessing your trading skills. You’ve got to get an accurate assessment of your skills, identify your weaknesses, and build skills to compensate. Focus on performance rather than potential rewards to your ego and social status. Doing so will help you control your big ego and prevent it from marring your trading record. Many traders have a big ego, and many traders have failed because of it.  If you have a big ego, learn to control it. Your long term success depends on it.

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