Flexibility is key when you’re a trader. One must be able to look at a trading problem from multiple perspectives in a calm, rational, and insightful way. Have you ever noticed that when you are under extreme pressure that you can’t think clearly? Your attention may become fixed and narrow, making it difficult to see alternative perspectives. It’s useful to gauge your flexibility, and if you find you are inflexible, be aware of it and change your environment to create a more flexible approach to problem-solving.

What is flexibility? A fascinating way to demonstrate intellectual flexibility is to consider an item from the WAIS IQ test. Let’s see how well you do. In what way are a FLY and a TREE alike? The answer to this question may surprise you if you don’t know it already. When psychologists ask most people this question, they seem to struggle. You can see their mind spinning, wrestling with various alternatives, and trying to discover the key similarity. They make the item complex and look for a very sophisticated answer. They tend to get stuck doing so, however. They tend to get themselves a little too upset and think that if they get the item wrong, the psychologist may infer that they are less than extremely intelligent. But it’s a hard question and few get it right. The answer? They are both living things. It’s obvious in hindsight, but it may have been difficult to figure out if you didn’t already know the answer. It’s actually a very discriminating question, with only the most intelligent persons getting it right.

Answering the question about the fly and the tree requires intellectual flexibility. It’s interesting to watch highly intelligent, flexible people to answer the question. It’s as if they could care less. They are extremely confident, and seem to just think back and forth, “What could it be?” Then they kind of just shrug their shoulders and seem to guess, “They are both living things.” They are surprised when they are told they arrived at the correct answer.

Flexible people take a very casual and relaxed approach to finding a solution to the puzzle. They don’t put their esteem on the line or put unnecessary pressure on themselves. They merely examine as many angles as possible, relax, and come up with an answer, any answer as long as it is somewhat reasonable. They know how to simplify when it is necessary, and know when to look for complex answers when required.

As traders, it’s vital that you solve trading problems in a flexible manner. You can cultivate the proper environment that is conducive to a flexible thinking style. For example, don’t put too much pressure on yourself. If a difficult decision needs to be made, put it off until you can look at the situation in a calm and open manner. (If that means closing out the position, by all means, do it!) You’ll be the most inflexible when you are under pressure or stressed, so find a calm and relaxing environment to do your thinking. (This may mean a lot of pre-planning before the start of the trading day since, after the opening bell, the markets can be quite stressful.) Also, don’t put extra pressure on yourself. Don’t put your self-esteem on the line, and tell yourself that you’ve got to get the answer right or it will prove you are a poor trader. That kind of pressure is not conducive to flexibility.

Flexibility is the key to trading success. By finding the proper environment and using the right mindset, you can be more flexible and solve significant trading problems.

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