Egoless trading, the best trading strategy of all

There was a small surge of direct messages in twitter this weekend on why I should not bother about people trolling about the recent drawdown in my daytrading activity. I casually mentioned in one of the tweets that “My ego and self-image are not attached to trading success” and it made me thinking on why people give priority to ego over making money in trading. Hence this post.

Ego and trading


If we have to make an attempt to extrapolate on what Albert Einstein said “More the knowledge, lesser the ego and lesser the Knowledge, more the ego” into trading, we could say something like “More the trading success, lesser the ego and lesser the trading success, more the ego”. A regularly encountered view in writings on trading psychology is that a trader has to let go of ego in order to attain that ephemeral trading success consistently. In simpler terms, we can say that ego is inversely proportional to consistent trading success.

Ego and prediction

In order to understand how ego clouds our judgment in trading related decisions, it is imperative that we understand on why people are enamored with ‘prediction’ so much. Think about this scenario – a trader calls a move (market will go up from here or go south) and try to lead the markets (or at least expect the market to move in the direction of his prediction). On the other hand, a sound trader usually lets the market to lead and takes his cues from the market’s moves. But, when a trader embraces prediction, he seeks to lead the market. So, it boils down to the trader – ‘us’.

If we’re making a market call and looking for confirmation (often called as ‘confirmation bias) by forestalling a market move, then it will be particularly annoying if and when that move doesn’t materialize. We no longer feel endorsed and the problem exasperates even more, when we announce our prediction to public. If a trading decision is not about us (or about the ego that drives prediction), being wrong doesn’t feel like being stupid. Being wrong becomes information – an information we can use to hone/fine tune the trading decisions.

Ego and conviction

The usual trading coaches tell us to trade with confidence and double down on bets when we have our greatest conviction. It is as ironic as William Eno (“Father of Traffic Safety” – invented the stop sign, crosswalk, traffic circle, one-way street, and taxi stand) who never learned how to drive. In fact, listening to markets and following its lead requires the utmost of humility and open-mindedness. The trader with supreme conviction is the one most likely to be blinded as markets change their direction. Conviction and ego are like twins.

Ego and stubbornness

If one is successful in trading, he will also exhibit enormous patience as patience is every successful trader’s virtue – without exception. Patience comes with a sense of calmness and confidence. We know we are doing the right thing. Thus, there is no need to justify excessively (excessive justification often leads to confrontation with others to defend the supremacy). On the other hand, stubbornness often comes with anxiety and over-justification. When we find ourselves trying too hard to explain what we are doing, we are being stubborn. Stubbornness can also be construed as mild form of ego. I always tell folks that Obstinate traders become obsolete, sooner or later.

Antidote for trading related ego

So, how do we tackle this ego then? ‘Balanced life makes for balanced living’. We need to live a fulfilling life outside of trading. If we don’t need markets for our self-validation, we’re less likely to seek those “good call” compliments (from others – this seems to be a big problem in social media like twitter), and we’re less likely to make our profit/loss statement a barometer of our personal worth.

If we make trading as a medium for satisfying our ego, then trading can be a very expensive profession to be. Fulfilling the ego outside trading gives that ‘much needed’ room for the traders to operate at optimal level and start the path towards consistent trading success.

Women and trading success

I cannot end this post without mentioning this point. If you are a woman reading this article and a trader, you have a brighter chance of making it in trading. And am not throwing this stuff out of thin air. Strong reason is there. Women simply don’t seem to have the mental blocks and ego barriers that males have (some women do though but we are not talking about exceptions). They are more readily able to learn from their mistakes. A man will repeat the same mistake over and over again, unable to admit to himself he is wrong because of his ego. Women also listen to those they consider experts. Men usually consider themselves experts at everything already, so while they may listen to what a real expert says, they typically don’t do what they are being taught.

Happy egoless trading !!

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