The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success

2.7. GOAL-DIRECTEDNESS IN TURBULENT TIMES

Of course, wherever there is a goal, there is the possibility of wandering away from it, and that is often a reality for even the most goal-directed individual. As I have conducted a number of coaching conversations with individual portfolio managers, I have witnessed a variety of patterns demonstrating how individuals veer from the goal-directed target. Every person is unique and a variety of personality characteristics as well as previous life experiences contribute to the way in which any individual responds to turbulent times. Traders are no different. Some seem more resilient and able to recover from drawbacks and failures; others seem to languish and even give up at the slightest change in fortune.

Consider the months of July and August 2007. The subprime mortgage debacle significantly impacted the credit markets and then began to spill over into emerging markets. Ryan went back to the drawing board. He took advantage of the opportunity to prepare for the future with fundamental analysis and used this period of time to reduce his risk and to do scenario analysis and look for displacements and opportunities and short-term trading opportunities while building his fundamental ideas.

Ian, on the other hand, became overwhelmed by the situation. He felt stuck in a panic mode, like a deer in the headlights. He attributed his drawdown during this period to the fact that he, like everyone else, had been caught in the same trades, and it was ...