Survival Instincts in Trading

This question was sent to me from one of our students:
Hey Joe! Would you agree with the following statement? “Of paramount importance to the trader, though, is fear. I am convinced that it is absolutely necessary to 'run scared.' Only an exaggerated emotion can generate the concentration necessary to survive as a trader.”

I agree, but not necessarily for all traders. Some traders are pretty laid-back and relaxed when they trade.

In general, trading is a stressful business. In many areas of activity we see constant demonstrations of performing under stress. Actors of stage and screen; sports figures; cold-call sales people… It is the ability to thrive under stress that sets the best in their fields apart from the other participants.

An effective trader handles stress on a survival basis. His natural instinct of self-preservation emerges whenever he is in a stressful situation. His behavior is reduced to pure selfishness and self-survival. He fights for what is his or what he wants to be his in the in a most greedy way. He flees from danger in a most cowardly way.

There is no thought about pride or style or personal grace or honor or bravery. Survive somehow. Win somehow is his only purpose.

As a trader, you must get in touch with your baser instincts and learn to accept yourself in that way.

Thanks for the post Joe!

I'd like to extend what you've just send with an analogy to taking formal and informal tests or exams.

Think back to when you did exams at college or school. Most educational systems allow you to do mock or trial exams before the big final. Which exam did you do better on? The mock/trial exam or the final exam? Personally, I found that I always scored better on the final, and not because I was any better prepared because I rarely did any work towards the final after the mock exam was taken. It was because under pressure my adrenalin was pumping and my mind was clearer and I could perform better. But that's my personality.

You should take a look at yourself and ask yourself which exams you did better in and why? Are you the sort of personal that thrives under pressure? Are you the sort of person who concentrates better under exaggerated emotion like Joe's student?

You need to create the right trading environment for yourself where you can perform the best. If you can't perform well under pressure then make sure that you don't put yourself under pressure when trading. Make sure that the market can't do that to you either.