Know Your Trader Ego
The worst aspect of a trader's personality is usually the ego.
The ego has many needs, such as the need to be smart, quick, clever, knowledgeable, analytical, etc. These needs can play out in trading and sabotage success.
The ego is a sense of self, so the ego's strongest needs are often tied to the personality traits in which the trader takes the most pride. To understand one's need, it may be helpful to fill in the following blank: Above all else, I am always __________.
When the ego has influence over a trader's decisions, the trader may choose trades to reinforce his/her sense of self, because doing so can provide a payoff, a sense of personal power. One of the most common ego needs is the need to be right. The problem with wanting to be right is that it can supplant the need to be profitable.
Some traders may accept unnecessary losses in order to prove they are right. The ego is easily bruised by losing because losing is considered "wrong" while winning is considered "right." To get even, the trader may try to win back losses in an attempt to erase having been wrong. OK, so I mistimed the first entry, now I can be even more right! The trader may be tempted to increase position size, but this usually leads to even bigger losses. When the ego is active, the trader may attempt to double down on failure.
Traders are often unaware that the ego is active when trading. The ego's need is often expressed as a fleeting thought just after placing an order, when optimism is high for a personal payoff. I can't wait to tell my spouse how I knew this stock was going to bottom, and how I nailed the entry! Exposing the ego begins with self-awareness. Once a trader acknowledges the ego, it loses some of its power to influence trading decisions.
Self-awareness starts with self-honesty, admitting that the ego is active and hurting trading results. This will allow the best aspects of our trading personality to better focus on the ultimate trader need--winning.
Important Disclaimer:
The information presented in the Stock Pick of the Week is for informational purposes. The information was based on data and charting programs from independent services and CC Trader LLC d/b/a TradeLikeaPro does not guarantee the accuracy of the information used in the analysis of securities presented. The information is not offered as a basis for making trading decisions based on securities presented. Investors and traders should conduct their own independent research before making any investment. Nothing contained herein should be construed as a recommendation to buy or sell any securities. Investing and trading involves risk. Before deciding on any investment, you should consider your investment objectives, level of experience, and risk tolerance. Do not trade with money you cannot afford to lose. You should seek investment advice from a professional investment advisor before engaging in investment activities.
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