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| "Trading Wisdom: Addiction to Perfection" - Aug. 2, 2005 |
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"TRADING WISDOM: ADDICTION TO PERFECTION"
by Janice Dorn, MD, PhD
July 30, 2005
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Foreword
I am delighted to bring readers the following article, authored by Dr. Janice Dorn, a person of great personal achievement. I am exceptionally proud to call Janice a friend, and I am currently exploring ways to bring more of her work to my readers. At the end of the article, you will find a biographical sketch that bears ample witness to Janice's extensive accomplishments. --Doug Gillespie
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"One of the great evils of trading is false exactness...Trading is a fuzzy process and I mean fuzzy in the best sense of the word. That is, as in fuzzy logic, as in the willingness to accept the idea that things aren't exactly quantifiable and to forge ahead anyway" --John Bollinger (creator of the Bollinger Bands)
Trading is not about perfection. It is about probability and progress. All charts, analyses (fundamental and technical) and trading plans are built on probabilities.
Why then, do so many traders strive for perfection? Why do so many traders miss trades, waiting for exactly the right entry and then beat up on themselves when it doesn't come and the position runs away while they sit there scratching their heads and condemning themselves?
Why are so many traders trying to turn a game
of probability into one of 100% certainty?
The answer lies in one of the cardinal sins of trading which is PERFECTIONISM.
Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the Holy Grail of trading go from one service to another, from one system to another, looking for a way that they can be right all the time. YES! Now, I found it. It’s this trading room, or this service, or this indicator! Wait... something is wrong here. Not all of these trades are working and I have draw downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES.
This is perfectionism in action. Not only does this type of irrational behavior and belief undermine and demoralize a trader, but it takes away all the enjoyment and fun of being in the markets. It leads to depression with depletion of psychic and physical energy, and leaves the perfectionist to confront his basic and overriding fear--- fear of failure. In the extreme, it leads to physical and mental illness, including addiction to prescription drugs, alcohol, or illegal substances as well as other addictions. The pain of failure or the haunting fear of failure is simply overwhelming, and one turns to whatever works to medicate the pain.
I want to share something of my personal history with you, as I believe that many of you can identify with and learn from some part of this story (and if you do, please let me hear from you?)
My parents were seriously ill from the time that I was born. I truly believed that if I was absolutely perfect, scored the highest in school, did the best at music and dancing and elocution and debating that I could make them better. So I did that. I had no life outside of study and learning. I was the perfect little daughter and even became the perfect little doctor for my sick parents, even though I was only 13. Shortly after this, while I was still in my teens, both of my parents died. I was not good enough or perfect enough to make them better. So- I tried even harder and studied more and more, to the complete exclusion of any personal or social life whatsoever. This time, I was going to be perfect for my dead parents to show them how wonderful I really was and how much they should be proud of me. This reached absolute culmination when, after receiving two doctorate degrees, I still had to continue with more and more exams and more and more training. Can you imagine anything so ridiculous? Even after my parents died, I was still trying to get their approval by showing them how brilliant and talented I was.
Many years later, I suddenly became critically ill, stopped breathing and lapsed into a lengthy coma. This was the culmination of years and years of unrealistic internal demands that I set on myself and which manifested as addiction to perfection. It was only when I awakened from coma that I started on a new road and a new path. I was not superwoman...never was and never could be. Yes, I would continue to work hard and to achieve, but I could never in a bazillion years be perfect. I am not and you are not. So, when I tell you to "Get over yourself" I mean that I had to get over myself. I had to address the demons of perfectionism and move past them. I accepted that I am a flawed human being and acknowledged that I had certain real and wonderful strengths. I chose to concentrate on the strengths and stop beating myself up for the weaknesses.
"Life can be lived forwards, but can only be understood backwards" --Soren Kierkegaard
What does this have to do with trading?
This is what happens with perfectionists. Perfectionists are made, not born. We are taught from an early age by demanding (and often well-meaning) parents that we have to be the best in order to win their approval and the approval of others. Unfortunately, this is totally upside down. Perfectionists share a belief that perfection is required in order to be accepted by others. The reality is that acceptance cannot be gained through performance or any other external factors. Self-acceptance is the root of happiness and the true beginning of personal evolution.
If you have a perfectionist mentality when trading, you are setting yourself up for failure, because it is a "given" that you will experience losses along the way. You must begin to think of trading as a game of probability. Your losses ( that you hope will return to breakeven) will kill you. If you cannot take a loss when it is small ( because of the need to be perfect), then you will watch that small loss grow into a larger loss and so on into a vicious cycle of more and more pain for the perfectionist. Trading on hope does not work. The markets can remain irrational for a lot longer than you can remain solvent.
The object should be excellence in trading, not perfection. Moreover, it is essential to strive for excellence over a sustained period, as opposed to judging that each trade must be excellent. This is a marathon...not a sprint.
The greatest traders know how to take cut losses and let winning positions run. Perfectionists often do exactly the opposite. They get in at the wrong time, stay in too long and then get out the wrong time. Perfectionists are always striving and never arriving. The market will find the flaw in a perfectionistic trader and exploit it day after day. The market is your greatest teacher and your most demanding critic, so take this wonderful opportunity every day to learn about yourself and make yourself strong.
If you see in yourself this trait of perfectionism rearing its ugly head, it's OK to get angry at it and even yell or curse at it. Do whatever it takes to acknowledge it and then find a way to fix it.
Here are a few suggestions:
* Try to appreciate and enjoy the process as well as the outcome.
* Set more achievable and realistic goals for your trading.
* Remember that your self-worth and your worth as a human being to those who love you does not fluctuate from day to day depending on if you win or lose that day.
* Focus less on achievement and more on enjoyment. Trading is serious, but it should be fun and not something which one approaches with fear and dread.
* Lighten up. Laugh more (especially at yourself).
* Learn from your mistakes, and forgive yourself and make peace with your past. Strive to be better...not perfect...just a amazing human work in progress.
"If we were always to wait for the most favorable combination of circumstances, no enterprise would ever be undertaken. There can be no end without a beginning--there was never an enterprise in which everything fitted in perfectly, for chance plays a leading part in the affairs of all men. Obedience to rule does not ensure success, but success, on the other hand, furnishes a canon -- a rule of conduct --Napoleon Bonaparte.
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Janice Dorn, MD, PhD - Biographical Sketch
Janice Dorn, MD, PhD is a graduate of the Albert Einstein College of Medicine where she received her PhD in Neuroanatomy. She did her postdoctoral work in Neurophysiology at the New York Medical College. She received her MD from La Universidad Autónoma de Ciudad Juárez, did one year of clinical clerkships in Phoenix, Arizona and then completed a Neurology Internship at The University of New Mexico in Albuquerque She is also a graduate of Coach University. She trained in Anesthesiology at UCLA where she also did a Fellowship in Cancer Pain Management. She completed a Psychiatric Residency at the Maricopa Medical Center in Phoenix. She has been a faculty member to the rank of Associate Professor at The University of Texas Southwestern Medical Center at Dallas, The University of Missouri Medical Center at Columbia and the Chicago Medical School. She also held the position of Director, International Clinical Research for a major pharmaceutical company, in which capacity she traveled internationally for nine years. Dr. Dorn began a private boutique practice of Biological Psychiatry in Phoenix, Arizona in 1987.
She holds the following board certifications:
Diplomate, General Psychiatry, American Board of Psychiatry and Neurology; Diplomate, Addiction Psychiatry, American Board of Psychiatry and Neurology; Diplomate, American Society of Addiction Medicine
In recent years, Janice has turned her attention to trading, mentoring and commentary in the financial markets, with emphasis on Behavioral Finance, Mass Psychology and Trading Psychology. She is the author of over 70 publications, including 30 online publications relating to the financial markets.
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