The ego is a person’s sense of self-esteem or self-importance. The ego is a mental construct that can be both on a conscious and unconscious level. An ego is the self concept that a person tries to protect and keep safe from pain and destruction. A trader has to trade the math and their own trading system and abandoning signals and their trading plan in favor of their own ego can result in stubbornness, self delusion, and big losses.
- Most market predictions are ego based. A trader wants to be able to say they called a top or a bottom or had a great stock pick. Signal and system based trading is a path that removes the need to predict you simply react.
- Stubbornness is an emotion that flows from the ego as it does not want to be proven wrong. Many times this leads to letting a losing trade continue to run against a trader. Egos have trouble taking stop losses because they hate to be wrong.
- Egos lock into being bullish or bearish and let their opinions lead their trading. Following the actual price trend creates better odds of success than having an opinion on what should happen next.
- You should not let trading consume your entire life. The markets should be only one of several things you do in life. A diversified life outside the markets with friends, families, hobbies, learning new things, and staying healthy will help you keep perspective during losing streaks and draw downs in trading capital.
- A profit and loss statement can not define your self worth. Your profits are more of a reflection of whether the price action is conducive to your method currently not whether you are a good trader or not. Your self worth has to be determined by whether or not you followed your trading system with discipline, consistency, and risk management.
Trading should stay a place to make money find your validation else where.