Traditionally brokers and industry lore report that only 5% of independent, single traders make it. I don’t know if that stat is true or not. Recently one of the currency brokers said that 25% of their accounts were profitable.
Here is what I do know – in a nutshell. All of our traditional ideas about the mental game of trading have basically made it harder. It isn’t about mental toughness or even about discipline in the traditional trading sense of the word.
How can I say that?
Simple – the brain science is proving that we think in a way completely different than we have been taught to think. We are perceiving and judging mostly at an unconscious level, complex decisions are best made non-deliberately and our brains do get tired.
Yet money-managers of all stripes sit at screens and stare them down all day long. This hurts the perception they really need. Thinking is just so darn physical. (Scientists call it Mind-Body Cognition). Every hedge fund needs an exercise room and a Chief Risk Officer that understands the value of his traders getting away from the screen. Nap rooms or pods should be de-rigueur if one wants to get the best decisions out of oneself or one’s team.
Yes I know … the markets are like a lover that one can’t stop thinking about. Yes I know … if you leave the screen, the year’s best trade may happen.
But hey, you know what I also know. You won’t have a clue what to do with that trade unless you are thinking the following:
1) social markets – who am I trading against and what are they doing?
2) do I know what set of feelings, emotions and intuitions I am bringing to this decision about something that in fact I cannot know the outcome of?
3) am I sleepy, annoyed, over-caffeinated or any other status that falls in the tails of my own personal psychological capital map?
… If we were all to get these things right, then the quants would have to recalibrate their models because the rhythm of price action would change. Fight back.