Is a sneaky ‘meta-hole’ trading hassle holding you back? Here’s how to tell…

Talk about a lucky escape…

I was sauntering through town the other day minding my own business. No reason to rush, no appointment to keep, so lord knows why I did this…

I arrived at a pedestrian crossing when the little man was on red. It meant I probably had to wait a whole 45 seconds before I could safely cross. But instead of waiting, I gave a quick glace over my shoulder and stepped into the road – right in front of a JCB digger!

I just didn’t see it. Luckily, the driver jumped on his brakes and the enormous, bright yellow, couldn’t-miss-it-in-a-snowstorm machine came to a clanking, rocking halt with the raised digger-bucket just 3 feet away from my head.

After apologising profusely to the visibly shaken driver, and giving a sheepish grin to the other people waiting to cross, I did actually manage to make it to the other side of the road in one piece. But it really played on my mind for the rest of the morning.

I’m always needling my children about being road-safe, so how could I have done something so silly myself?

There was no excuse for my impatience. What difference was it going to make to my day if I just waited until the light turned green and I could cross safely, compared to the consequences of getting flattened by a JCB? The payoff just wasn’t worth the risk.

But it was the way in which the JCB seemed to bypass my vision that I find really intriguing. I did look back to check the road was clear, but just didn’t notice it, even though it was bearing down right on top of me!

Time for a bit of amateur psychology, methinks.

Here’s what I think was going on…

I think my brain was aware I was about to put myself in a slightly risky situation, so it cranked-up whatever biological risk-assessment functions go on in there. It kind of put itself on ‘amber alert’.

And I think this might involve some kind of selective filtering coming into play: I was scanning for the kind of hazards you’d normally expect to see on an inner-city road: cars, motorbikes, cyclists etc.

But I wonder if other things – objects that are bit out of the ordinary given the situation – don’t get the same kind of attention.

They’re not classed by the conscious mind as a likely risk, so they slip through almost unnoticed.

In fact, there was a famous experiment that actually proves ‘selective attention’ exists. It’s called the Invisible Gorilla and you learn about it here:

So that’s why my huge, unmissable, 8-ton-yet-very-slow-moving nemesis nearly got me!

Now then… what if we use this idea of selective filtering to potentially crack open and get the bottom of some deeper trading performance issues you might be having?

I’m sure you’re already aware of the obvious ‘technical’ things you need to pay attention to: your ability to trade a system with discipline, the emotional tug-of-war you sometimes feel as soon as real money becomes part of the equation (good old fear and greed at work!), and making sure you’re not overexposing yourself to risk on individual trades.

You know the kind of things I mean: it’s the stuff trading books always cover. And they are VERY important. I’m not belittling their relevance in any way.

But I think there can also be deeper issues at work too. There can be a ‘meta-hole’ in your approach, which you might not spot by thinking purely in trading terms.

So let me tell you the kind of things I mean…

4 traders and their stubborn big-picture afflictions

These are all examples of deeper issues that I know have affected traders in the past. They can often be the actual driver behind performance issues, and can therefore be the issue that ultimately needs addressing in order to improve.

Trader A was doing it to prove his friends wrong

This is a common one. He might have mentioned to his brother-in-law or the guys down at the golf club that he’s doing some trading, only to be met with smirks and snide comments: ‘Ha-ha, you’ll never make any money doing that!

It can be easily to slip into an emotional ‘Right: I’ll show them!‘ mindset.

Instead of placing his trades because it’s the right thing to do at the time, Trader A is suddenly working to a completely different agenda: he’s trading for bragging rights, so he can prove the doubters wrong.

This can create an unholy amount of pressure to perform and can also create an environment of self-delusion (it’s tough to be honest with yourself about any areas that might need attention and to make progress when you’re feeling harshly judged by other people).

Trader B believed he’d be unstoppable because of his superior abilities 

This is a common pitfall for people who have enjoyed great success, or held respected positions in other fields. Especially those which involve working with known outcomes, like engineering and medicine.

It can be easy to mistake the efficacy of a preconceived ‘formula’ – the engineer’s time-tested load calculations, the surgeons preset procedures – with some kind of advanced ability of your own creation.

Now before I received angry emails from engineers and doctors from across the country, I mean no offence. It’s just there’s no diploma Trader B could brandish, no letters after his name he could refer to that will guarantee success in the markets.

It can be understandably difficult for people who have applied advanced skills to great effect in other fields to revert back to a beginner’s level and accept there is no headstart in the markets solely because of their other achievements.

But there is simply no substitute for a humble and respectful approach to the markets!

Trader C just liked the adrenaline rush!

You know, deep down some traders really aren’t in it for the money. They might think they are, but it’s the thrill of the chase – the adrenaline rush of the unknown outcome – they are really after.

And this is completely fine. There’s space for everyone in the markets, but being honest about the reasons behind his trades could cure Trader C’s frustrations instantly.

If he accepts that he’s not really bothered about making a fortune from trading, it could take the focus right off his performance and let him enjoy it as a hobby instead.

If he makes sure he sets aside only the amount of money he’s prepared to lose, he could just have some harmless fun!

But be warned, Trader C: you might find you suddenly start making much better trading decisions once your focus is taken away from the result!

Trader D fancied some fast and easy money (but wasn’t prepared to earn it)

A lot of people come to the markets because they think it’s easy money – a way to make a fortune without actually doing much.

And you know what? There aren’t many businesses simpler than trading: there’s always a supplier to buy your wares from, and there’s always a customer ready to pay you for them.

All you need to do is press the buy and sell buttons at the right time and in the right order. But as simple as it is, there’s still work to do.

Admittedly it’s mostly of a psychological nature – working on your own mental strengths and weaknesses – but when I receive a tetchy email from Trader D who complains he has placed his first week’s worth of trades but hasn’t yet hit pay-dirt, I can read the underlying problem like a book.

And the unfortunate thing about the Trader D type is they are usually unwilling to spend time upgrading their unrealistic outlook, even when I offer to help.

They’re usually too busy looking for the next glittering path to overnight riches!

So anyway, there are a few examples of the kind of bigger issues that can be at work, well away from the entry patterns and stop-loss adjustment of day-to-day trading.

If you’re trying to remove a trading blockage, it might be worth giving some thought to the big-picture circumstances you find yourself trading from.

You might find your performance-enhancing breakthroughs actually rest in some surprising places!

Be Prepared: Market Moving Data Coming This Week (London Time)

Wednesday 27th January
15:00    USD    New Home Sales
15:30    USD    Crude Oil Inventories
19:00    USD    Interest Rate and FOMC Statement

Thursday 28th January
09:30    GBP    Gross Domestic Product
13:30    USD    Core Durable Goods
15:00    USD    Pending Home Sales

Friday 29th January
06:30    JPY    BoJ Press Conference
10:00    EUR    CPI
13:30    USD    Gross Domestic Product

Monday 1st February
08:55    EUR    German Manufacturing PMI
09:30    GBP    Manufacturing PMI
15:00    USD    ISM

Tuesday 2nd February
08:55    EUR    German Unemployment Change
09:30    GBP    Construction PMI

Keep an eye out for those central bank events this week: interest rate decisions, statements and press conferences. And I’ll catch up with you again next week.

Until next time, happy trading!