Know thyself is more than a philosophical concept. It also applies to trading professionals as well as anyone else, the author believes.
So when markets are melting and tons of trades are going bad, it is critically important that the financial professional understands himself or herself.
Traders shouldn’t ask themselves how to succeed. Before the hows, they should ask why they are in trading. That’s one of the themes of this interesting, slender self-help book for traders entitled, "8 Ways to Great: Peak Performance on the Job and in Your Life."
The author is Dr. Doug Hirschhorn. He is a performance coach who works with traders. But he believes his eight basic principles can apply to anyone in any line of work. He contends that that each trader must find his or her "why."
Seeking the why is a positive way to approach one’s professional life, the author argues. It goes to the essence of who we are. The why explains the reason for working in a profession, according to Hirschhorn, who documents his training techniques through stories of trading success.
For example, after one of his trading students had applied his principles over a few years, he reviewed why he had huge success. The trading professional now had several billion dollars in assets and had 75 people reporting to him. Hirschhorn reminded him that he had focused on answering the question of why he was a trader.
"You said," Hirschhorn told him, "you wanted to be the best you could be because you loved the challenge and excitement, you loved playing the game, and solving the puzzle."
A former trader on the floor of the Chicago Board of Trade, Hirschhorn concluded that it is the excitement and the challenge of the profession that motivate the best traders. Pride and the typical trader’s need to compete, he argues, are ultimately the most important factors in the making of a first class trader.
World-class traders, he argues, aren’t in the difficult game of trading solely for the money-a challenging game in which even the best traders only win on 53 percent of the trades-because the most successful of them have already achieved financial independence.
By contrast, the trader who first asks himself how to be successful before finding the whys, the author says, inevitably sets up roadblocks to success. One starts reviewing all the various steps to success. One quickly concludes there’s too many steps and that it is likely unachievable.
This is a negative approach to problem solving and in life. Too many hows can overwhelm almost anyone in any profession, the author writes.
Using Hirschhorn’s analogy I thought of all the elements that go into succeeding as a top-flight hitter. Timing, bat speed, identifying pitches and reacting in a split second. Impossible to consistently achieve, many would conclude who take the how approach to the hitting
Indeed, what if the greatest hitters in the game had constantly had dwelled on the how? They probably would have thought: "How am I going to get a hit when I make an out 70 percent of the time?" Or as Yogi Berra once said: "I can’t think and hit at the same time."
These baseball immortals wouldn’t have gotten anywhere had they had only thought of the hows, just as the greatest traders would fail if they only considered the number of times they failed.
Instead, using Hirschhorn’s philosophy, many of these great athletes and traders concentrated on why they loved baseball, why it must have been a tremendous high to get that key hit in a big game or make a big successful trade.
Two more of Hirschhorn’s eight principles are keep your cool and learn to love the process. Many times, he notes, the process can be more important than the short-term result.
On this point, one should examine trades that don’t work out. The issue is why did a trade fail? Did the trader make a fatal mistake? Or was the trade overwhelmed by a market that the trading professional had nothing to do with?
Again, a baseball analogy can illustrate the principle. A hitter in a game comes to bat on average four times. Let’s say he does everything right but just hits the ball hard at fielders four times. He goes zero for four and some people reading box scores the next day might think he made poor contact with the ball.
But why did he go hitless? What was his process?
He had a bad day for the right reasons–he was unlucky just as some traders get unlucky when they are overwhelmed by market events–but he stayed on plan. Now the trader or the baseball player has to know to stay with the process. The hits, Hirschhorn contends, like the profitable trades will come.
Another of Hirschhorn’s principles is learning to live with volatile markets that are here to stay. Traders must get used to being uncomfortable. Yet, it is understandable, he says, if a trader feels pressure during difficult market periods.
But if he shows it, if he loses "his cool," which is his ability to reason and find solutions, then he is destroying himself and his clients. Hirschhorn cites a recent market meltdown. One of the traders he had been working with made a frantic call.
"I’m getting killed," he heatedly told Hirschhorn. "Millions of dollars…we’re losing millions!" Still, Hirschhorn wasn’t going to baby him.
"I’m sorry, man, but if you want a hug, call your mom. I don’t do pity," Hirschhorn advised. There was a pregnant pause at the other end of the phone, while the author’s client took in the advice. Then he gave the trader more candid counsel.
"Listen, don’t focus on the losses. What’s happened is terrible, but you need to get back into the game. Do you know the opportunities that are out there now?" The trader hung up. But two hours later he called back Hirschhorn.
"First," he said, "you are coldhearted. Second, you are right. And thanks for telling me what I needed to hear. Third, I’m done feeling sorry for myself."
Hirschhorn had convinced another trader on the need to "keep cool." He had sold him on the need to avoid panicking or choking when times are tough, which seems to happen often these days in the volatile world of trading.
This is a useful book for trading professionals. Some of the author’s principles and analogies, however, don’t always work. I thought the analogies citing Donald Trump were weak.
I also regret that a man as smart as the author hopes he can get his own show on television. Instead, he should write another book like this, continue to train professionals and leave the idiot box to the mountebanks, shills and clowns who are its most populous denizens.
Still, most of this little book–a book that harried traders can knock off in an hour or two, which is another benefit–contains common sense advice.
Reading it and marking up certain critical sections for periodic review could help one get to the next step in career development or get through a trading slump. The ideas could also help someone survive the next market meltdown.
SIDEBAR: Why Why Works
There’s nothing magical about why why works. It’s all a matter of perspective. Knowing why you want something shifts your perspective from the negative to the positive. Instead of getting that sinking feeling in your stomach because you’re asking, "How am I ever going to able to do this" you’ll be buoyed by knowing, I have to do this because…Knowing your why is what’s going to get you to figure out how.
