Why They Are Important to Trading



In these posts, I attempt to provide perspectives in trading psychology that go beyond the usual platitudes and generalities.  Today’s topic may seem unusual:  how our relationships shape our trading.

Consider the distinction between transactional relationships and intrinsic ones.  A transactional relationship is one in which each person agrees to do something for the other.  In that sense, it is like a business transaction.  For example, a couple could get married if one partner promised money to the other and the other promised social status.  Employer-employee relationships necessarily have a transactional basis:  one party provides a salary and benefits; the other performs expected work.

An intrinsic relationship is one in which there is a commitment to the other person, not for any specific things they are expected to do, but for who they are.  When a baby comes into a family, we expect nothing from the little one.  We love her out of an ongoing bond.  Similarly, in a good marriage, the parties are special to one another because of who they are.  

Transactional relationships are unusually fragile.  As soon as needs and interests change, or as soon as one person’s ability to meet the needs of the other is diminished, the basis of the relationship is threatened.  If I’ve married a person for their looks, I may become less interested in them as they age.  If I lose my job, my partner may become disenchanted if money was central to their expectations.  At an intuitive level, we recognize that transactional relationships are selfish and ego-driven.  They are only as solid as certain conditions can be met.

Many relationships are mixtures of transactional and intrinsic modes.  Yes, there is a transactional aspect to working at a trading firm, but we are most likely to be loyal to an employer if they also display an intrinsic interest in our growth and well-being.  I can think of hedge funds that have portfolio managers who have stuck with them for years and years because of a personal commitment shown by management.  I can also think of funds that are known for firing traders as soon as they lose money.  Those funds generate little loyalty and have great trouble in retaining employees.

Even intimate relationships have their transactional aspects.  Yes, Margie expects certain things of me in terms of responsibilities at home and commitment to family and I have similar expectations of her.  But in a lasting, loving relationship, the bond goes beyond that.  I am confident that if Margie or I were to no longer fulfill our expectations due to illness or disability, the relationship would lose no element of love and commitment.  To use the terms of the Radical Renewal blog-book, intrinsic relationships come from the soul, not the ego.  Intrinsic relationships are necessarily unique, because they are grounded in what is special about the other person.  That is why, Fitzgerald notes, there can never be the same love twice.

So how are these ideas relevant to trading psychology?

If our interest in markets is purely transactional, based on what markets can give to us in terms of profits, then we will be unable to thrive during periods of inevitable drawdown.  You can always tell when a trader’s interest in markets is predominantly transactional.  They talk about P/L, getting bigger in their trading, making more money, finding more opportunities, etc.  They rarely if ever talk about their fascination with markets, what they are learning from their trading and research, and how they are contributing to the development of other traders.  Once drawdowns occur, they experience emotional disruption, not because they lack discipline or because they’re trading poorly, but because they cannot tolerate the frustration and emptiness of unfulfilled needs.

When our interest in markets and trading is intrinsic, we find value in our learning and development.  We are also motivated by the intellectual curiosity of finding opportunity in ever-changing circumstances.  Similarly, an intrinsic interest in trading is one that we’re eager to share with others, fueling rewarding teamwork.  That fuels us–and our growth–when times are tough in markets.  I can not only survive during drawdown, but thrive, because it’s not simply about how markets pay me out here and now.

Transactional relationships are about me; intrinsic relationships are about thee.  Often, we fail in trading because we make it about us.  Transactional relationships in markets are as fragile as they are in our personal lives.  No amount of time spent on working on mindset or setups can help us if we’re trading to fill voids in our lives.

Further Reading:

Taking the Ego Out of Trading

How Our Bodies Become Our Souls

Radical Renewal:  The Spirituality of Trading



Image and article originally from traderfeed.blogspot.com. Read the original article here.