The Value of a Trading Tribe
“It is better to move to action through inspiration rather than desperation” – Dr. Brett Steenbarger
Today’s article stems from a simple question which stems from my experience in helping traders. Most people I help have been trying to find a solid trading system for some amount of time (years in many cases) and start wondering whether trading the markets is even possible.
I get these people to the stage where they can make a logical assessment about whether trading suits them, or not. Whether they actually like it, or not. Whether it gives them purpose (and they feel drawn to it) or whether they need to push themselves towards the goal. The result is that some people exceed their own expectations, whilst others will take a decent trade now & again but never really make headway. There are many psychological issues that come into play, which explain the performance gap.
Fortunately there is one tool, which is one of the most effective but also one of the most overlooked, that can help struggling traders get a grips on things: a network of like-minded people – a Trading Tribe as Ed Seykota named it.
The Value of a Trading Tribe
The value of a trading tribe is directly proportional to the maturity of the people in it. Here are typical traits that mature participants tend to demonstrate in our own Tribe:
- openness: not having any issues whatsoever talking about difficulties, sticking points, frustrations or any other kind of emotional withdrawal;
- non-judgemental: commenting in a way that stimulates reflection and thought, as opposed to criticism;
- empathic: when someone makes a mistake, gets stopped out, or experiences anything negative, mature individuals act like a safety net because we all go through similar experiences sooner or later.
Together, these attributes promote growth. Only in a circle of “safe people” can a frustrated trader really open up, share his feeling and frustrations, and thus start the healing process.
At it’s core, a trading tribe should be a meeting place for traders to ask questions, express feelings and frustrations, discuss the markets and stimulate ideas and growth. Trading is a very lonely activity and when we face issues, it’s easier to have a group of like-minded people at your side to turn to and bounce ideas off, instead of facing the challenges alone.
In my experience, traders that hit a road block or some setback put a lot of pressure on themselves. They start to feel incompetent (and carry this feeling with them to other places during the day), they start to experience self-doubt (which further limits their mental capacity to overcome the obstacle), and they start filling up with negative emotions that take them further away from the solution.
Here’s a well known example: the Candle Problem.
The problem is this: find the quickest way to fix and light a candle on a wall in a way so the candle wax won’t drip onto the table below. It’s a simple problem but it takes people a few minutes, on average, to get to the solution.
In the seminal study in 1962, Glucksberg offered cash prizes for completing the task quickly. Subjects who were offered no prize, termed low-drive, were told “We are doing pilot work on various problems in order to decide which will be the best ones to use in an experiment we plan to do later. We would like to obtain norms on the time needed to solve.” The remaining subjects, termed high-drive, were told “Depending on how quickly you solve the problem you can win $5.00 or $20.00. The top 25% of the subjects in your group will win $5.00 (around $40 nowadays) each; the best will receive $20.00 (around $160 nowadays). Time to solve will be the criterion used.”
Surpize surprize, the high-drive subjects performed worse than low-drive subjects. The process of turning the task into a competition for limited resources can create mild levels of stress in the subject, which can lead to a sympathetic nervous system response known as fight-or-flight. This stress response effectively shuts down the creative thinking and problem solving areas of the brain in the prefrontal cortex.
This experiment has been repeated many times throughout the years and the results remain intact. Whenever we face a problem that requires creativity or thought, as opposed to any physical requirement like speed, strength or stamina, pressure to perform actually limits our resources.
Lets bring it all back to trading: when struggling traders need help, they seldom admit it because (sadly) talking about failure or problems seems to be a taboo in our modern society, which is instead dominated by the need to appear successful, in shape, etc. as is evident from the pictures on Instagram, Facebook, Twitter. For example, it’s basically impossible to find a losing trader on Twitter.
This is another form of pressure, that gets added to the original issue of being unsuccessful in the markets. Traders in this situation need a safe place to go, where they can share their fustrations with other traders, receive grace and also receive useful inputs or useful brainstorming sessions. Without this kind of environment, the risk is for the trader to “close up” even more, never acknowledge his emotions, hence generating a whole new negative self-image which he will carry around with him in his day-to-day life.
In other terms: a proper trading tribe is a support group that shares ideas, helps struggling traders open up and lighten their burden in an open and non-judgemental atmosphere. This is the only kind of environment that promotes personal growth and all market wizards agree that mastering the markets has much to do with self-mastery.
Proper Content in a Proper Context
Now that we know what kind of environment (or context) a trading tribe should provide, let’s explore the kind of market-inherent content that should be present, and that inspires good trading habits.
- Proper Trade Calls: the only kind of trade call that has educational value is one that is planned in advance (“I’m looking to trade XYZ because of ABC, and will look for pullbacks around QQQ level), executed in real time (“I’m entering now as the pre-idenitified situation has manifested itself), managed (adding/scaling-out/closing the position) in real time with charts to help focus attention.
- Discussion about current market drivers and influences: trade calls as stated above naturally stimulate discussion about the why’s and the how’s. More than the technical aspects of the trade, a better discussion surrounds the current influences that inspired the trade in the first place. After all, there are tons of resources available online regarding technical analysis…but there are very few (if any) resources that help select or identify how to go about selecting trades in the first place!
- Working together to generate ideas and learn from one another.
How NOT to Use a Trading Tribe
Now let’s cover the obvious: how NOT to use a trading tribe.
- Waiting for knowledge and wisdom to be imparted from above. Most traders sadly just sit on the sidelines and watch one or two main contributors do all the heavy lifting and expect to learn something by doing so. This is just folly. Wisdom can only be learned by getting your hands dirty by jumping into the pit and exchanging beliefs, comments and ideas. No lessons can be learned without first making mistakes; similarly, no wisdom can be learned without asking questions.
- Copying trades. This is another big issue. Colm O’Shea in The Market Wizards put it best: “If I try to teach you what I do, you will fail because you are not me. If you hang around me, you will observe what I do, and you may pick up some good habits. But there are a lot of things you will want to do differently. A good friend of mine, who sat next to me for several years, is now managing lots of money at another hedge fund and doing very well. But he is not the same as me. What he learned was not to become me. He became something else. He became him.’”
- Talking about trades you took in the past and the money you made. I’ve never met a good trader who talks this way. There is nothing to learn from this kind of discussion, and what’s worse is that talking about money always stirs up strong emotions in those who are struggling. So it is to be avoided at all costs.
Over to You
Judgement is the enemy of growth. Whether in the form of criticism or comparisons, judgement creates walls instead of promoting cooperation. Sadly, most trader gatherings I’ve seen are all about showing off, talking about money made, and dropping hints about possible trades to take or being taken.
We try to be different, and take inspiration from the man who created the term Trading Tribe: Ed Seykota. A network of traders, each giving their own contributions, each bringing their own speciality to the table, is like an inspiration factory. Traders that struggle need a different input than the ones they have been using. They need fresh inspiration and a safe environment.
This is what we try to offer…a place where traders come to learn, share ideas and grow together. If you’re serious about succeeding as a trader, or if you’re having difficulty and need fresh input or perspective, pull up a chair and make yourself at home in the the FXRenew Trading Tribe.
About the Author
Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.
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