What, How And Why?
What are you trading? (Stocks, FX, Commodities, Crypto’s, Futures, Bonds, STIR’s)
How are you trading it? (Technically, Fundamentally, Spreads, Outrights, Short-Term, Long-Term, Scalping, Automated, Discretionary)
Why are you trading?
Most traders can quite clearly explain the what and the how, but often find it harder to articulate their why.
How about you? Do you know your why?
Knowing your why connects you to your motivation for trading; but what is motivation, and why does it matter?
What Is Motivation And Why Is It Important?
Having strong motivation is a very important ingredient in achieving and, maybe more importantly, to sustaining trading success.
To achieve trading success three core elements are required;
- A strong interest in and commitment to trading (motivation, purpose, captivation, interest).
- The desire to reach a high level of performance and understanding of what it will take to achieve that level (know your outcome and know the ‘price’ – what it will take to achieve the goal, which might include aspects such as time, effort, money and changes to lifestyle).
- The willingness to put in the significant time and effort to reach that level (paying the price!)
(Adapted from Human Performance: Cognition, Stress and Individual Differences, 1985, 2000)
Motivation is integral to achieving trading success. In very simple terms, it provides the energy to do – to engage us and keep us engaged in the actions required to achieve requisite levels of knowledge and skill; to adopt the attitudes and behaviours that it takes to become a successful trader.
Strong motivation is also a component of resilience, keeping you going through challenging times such as drawdowns, to bounce back from losses and setbacks and to keep going in the face of adversity.
But, what is motivation?
Motivation, can be thought of as motiv-ation; a combination of motives, and action, or motives in action. Motives are reasons for doing. These reasons provide an energy to act.
When you ask, “Why am I trading?”, you are gaining insights into your motives for trading, the reasons why you trade.
Do you know why you trade?
Discovering Your Core Motivations
Here is an exercise to help you to discover and understand your core trading motivations.
Give yourself the time to complete the exercise fully, and write your answers down somewhere so that you can re-visit them, and remind yourself of them.
Uncovering Your Core Trading Motivations
Why did you start trading? (Why do you want to trade? – if not actively trading)
What was it about trading that particularly attracted you?
What do you want from your trading? What would that give you?
What do you enjoy about trading? What do you not enjoy?
Why is trading/being a trader important to you?
When you have completed all of the questions, you might like to see if you can summarise them in some way, into a sentence or two, or a few bullet-points, perhaps even something visual.
You can then keep this somewhere accessible as a reminder, as a way to tap into your motivational energy on a more regular basis. Many of my coaching clients have their motivation, or purposes statements featured in their daily or weekly preparation sheets.
Once you are aware of your motivation, and recognise the role that it plays in your trading, then you can also assess it.
Assessing Your Motivation
In the ‘Traders Mind Journal’ on the ‘Trading Performance Scorecard’, we think about motivation as;
“Motivation is a feeling, an energy to do, and is often seen as being the mental and emotional fuel for success. Being clear about what you want to achieve from your trading – your mission or goal – and why you are trading - your purpose – can help you to stay motivated, and mentally energised.”
You can check-in on how your motivation, perhaps weekly, by asking the following question, and rating yourself on a 1-5 scale.
“I felt motivated and mentally energised.”