April 22nd 2008
Trading Success and Testosterone
Here is a story from Scientific American on trading success and testosterone.
According to the story, the traders in the study had a higher level of testosterone in their saliva on days when they beat their daily average.
The story goes on to state that the increase in testosterone led to more confidence which in turn led to more winning.
I found it amusing that the researchers warned that longer periods of testosterone make traders prone to excessive risk taking which exacerbates a bubble. You know what caused the last bubble? Highly compensated traders making huge bets with little downside risk to themselves. I mean, really, how many years of multi million dollar pay checks does it take before you’re set for life, but I digress.
Before you go to your neighborhood gym to stock up on Andros or raid granny’s medicine cabinet, let’s talk about building trading confidence legally:
The most effective step I took to build confidence in the system I wanted to trade was to get a mentor. Someone who had been there. Someone who knew the ins and outs of my chosen style of trading. I had confidence in my mentor(s) and they gave me confidence in my system. I was able to experience a variety of trading situations through their combined expertise. I was able to avoid certain pitfalls and navigate through ones into which I had fallen.
In other industries, having a mentor is standard practice. You seek them out. The relationship may only last through a certain project or be for a specific problem. So why is it not common practice in trading? Perhaps, at least for the retail trader, there’s the desire to be on your own. Another big reason is the financial one. Mentoring relationships for retail traders can cost $$$.
I think blogs can be helpful as a mentoring tool, as a mentor and protege. I love to coach people and I enjoy answering questions. It forces me to really know what I’m talking about.
Commenting on other blogs as also helped me personally. Trying to understand how others view the market, analyze setups, control their emotions.
I am skeptical by nature. So, being a protege was difficult at first. I have a hard time taking what a person says without asking questions. So, when you do get that mentor, listen to what he/she has to say, but test. Trust but verify.
Finally, maintain strict risk management discipline. I’m always saying trade small, and I know it probably gets annoying. However, it is a fundamental building block of my trading operation, and even coaches in professional leagues teach fundamentals, right?
