#008: HOW “BEING SMART” ALMOST KILLED MY TRADING CAREER
This one is going to be a bit longer, but a really serious one, definitely applicable to most traders, as I´ve had the chance to witness it during the years of my trading career.
Generally, in trading, you have to face many challenges every single day. For example, you have to fight against technology almost nonstop; you see things in the market that you’ve never seen before, which you aren’t ready for yet and you constantly doubt your abilities when things don’t go the right way. But mainly, most of the time, you have to fight against your biggest enemy – your Ego.
In short, I have to admit that I could have moved forward toward successful trading much faster if I had known more about the ego-related trading obstacles in the past. Probably, the biggest ego-related issue comes from a self-belief that you are abnormally smart and that “being smart” is exactly what you need to “beat markets”.
Well, let me tell you this: Believing that “being smart” is the right way to approach markets produces, in general, much worse results than admitting the fact that we know basically nothing. Once you start operating from a different perspective, accepting that luck, spontaneous ideas and creativity are the keys in the world of markets, and that these are random and mysterious, you’ll start moving towards success much faster. Contrary to that, sticking to the belief that you can “outsmart” the market thanks to your intelligence, is probably the worst approach ever. Seriously.
In the past, I got into too many traps just by thinking that I was so smart that I had to show it to everybody – the endless smartness of my ego! But, after many hard lessons, I realized that doing that to please my ego could have absolutely fatal consequences.
For example, one and a half years ago, I still remember pretty well, wanting to show my work team, and myself too, how smart I was by establishing a hedge fund. At that time, we were developing a new Design & Prototype code (a code that automatically designs and develops trading strategies – I call it a D&P Code) and I decided that it would be my „smartest“ code ever, that it would be THE CODE. So, I put all the fanciest ideas I had into it and was constantly trying to impress everybody around me with the level of complexity and novelty I could bring in and handle. I got so ego-driven with that project that the real result, after many months of hard work, was that we weren’t able to finish it!
It all just got too complex, too ambitious, too ego driven. Those abstract, technical aspects and the never-ending frustration of the highly limiting possibilities of technology we were using were such a struggle that we had to give up. The worst part was that I had known about all those limitations of technology; I had known that this level of complexity and abstractness couldn´t be done within our possibilities and timeframe – but I was still pushing to show everybody that I was the smartest!
After all that experience, which couldn’t have had a different outcome, I felt really defeated and my self-esteem went very low. Of course, at that time, I didn’t realize that it was all due to my ego issue. I blamed everything and everybody around me. In the end, I put the project aside and decided to forget it.
More than a year later, when I was already able to see my ego related issues more clearly, I decided to get back to the project, with another perspective and an honest effort to look at everything with a fresh mind, without the ego being attached.
When I opened the work as we had left it for a long time, and saw all those 10.000 lines of code, I was really shocked at how I could have ever thought that this could ever work! Despite full of fresh ideas and novelty, it was also way too (over)complex, (over)complicated and (over)ambitious. At that moment it felt like looking at an image of my own Ego: Proud, big, complex, hungry, never satisfied. It was like looking at a kind of mirror and it was a very strong negative feeling and a very valuable lesson at the end of the day. (Later on, I tried to get as much as I could from that lesson and we developed a new Design & Prototype code, much lighter, more compact, and driven by the passion and by the joy of the process, rather than by ego and the need to impress everybody around me).
And all this is just one of many examples.
The problem with trading is that it’s a really challenging (but also very rewarding) profession. Once you start doing well, you start feeling very proud of being one of the few who has made it. So, you start feeling that “now you need to show to everybody how great you are”, or even worse, that you are exceptional, a special human being, above everybody else. You can even feel the inner need to scream to the world how smart and great you are and how everybody should listen to you.
And that is exactly the moment when you start getting into big trouble.
That is the moment when markets start giving you more painful lessons on humility, reminding you that you are not the smartest man on this planet and that is obviously not the way you should “treat” markets.
This kind of never-ending inner ego-related battle often costs you more money and energy than anything else.
After many years in markets, I still keep learning how to value my team´s ideas more than mine, how to admit that many great trading results are also the consequence of being lucky (seriously) and that I’m NOT superior to others just by having some great trades, returns, or ideas. It helps me a lot to be a better and more profitable trader, but there are much more important factors in successful trading than just being smart (or thinking that you’re being smart).
Every single day, I still need to remind myself how important it is to keep your ego aside.
It sounds easier than it is.
(P.S.: That high, my Ego sometimes feels. I took this photo in Kuala Lumpur, in front of the Traders Hotel. How symbolic!)