Trading RM, LLC.

Recently I read Gary Mack Casstevens book Mind Gym, which deals with the importance of mental and psychological strength to achieve excellence in sports. Not surprisingly, the parallels to trading ring loud and clear throughout the novel. One specific section dealt with the characteristics that define mental toughness for athletes is especially relevant:

1) Competitive- "find a way to win" & "take bad breaks and use them to drive themselves"
2) Confident- can do attitude and avoid "self defeating thoughts"
3) Control- focus on what can control and don't allow things they can not control affect them
4) Committed- focusing time and energy on goals and dreams: "wanting it'
5) Composure- staying focused and dealing with adversity
6) Courage- willing to take risk: "only climbers get to the top"
7) Consistency- possessing an inner strength: no place for excuses

As I view the above list, these are many of the attributes that I spend most of my time trying to develop and sharpen throughout my trading career.

At the end of the section on the "Seven C's of Mental Toughness" we are left with a quote to ponder. In sports (and trading) "Competition is won or lost on the six-inch playing field between the ears."

As we near the end of the trading year, it is a time to focus on these keys and hone our skills for the year ahead.

I love sports and trading analogies. An article has been going around our office (and other trading offices) from Golf Digest written by Michael Jordan with Craig Bestrom. It details Michael Jordan's 10 rules for maximizing your competitiveness. Michael Jordan is specifically talking about his golf game. But the lessons cross over to basketball and trading.



Some highlights from the article:

• ''If you have 100 percent confidence that you can pull off a shot, most of the time you will.'' -- Michael Jordan My takeaways: Not many traders who do not believe in themselves will succeed.

• "Focus on the little things. During my basketball career, I always told myself to focus on the little things because little things added up to big things. I equate making putts with making free throws, and my biggest mental challenge shooting free throws was in my second year, 1986, when I came back from a foot injury for the playoffs and had a 63-point game against Boston in the Garden. I had to make two free throws to send the game into overtime, and all I focused on was the basics -- I'm not gonna be short. I'm gonna extend and reach for the rim -- all the fundamentals that I had worked on at home and at practice for all those years. Golf is no different. Don't assume, for example, that any putt is good. Make sure you putt every three-footer with conviction.
  And keep score every time you play. I do. " My takeaways: focus on one trade at a time. Keep score = keep track of your stats (win %, average winner, etc...).

• "Don't think about the prize; think about the work. At my basketball camps every year, I award the kids shoes if they make a certain number of free throws or if they complete an around-the-world or something like that. But I always tell them that if they're thinking about the prize, they should be thinking about the work. Prepare, practice and perfect it. Do the work, and the prizes will come." My takeaways: this one is obvious. Focusing on PnL and avoiding the day to day work is a recipe for disaster.

• "Keep it simple. There are a lot of correlations between basketball and golf, especially on the mental side. Whenever I played a big game, I tried to stick to things I knew I was capable of doing. I do the same in golf. I've seen Tiger hit that stinger, and I know it's doable for me, too, but it isn't a shot I've practiced much. Why would I try that in the heat of the moment?
  My instructor, Ed Ibarguen, has me focus on a specific target before every swing. One of my biggest problems is, sometimes when I see water right I try extra hard to stay away from it. And what happens? You end up going right in the water. That's because you're focusing on the wrong thing.
  Eddie tells me to pick a blade of grass on my line or a building in the distance and to blindfold myself to everything else. That's keeping it simple, and that works especially well in pressure situations." My takeaways: Focusing on the home run trade, what a big trader is doing, or complex setups are not great...especially if struggling. Focus on your best set up, a simple trade. What simple steps do you do to prepare for a trade, enter the trade, and exit the trade. Focus on the blade of grass in front of you, not the end of year PnL number.