Trade without ego

Eckhart Tolle’s excellent book ‘a new earth’ explains ego beautifully. His spoken version – where Eckhart is also the narrator – is the best.

To trade without ego is a necessary but difficult goal; to do so, of course, is to trade without emotion. Loss is part of the trading game and the successful, professional trader manages loss with the same detachment as she manages wins. Without emotion.

Don’t get me wrong, the unexpected ‘grand’ win will come along, so allow ourselves a small celebration. However, the professional trader manages each trade with a (egoless) positive traders equation in mind, an approach that will never have the need for commiseration.

To achieve a positive traders equation – an equation that includes risk, reward and, the often forgotten about, probability – is everything. Fear, greed and overconfidence are all parts of the ego. And, ego messes up our ability to recognise probability.

However, with understanding, determination and practise, as in all our endeavours, we can largely eliminate many of the damaging characteristics of the ego. To do so, certainly in trading, we need to train ourselves to be aware of these emotions and manage them correctly. Eckhart says that to manage ego we simply need to be aware of it and be in the present – that is, be in the now.

Taking a trade, for example, based on making up ‘lost ground’ is trading based on the past; or more accurately, based on the ego. It doesn’t work!