Trading: Inner Game

Michael Martin, trader and blogger over at, sent me over a copy of his new book, The Inner Voice of Trading:  Eliminate the Noise, and Profit from the Strategies That Are Right For You.  The book is filled with shout outs from some hall of fame traders, so it jumped my reading queue and I read it over the weekend.

One concept Michael drives home is that methodology is much less of a factor in your overall success than you might think.  Matching up a methodology with your personality is important.  It reminds me of when I was a junior member at the golf club and the course pro came out and played a round with us.  We thought we were pretty hot shit at that time because we were shooting in the mid-80’s.  The course pro decided pull a classic stunt and teach us a lesson.   He bet us that he could shoot a lower score than all of us, using just a 5-iron and putter.  We thought the old guy had lost his mind!  Naturally, after 18 holes, he blew us out of the water.  Having every club in your bag is not a requirement when you have flawless course maintenance (taking small losses) along with experience and a strong mental game (inner voice).  He was able to accomplish more with less.  Golf is a mental game and so is trading.  Achieving harmony between your style, methodology, and personal goals is the objective, not relentlessly tinkering with indicator settings or re-optimizing your entries and exits.

Some people are lucky; they either stumbled upon, or naturally sought out a style that works for their personality.  To these people, trading seems like pure science.  Others struggle to find a methodology that is compatible with their inner voice.  They end up fighting themselves and grinding away at a strategy completely unsuited to them.  This is a book I wish I’d read when I first started out.  The examples and anecdotes should help to free your mind and get you thinking about what it really means to find a path in trading.  Maybe you though it was one way, but it’s really the other way.  Maybe you heard of some system that works or you know someone who made money doing something.  Doesn’t matter, it probably won’t work for you.  You’ve got to find your own way.  Martin writes: “Incompatibility between trader and system is the single greatest reason most traders don’t succeed, regardless of trading style.”

Once you’ve mastered your inner game, you can be like the old pro and knock out pars and birdies all day long with any old rusty 5-iron.

Some other great quotes:

“Feelings of regret and reluctance kill more traders each year than black swans.”

“If you don’t know who you are from a self-awareness standpoint, it doesn’t matter what you know. Sooner or later, the market will amplify your worst character defect and hit you in your most vulnerable place.”

“The feeling you get from losing 50 bps 60% of the time must be the same feeling you get from earning 150 bps the other 40% of the time. Focus on the overall process, not the outcome of one particular trade. If you find in love with a trade, you have lost your objectivity. You cannot fall in love with these things…they are not women.”

The book drops September 28 from FT Press.  Order your copy of The Inner Voice of Trading on Amazon.

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