Confidence v/s Will Power

The Only reason I am uploading this piece so soon in our season; is because this is the key to everything you do ...not only in market but in real life as well.

Since last few months working with few FII and fund managers; i have got a chance to learn something more in-depth and come to "in terms" with this ideology

There are three types of confidence:

•  False/Imaginary Confidence

• Temporary/On-Off Confidence

• True Confidence

False confidence —  This type of person will talk big and poses like a big shot. he often takes big risks in an effort to either impress others or to message their own ego and discomfort, and the outcome is terrible sometimes as it leads to busting there trading account.

Temporary confidence — Which is conditional on recent performance. This type of person's self-esteem is tied to their account equity or P&L.  When they are in a good run, they feel confident and like to take larger risks (often the prelude to giving it all back). And when performance is lousy they start grasping at anything, maybe exiting winners prematurely or taking on excessive risk to get their money back.

 True confidence — This is confidence that does not depend on recent results. It is based on a deep sense of inner trust.This is the person who has a history of doing the right thing, regardless of the outcome. Doing the right thing in the sense that they act in their own best interest and trust and understand that doing so over time has a positive impact on results.  The trust runs deep enough to provide resilience in the face of disappointment.  This is true self-confidence, the kind you want in trading and in life.

In my many years of experience and learning from it, I’ve discovered confidence is a major part of the foundation for discipline.

Why is self-trust and resilience in the face of disappointment the  foundation for discipline? 

Disappointment in trading, in it’s myriad of  manifestations – missing out, leaving big money on the table,  taking a loss, etc – is inevitable for even the best traders. It’s an elemental fact that traders who  understand this, internalize it, and make it a part of their trading strategy are the most successful.

 Almost everyone says that discipline is a requirement to succeed in trading. But most people never talk about  what really underlies  discipline. And now you know.

 Are you surprised it’s not will-power? Will-power is not sustainable, it also results in fatigue by significantly reducing glucose (blood sugar levels).

In fact, empirical research shows that extended use of will-power results in cognitive fatigue and lower glucose levels. And cognitive or mental fatigue is dangerous for a trader, it makes us susceptible to making the kind of mistakes we regret later.

 Now that you know that will-power is not enough, do you want to develop the necessary ingredients for discipline?

Stay tuned for next post with market update and insight.