Trading has an uncanny ability to turn anyone into an insufferable jerk. Have you ever been around a trader, or group of traders, and all that seems to be happening is everyone is trying to one-up each other? Brag about their latest “10 bagger”, revel in their home runs and how “they totally knew that was gonna happen”, etc.? That’s the ego talking, and it’s a very dangerous and hungry beast that when fed, only gets hungrier.

But what exactly is ego anyway? Let’s start with a definition:

e·go

/ˈēɡō/

noun

a person’s sense of self-esteem or self-importance.

“a boost to my ego”

So the ego is what makes people feel that they matter. It’s something we all have, to one degree or another, and it’s something that tends to make us feel really good when attention is paid to it. It’s why salespeople, marketers, politicians, and anyone who wants to get you to do something to suit them, try to pander to it, to metaphorically stroke it. We all like to have our egos catered to as it makes us feel good and by extension, we like the person who is at the source of that feeling.

But what if we are actually at the source of it? What if we’re stroking our own ego? This can have pretty serious ramifications which can be beneficial, but also extremely harmful. And in trading, we mostly see the harmful side more than the beneficial.

Everyone operates best with a healthy ego. And by that I mean just basically being secure, self-confident, knowing your own value/worth, etc. But ego can be a lot like anything else in that it can get a bit addictive. You get an ego boost, and it feels good, so you want more. Which feels better, so you want more. And the cycle can spin out of control, until you get to the classic “egomaniac” stage where nobody can stand you anymore. Inevitably something happens to “burst your ego bubble” and the fall from such a height, can be extremely brutal. The low one can find oneself in after getting your ego bashed in, can be hard to climb out of.

In trading we see this all the time, especially on social media like Facebook, Twitter, and Instagram. But even in private forums, Discords, etc. you’ll get people coming in and they’re all ego. “I passed this evaluation in ONE TRADE! Look how awesome I am!” “I took 216 scalps today and didn’t have a single loser! I rule!” “I made $20k this week, I’m the greatest trader alive!” Honestly I’m not being all that hyperbolic here, I’ve seen stuff like this and in the moment, these folks are so hopped up on ego that they can’t even see how ridiculous it sounds. Usually, you never really hear from them again. Likely because they promptly blew up from overleveraging, overtrading, adding to losers, fighting the direction of the day, etc. All the classic stuff. That’s their fall, and they don’t usually reappear until they’ve managed to climb back up to the heights again. That’s when you’ll see a new ego post, because they’re trapped in a boom-bust cycle and don’t even see it.

So what can we as traders do about this, in order to maintain a healthy ego but not fall into the traps that drive us to being egomaniacal? There’s no perfect one-size-fits-all solution, but here are a few of my thoughts on the subject.

• Keep in mind that ego is important, and we need it. In fact it can help us get through “tough times” in the market, bad days, whatever. Make sure you do nurture your ego, acknowledge when you’ve got a good read, executed well, managed risk, etc. Just don’t go running around your room fist-pumping and flexing like a young Arnold Schwarzenegger.
• If you have the urge to immediately rush to social media to post about your latest winner, stop. This has to be caught in the instant and recognized as ego getting in the driver’s seat. Unless you are also in the habit of always posting your losing trades as well. Showing only “one side of the ledger” is dishonest and is only serving your ego.
• If you notice ideas in your head like “I’m going to be the best trader in the world” or “I’m going to absolutely crush the market today” etc., don’t trade. Seriously, just stop before you get completely run over. This is not the way a professional approaches their job. If you think you’re going to corner your chosen market, believe me when I say that never works. Just ask the Hunt Brothers (or Mortimer and Randolph, if you prefer! 😉 )

• Keep in mind that you don’t at all need to be the greatest trader to ever live, or make 8 figures a year, or trade a 10 figure book, to make a phenomenal income from trading. But you do need to survive, and trading from one’s ego is a recipe for disaster. Long term survival means you have a chance of long term success. Protect yourself, before you’ve rekt yourself.
• Stay mindful of your self-talk. Listen for words that are all about you, how great you are, how much better you are than someone else, what you’re going to buy, how impressed so-and-so will be with your results, etc. There’s absolutely nothing wrong with recognizing that you’re competent, or even good, at trading. But the market will devour you if you let your ego make your trading decisions.
• Above all, decide that this is important and that you’re going to be in control of your ego, and it will not be in control of you. This is potentially critical to your trading survival, so make this decision now. No waffling! (HAH, see what I did there??? lol)

I hope some of this is helpful to some of you. And I’d love to hear from you, your experiences with ego and any methods or techniques you’ve found helpful in managing it. Have you ever caught yourself in the moment and prevented ego-centric trading behavior? Have you experienced your ego taking over and causing trouble? Feel free to share your thoughts in the comments below.

Until next time, good trading!

Jonathan van Clute
Community Manager, Trading Research Group