The Ego - The Larger The Ego, the Lower the Profit

· 8 min read
The Ego - The Larger The Ego, the Lower the Profit

The Ego - Your Worst Enemy

Writing about the ego is tricky. Most notably because there is a real dichotomy between the advice I give, and how I act in actuality (due to my ego). I'll humbly ask that you take this for what it is - a warning.

There are hundreds of philosophical arguments about what the ego is, it's importance in life, trading and personal relationships. Is it a good or bad thing? Is there such a thing as good and bad? Who makes these decisions? Immersing yourself in, well... yourself... can lead to some fantastic self-sabotage.

One spectacular example was in 2018 June when my account was up 57% and by June 2019 I erased the gains with another 9% loss to top it all off. My first real losing streak and some really bad trades - what went wrong?

Let me share my experience with you on the Ego, how I've managed it (or handed it over to the 'universe') with respect to trading. At the end, I'll share one of my breakthrough moments which happened during a Psilocybin trip (yes, magic mushrooms, If your ego no 'likey' then bye bye, thanks for reading first 6 lines).

From a stock trading perspective let me know if this sounds familiar:

  • You've had a string of winning trades and jack up your risk only to lose all of your prior gains (and more), which I did in 2019.
  • You hold onto a losing stock or position - proceeding to look away from the account or ignore it
  • The mind is like a yo-yo swinging between elation and depression all based on your trading balance
  • Every time you open your brokerage account your eyes hit the PnL and this determines how you feel for the day

When trading, our delusions and ego make us act irrationally, in all of the worst ways possible. We get caught up in right or wrong which are simply labels given to us since birth. The stock market, large institutions and hedge funds could not care less about us and how we feel - yet we force ourselves onto the market and wonder why we lose.

If you feel beat up when losing trades or think the hottest girl in town is waiting for you when on a 'hot streak', you could could be grappling with some ego issues.

The Market and Finance is not About Your Ego

It's funny how we intertwine who we are with the stock market. The market is simply what it is - a market. Somehow though, we make it about the all important self, the ego. It is not enough to be given the gift of consciousness, we strive towards more of almost everything. We take our parenthesis in eternity and reduce it to how people think about us and how we're perceived.

I strongly believe if you worry about what people think of you, you have no time to think for yourself: objectively and outside of the illusions and traps which cater to ego. Some examples:

The Ego Likes to be Fed

A life better than your own. Traders making more than you with Gucci shoes on Instagram etc.

Unattainable possessions which you 'need' so you can show people how allegedly successful you are.

Winning at the expense of others, always coming first irrespective of the wake of destruction.

Cocaine or high octane drugs. More, better, faster! Me!

The dopamine train is chugging along and things feel great. Seldom are we reflecting and being conscious of our actions and their impact on the life we are trying to create.

Subtle Triggers

You will probably recall a time you were trading really well. There was no internal conflict, decisions were not forced and yet you made more money. The stress you impose on yourself and the market dissipates and you can't believe how easy it is to make money (if I register this now I write it down to avoid the trap).

As soon as you realize the 'easy way to make money' it's ego time! Better put on some gigantic positions because all of the prior results were 100% you, the next Market Wizard. I've always found it funny that people claim full responsibility for wins but losses are due to external factors.

To be ultimately free from stress induced by trading, decisions need to be clear, effortless and rule based. Essentially, giving up what you think about yourself, the market, news and all of the distractions of life. Good trading comes from letting go, letting go means dropping the ego and what you think you know.

What is Trading Then?

Even if this may sound rudimentary. Trading is simply identifying and executing a plan with a higher probability of winning than losing. That plan needs to be rolled over enough times to generate more profit than loss.

Ironically, there are hundreds of thousands of ways that you could make money in the stock market. You've read all the books, spent thousands on courses and know this, at least it makes sense logically. That feeling of excitement you get after devouring another Minervini book is infectious. Straight back to the 'this is easy' 'I am smart' paradox that is the very thing preventing success in trading.

If we imprint what we want or the 'me' into trading system it personalizes the experience and our version of the system ends up being Frankenstein's monster. When I use my trading journal to reflect on my wins and losses, I am always shocked to see just how little I followed the exact strategy. More commonly I see a whole lot of:

Taking trades too early (FOMO)

Moving stop losses down a notch to give my positions more room to move

Taking unplanned trades based on news or Twitter because I was scared to lose (FOMO)

Being bullish when I should have sold

Selling when I should have bought more

Again, all of the above was fed by the need to win at any cost. The Ego was in the driver seat and I caught myself day dreaming about hitting it big. Although I am a massive proponent of positive visualization, it needs to be from the right mindset.

Focusing on the outcome instead of building a system or process you enjoy following can destroy gains in minutes.

You Are the Holy Grail

I wrote some time ago about 'Holy grail syndrome'. This is where you need to know everything in the stock market but somehow nothing works. Let me disclose a few strategies I have run because my ego would not allow me to lose even once (another paradox as it results in losing more).

Stock Trading Ninja strategy (trend trading)

Index investing - which I never saw through and then went into property (which worked out thank heavens)

Selling options

Buying options

Spreads, iron condors and other options strategies

Crypto - which also worked out but helped me develop a few ulcers in the process

Value investing for long term

Property development and being a landlord

Opening a micro business


Instead of focusing on the things I truly enjoyed and following a structured approach to my investing, I have simply tried all of them at once. This was driven by my deeply neurotic behavior and what psychologist Karen Horney calls the 'tyranny of the should'.

When our ego is in control we always have the feeling of 'I should' do better, be quicker, smarter and better looking. Seldom do we consider reducing the noise and pursuing mastery. I grew very tired of terrorizing myself with expectation driven from the ego and felt there was a better way to trade and live.

What Great Trading Looks Like

I find that when I trade and spin out into ego mode the best way to focus my trading is to systematize how I approach not only trading but my overall day. This seeps through into the decisions I make around people, work and my own mental makeup.

Trading should revolve around building sustainable habits and processes that can be executed with your ideal self in mind, someone connected to powers far greater than their own, not the neurotic perception of self exacerbated by others expectations.

Before you put on a trade your subconscious processes have already been aligning to produce result. If you are unbalanced emotionally and physically, expecting this to not show up in your PnL is a fantastic case of getting the ego to go into overdrive.

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My Ideal Day

On the days when I feel truly centered and connected to everything (which is not every day, it's an evolutionary process) I tend to plan the following:

Writing down what I am grateful for, starting with other people and then working towards myself

Meditating and clearing my mind to focus on the 'now'

Creating a clear list of my plans and habits for the day. I am an avid fan of Atomic Habits, recommended to me on Twitter by @Lonestocktrader (make sure to follow this guy)

Exercising and eating well through all of the above

As I travel with work a lot recently, It has been challenging to keep these commitments to myself. The beauty of managing the ego, is that I can identity the emotion when it comes up, without judgement, and maintain the effort when the stars align again.

Clearly defining what you want to create your own version of success is everything. Knowing the difference between what others see as success and what it means to us involves picking apart our own ego and hereditary learning.

Know Thyself

Putting together an ideal day really is the tip of the iceberg when it comes to deconstructing the ego. For me, the experience let me reduce the daily noise and constant pull on my time and let me begin living with more purpose and direction.

The ego is easily distracted and pulled towards what seems like new and shiny, big money and more power. My trading really changed when I reduced the noise and asked myself why I bothered trading at all in the first place! There are far easier ways to make money, trading for a living could be one of the hardest endeavors one can pursue.

Dropping the ego and truly knowing why you decide to do things is a great first step, a true reflection of your purpose, is this what you really want? Are you truly happy to trade or simply chasing expectations placed on you since inception? Most importantly, are you authentically pursuing your purpose or chasing an illusion?

Trading is deep and can be very painful if you don't take care of yourself. Getting centered and seeing your reflection for what it is will be the difference between success or failure.

Some Fundamental Shifts

My perception on trading has changed to someone who is totally immersed with the outcome, to a third party observer of my behavior during market hours. I feel the following phases reign true for all people who pick up the art of trading.

  1. When you begin trading, you aren't aware of the potential emotional traps associated with the ego.
  2. Things that seem positive such as winning streaks are paradoxical and end in huge losing streaks further breaking the ego.
  3. This can end in over-trading or revenge trading and feelings of 'not good enough'. People become tied to the outcome and not the process.
  4. Giving up seems inevitable, you become a long term investor after not cutting a loss.
  5. The cycle ensues until you hurt yourself enough to either stop or make a change.

Process Oriented Behavior

  1. You have selected and defined a list of objective criteria you understand and can trade or implement.
  2. Before making a decision it is clear that the potential action confirms to the rules without exception.
  3. The trade or habit is executed and documented in a way that can be observed objectively.
  4. Reflection is systematically built into the system in a way that provides insight and value into development.
  5. This is done so in a judgement free environment that facilitates growth, autonomy and self-actualization.

Defeating conditioned behavior and dopaminergic triggers is not easy in our modern society. The ego is driven towards noise, gratification and destructive habits dressed up as 'new' or 'sexy' ideas that add little value to finding our own path.

Making the decision to stretch outside of these patterns requires the development of your own philosophy on life and what value you bring to this fleeting moment in eternity. Now, more than ever, it is important to know yourself deeply and become the author of your own trading account and life.

I hope you enjoyed this read, some resources that shaped my thinking below:

What I learned Losing a Million Dollars - Brendan Moynihan

Meditations - Marcus Aurelius

Winning - Mark Minervini

Neurosis and Human Growth - Karen Horney

The Inner Game of Tennis - Timothy Gallwey

Reinventing Yourself - Christine Hassler

Trading in the Zone - Mark Douglas

The Disciplined Trader - Mark Douglas

Atomic Habits - James Clear

This is not an exhaustive list. I read way too much. Probably an ego thing :)