The Perfect Trader by Van K. Tharp, Ph.D., and Jennifer Benson
What is a perfect trader and is such a condition desirable? Does such a creature exist? Psychologist Van K. Tharp of Investment Psychology Consulting says not and further, you're far more likely to succeed if you don't try to be perfect.
E lmer was a perfectionist who was trying to develop a trading system that would win in nine out of 10
trades and would make five times as much money as he was risking on any given trade. When he first
tried to develop such a system, he came up with something that was just profitable after commissions and
slippage. But when he saw the results — only a 2% gain each year — he wanted to beat his head into the
wall. After three failed attempts, he was beside himself. His family found him hard to live with; he just
locked himself in his computer room doing more testing and feeling more and more dissatisfied with
himself. Normally, Elmer would have just given up after about six months. But in the case of trading, he
seemed exceptionally committed to finding something that would meet his standards. He'd abandon a lot
of good ideas before testing them, and those he did test, no matter how well they turned out, did not meet
his exceedingly high standards. In fact, he had several good systems that he was trying to trade, but he
could not get himself to trade a system that wasn't perfect. Eventually, Elmer's wife left him and Elmer
found himself broke, without a family or even a trading system that met his standards.
WHAT IS PERFECTIONISM
People strive to be perfect in what they do because their parents demanded they be perfect as children.
Unfortunately, these unreasonably high standards sometimes keep them from ever coming close to
achieving them. Production seems to go down in perfectionists. Businessmen make less effective
decisions, traders make less money, and athletes perform poorly — mostly because of the unreasonably high standards they set for themselves.
But the perfectionists' problem is not just created by unreasonably high standards. You can have high
standards without being a perfectionist. But perfectionism becomes a problem when perfectionism means
that those standards are tied into your self-esteem. If you don't achieve those standards (and for the
perfectionist, those standards are all or none, nothing in between), then you feel as if you are less of a
person. The perfectionist has trouble tolerating a mistake or a distraction. Perfectionists tend to have all
or naught thinking, so that little everyday setbacks can lead them into a world of despair.