Dealing With Setbacks

“Of all the virtues we can learn, no trait is more essential for survival and more likely to improve the quality of life than the ability to transform adversity into an enjoyable challenge.”

 - Mihaly Csikszentmihaly

I was due to race the London triathlon at the weekend, the culmination of months of training and preparation. I left the house to get to drive to excel the race venue which is typically a forty minute drive allowing one and a half to two hours for the journey. Two minutes down the road I was stuck in slow moving traffic and two minutes after that I was stationary. After an hour of not moving and with updates on the traffic situation I realised that I was not going to get to the start line. I had to turn around and head home – pretty disappointing, but not the end of the world – an opportunity to spend more time with the family and to refocus for the next event.

Setbacks are not uncommon in sport, and trading is no different. Sometimes things just don’t go to plan often through factors that are outside of our control. How you deal with setbacks tells a lot about your attitude and mental toughness – it is a key factor in the DNA of high achievers.

Cognitive psychologists suggest that an individuals "explanatory style" – the way in which you explain events to yourself - can be a significant factor in influencing their level of performance. The research done by Martin Seligman (Learned Optimism 1990) suggests that individuals with an optimistic explanatory style not only consistently outperform those with a pessimistic explanatory style but are also happier and live longer. Seligman’s work is essentially based on 'attribution theory' which is the study of how people explain 'good' and 'bad' events that happen in their lives. An individual's explanatory style can be used to determine their level of optimism or pessimism.

Seligman’s work covered three core "dimensions" about both negative and positive events which has been suggested ultimately determine optimism or pessimism in explanatory style:

Personalisation (Ps) – how personally people take events

Permanence (Pm) – the time factor to which the person ‘dwells’ on the event

Pervasiveness (Pv) – how contextually or globally the person makes the event

Researchers suggest that an optimistic explanatory style, particularly about bad events, encourages perseverance: pessimistic people are more likely to lose confidence and motivation after a poor performance than optimists, and encouraging optimism in traders can therefore lead to perseverance which is of course a key part of resilience. With pessimistic traders when a negative event occurs - for example, a big loss; a sustained period of drawdown; making an error; and so on - then their explanatory style would promote less perseverance, and may be result in those traders not achieving their full potential.

"It's significant to note that one can't not make explanations about the events that happen in one's life; one has to do that in order to make meaning out of the world. However, the consequences of the type of explanations one makes is very different. If we tend to make more optimistic explanations about events, then we'll be more successful in the long run, than if we tend to make more pessimistic explanations."

 - Jeffery Hodges, Sportsmind

Take a moment to a setback that you have encountered.

How did you explain that event to yourself?

What meaning did you give it?

How personally did you take it?

How pervasive did you make it?

How permanent was it?

Could you have responded in a more useful way?

Accepting that there may be setbacks along the way to trading success is one factor, dealing with them positively when they arrive is the other and so adopting a positive, optimistic explanatory style is key.

Until next time…

Steve Ward

Peak Performance Trading Coach