Thursday, September 16, 2010

PSYCHOLOGICAL CAPITAL - Do I have it? Is it enough? How can I get more?

As a trader, you're very familiar with the term "capital," it's money. You know, that stuff you seek on the other side of the risk you endure. You hope you win enough of it to keep you showing up in order to get more of it. Isn't that the purpose of trading, getting more and more capital?

Another kind of "capital" that I believe is foundational to the art of earning and maintaining the financial capital you seek, is PSYCHOLOGICAL CAPITAL

What is this stuff called Psychological Capital (PsyCap) anyway? Is it just a nice intellectual concept to make me sound smart, or you more secure or rich? Researchers in the field of positive psychology have come to define it as the positive and developmental state of an individual characterized by high self-efficacyoptimismhope and resiliency (Luthans et al.). 

So the next questions to consider are:

  • Do I have enough self-efficacy (confidence)?
  • Do I have enough optimism (good things are on the horizon)?
  • Do I have enough hope (I believe in positive outcomes)?
  • Do I have enough resiliency (I can endure and bounce back)?

My experience coaching traders has taught me if I'm not addressing these questions in a pragmatic and deep level, I'm not helping a trader grow their psychological capital, and thus not helping them perform optimally to sustain a successful trading career. My job is to coach traders in the art of self regulation so they earn the confidence to manage what they can influence, i.e. their internal market. Once they experience a consistency to positively influence their inner market i.e., 
emotional arousal & decision making, they begin to shift into believing that good opportunity is on the horizon. When set backs occur, which they always do, traders recognize they're entering an opportunity to practice resiliency. Bouncing back and recovering perspective is imperative to maintaining a long, stable and prosperous trading career.  

Psychological capital can fluctuate just like P&L, thus, some days you have lots of it, while other days you can't locate it at all. Growing PsyCap requires a commitment to self awareness and self regulation, two core components of emotional intelligence (EQ). Knowing what to do and when to do it, like in trading, makes all the difference between being a winner or a loser. I have been on a several year journey researching what types of actions I need to coach traders into doing to optimize their ability to grow their capital, both psychological and financial. The psychology of human performance has demonstrated there are deliberate routines that when practiced, develops a performer towards expert status. 

In future posts, I will elaborate on what kind of deliberate practice seems to make a difference in growing a traders psychological capital. Rest assured, it's not going to be a simple recipe or a one-size fits all, but more so a customized fit to the unique qualities of each trader. A trader knows that without clarifying the components of their strategy into a written and executable format, they often cannot do what they think. Similarly, without clarifying the components of how to grow your psychological capital, you likely won't produce the state of mind that supports coherent and profitable decision making.  

~Keep Growing, Coach Ken

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