A Sharp Mental Edge

Why do you need to sharpen your mental edge? A sharp, mental edge means you are aware and alert, ready to take advantage of opportunities that come your way. Depending on your personality and background, cultivating the proper mental edge may be difficult, but not impossible. It is just a matter of working hard to achieve your goals.

In his book, "A Strategy for Daily Living," Dr. Ari Kiev observes, "A successful life does not result from chance, fate, or good fortune, but from a succession of successful days lived in pursuit of a worthy pursuit." Dr. Kiev points out that you can work toward your goal every day, day after day, and in the end, you will achieve your goals. Perhaps you will make more progress on some days than others, but what is most important is that you never give up and spend every day working toward your goal. That's what it takes to develop the proper mental edge for trading. Developing the proper mental edge is a process that takes time. It's a result of gaining the wealth of experience you need to succeed.

Many people make the mistake of thinking they need to be an overnight success. It’s part of the American dream. The media reinforces the myth, which is sometimes true but the exception rather than the rule. Most people are not lucky enough to achieve success over night. It takes time. When you work under the assumption that you can be at the right place at the right time and succeed without talent, hard work, and a wealth of experience, you will feel disappointment when you face setbacks. It is more useful to acknowledge that success takes time for most people.

It’s also vital to admit that you are human and that as a human, you have mental limits. You cannot do it all. You have to work with what you have. You also have a limited amount of psychological energy to achieve your goals. One of the best ways to maximize your psychological energy is free up mental energy that is used up by other psychological processes. For example, handling stress, and mulling over interpersonal conflicts uses up precious psychological energy. By spending leisure time resolving interpersonal conflicts or effectively coping with daily hassles, you will have more psychological energy to devote to achieving your goals.

You can only work with what you have, but if you take the proper steps, you can free up poorly allocated psychological resources, and allow more resources to be dedicated to achieving your goals. By taking concerted measures to free up energy, you can expand the limits of your mind, and sharpen your mental edge.

Don't Choke, Stay Calm and Focused

Whether it is trading or playing sports, conventional wisdom suggests that people who put too much pressure on themselves tend to choke under the strain. For example, compare the Olympic performance of Sarah Hughes to Michelle Kwan in the 2002 Winter Olympics. Michelle tried to meet high expectations of winning the Gold Medal and made several mistakes in her performance. Sarah, on the other hand, went into her performance with fewer expectations and a carefree attitude. She said, "I really thought there was no way in the world I would win. Realistically, there was this little window, but I didn't think I would win. I went out and just skated." By taking this carefree attitude, rather than putting pressure on herself, she skated freely and without worry. This stance allowed her to react to the moment, express her creativity, and win the Gold Medal.

Many times you can lose their mental edge merely by believing that it is too difficult to profit under volatile market conditions. Part of this belief is based in fact, but it may also reflect a pessimistic state of mind.

Researchers Liqing Zhang and Roy Baumeister (2006) showed how what people think about their ability to handle stress impacts their financial decisions. Participants played a game of chance that was similar to continuing to invest in a losing trade: they were told they could win a jackpot of $10 if they patiently played long enough by feeding the investment in 25-cent increments. Each participant was given $5 in quarters to play the investment game. They had the choice of continuing to put in quarter after quarter to keep an investment going or cutting their losses. In one group, participants were told that most people choke under pressure when playing the game and that if they were prone to crack under strain, they would have difficulty. In a second, “control” group, participants were allowed to play the game without this feedback. Participants who were threatened by being told they would choke under pressure lost more money than people who were not threatened. These findings suggest that if you believe you will crack under the strain, then you will. But such beliefs can be limiting. It’s more useful to make a solid effort and believe it will pay off.

When trying to perform at your peak, it’s vital to have a solid, realistic belief in your abilities. If you can feel assured that you will not choke when under pressure, you can cultivate the proper mental edge you need to win.