Support and Guidance for Tribal Minds - Part 1

FTMO Trader Scouting


Staff member
This is the sixth installment of the On Professionalism thread series.

The previous installment thread can be found here:
Clean your Charts

The index and first installment can be found here:
On Professionalism

Of the many different emotions and instincts wired into our brains, our natural tendency to be tribal (both socially and professionally) has to be one of the more interesting barriers to successful trading.

To be clear, when I say 'tribal' I do not quite mean primitive, or degraded. I'm using the term "tribal" as a reference to the social-communal and cooperative makeup of our psyche, be it the instincts we've been instilled with genetically, or the social fabric impressed upon us in our childhood. I use the word "tribal" because I want to highlight where these instincts and social fabrics originated from, and where they had the most use; back in our tribal past. Thousands of years ago, humans needed to be tribal in small communities to survive, as alone we often just died off, but as groups we could hunt bigger game and flourish.

Our minds are both absolutely awesome and incredibly lazy. We can invent, be creative, and feel individual identity, but we also seek the approval of others and wish to belong in a group.

This is where a lot of new traders get into some serious hot water: Without realizing it, the comfort found in collective thought will hold an aspiring trader back from the goals they seek.

This isn't to say acting socially tribal is entirely bad. In fact, there are ways we can tap into this desire so that it becomes a positive outlet in our trading careers. This installment of the thread series 'On Professionalism' aims to break down how to focus on the positives while cutting out the negatives aspects of tribal thinking.

As mentioned earlier, tribal thinking came about when we had to act, well, tribal. Thousands of years ago our survival depended on working as a small community or 'tribe'. In today's world, however, our society is structured in a way that we, as individuals, can be much more individually independent. We still have our instincts, and they play a part in our social circles and relationships, but as far as our personal survival goes, are social instincts aren't exactly required to keep alive or pass on our genetics to the next generation.

(One could argue that the 'tribe' has simply gotten larger and more complex as technology and society advanced, but this is beyond the point of this installment.)

So how does this relate to trading?

First off, where our tribal mind can fail us as traders:

The non-traders influence.

When you approach the people close to you in your life about this little trading business you have on the side (or as a full time career option,) you're going to get a wide variety of responses.

Your friends and family, who hopefully have only the best of intentions with whatever advice they give you (so don't fault them trying to be apart of your life,) most likely don't know enough about the world's financial markets to really help with your trading career.

There's even a good chance these people will be pretty disinterested in the world of trading and financial markets (or at best their understanding stops at the mutual fund they bought for their retirement account,) so soon you'll be bombarded with words of advice that stem from fear, greed, or just straight out lacking the foundation of knowledge needed to advise properly.

This isn't to put them down, like I said, they hopefully mean well. But consider this: if the average person's understanding of trading comes from watching the movies Boiler Room and Wall Street, their opinion of you trading as a career might not be the most worth while to follow.

Be polite, but do your best to turn the volume down on incoming advice from this category of people. Since they mean well, don't get flustered with them over it. Don't tell them they are wrong, don't correct them, just realize that they care enough about you to express their concerns and give and opinion. And that means something to you personally, so thank them, but move on quickly to other subjects.

There is one exception to this group of people (friends and family) who you'll have to both listen and communicate in detail with about trading, and I'll talk about them when I go over the positive side of being tribal.**

Fellow traders and "experts" influence.

Outside of your friends and family, new traders will often flock in droves to market commentators and experts. It makes sense, if you want to do something well; follow the experts. But tell me, even if the expert is talented, do you know anyone who made it into professional basketball just by watching NBA games?

This is assuming the 'expert' is even half good. Most aren't good at all and try building a business around trading signals or market calls because that's the only way they can make a decent living in this business. You will find this far too frequently once you gain enough experience and can identify talent in other people.

What's worse, non-professional traders will often see their account balances die by an 'experts' recommendation because the external influence of the expert's trade call makes taking a loss so very much harder than if it was your own decision. If you got a tip from an 'expert', taking a loss isn't just you admitting you were wrong, but saying the expert was wrong too, and you've already put the expert in your mind as a more experienced trader that yourself.

At this point, you might be saying to yourself:
"Oh, but I totally don't watch CNBC, or listen to these 'so-called' experts at all... I don't have this problem!" Really? Ever watch a webinar that talks about a new trading system? Ever dive into an online and read through the latest on your trade instrument of choice just to "see" what other traders are doing? Ever read through another trader's journal and drool at their charts?

Guess what? You've just created a serious unconscious bias and you might not even realize it. If a hand full of traders you generally respect all go long on a given security, and you sit down to do your own chart analysis telling yourself you'll make your own decision, guess what direction you'll likely trade? Even if you go short, do you not think you'll be a tad bit more uncomfortable doing so?

Once again, there's nothing wrong with wanting to be connected to your peers, being included, feeling confident since so many others are with you; it's normal. But remember what I say about normal?

Some of you might have this part down pat so far, you might not be biased by other trader's sentiments, calls, and charts. You might still enjoy reading other trader's opinions but only take them in objectively, and have zero problem fading their trade if you disagree. You might put on a trade only after taking a cold, hard, un-biased look at your own analysis. This is all good, but your tribal mind isn't done with you just yet!

Ever get into a losing trade and search out what other traders are doing to see if you should close it out or hold it longer? Ever let their influence turn a trade into an "investment"? Yeah, that's the tribal mind getting at you again.

Trading in general, especially if you're in a drawdown or in a losing trade, is uncomfortable. This is why, in an earlier installment, I talked about limiting your risk to something you don't care about losing, so if you experience a stop out you aren't emotionally affected.

If you care about a single loss, you're most likely going to give in to external influences, and next thing you know you're looking for reasons to say in the trade hoping it will turn around instead of just cutting the loss short. Looking around for people trading in your direction, or thinking "this trader took the same trade as me and he's an expert" will only give your emotional side reason to let the loser keep hurting you.

I will say this now, if you want to stop being held back from trading independently on a professional level and gain better consistency through your own hard work, you MUST let go of external influences when it comes to trade calls, and instead keep them in your mind only for strategy ideas. Otherwise, turn off CNBC, stop browsing online forums for other people's entry calls, stop spending time in trading chat rooms where people yell out calls to follow, etc...

If you can't rely on yourself and yourself alone to make a return in the market, then you're not really working toward trading professionally, you're just indirectly subjecting your capital to other people's trade ideas. Think about that.

(Though by all means keep using online forums to talk about trading, I'm saying to cut out the sections of the forum that might give you a bias, and without question stop shadow trading people online.)

Here are some real life examples of why it's good to turn off our tribal-communal instincts?

If you read the biographies of a few ultra-successful people (examples in technology: Gates, Dell, Jobs, etc.. in finance: Soros, Bogle, long list here..) you'll find that most didn't care about what others thought of them, or what others 'thought' all together for that matter. They did what they thought was best, or what they enjoyed, despite the world only giving them friction. Put simply, most ultra-successful people are, to some degree, a bit odd, in that they went against the influencers around them and did their own thing.

Take Gates for example, the guy dropped out of Harvard to start his company. If he went out and asked for advice from the school's academic adviser, his family, his friends, etc. they'd have told him to stay in Harvard and finish first. Gates didn't stick it out in Harvard, he hated to lose and didn't want to miss out on the computer boom by being even a year late to the game. Was it the right choice? Probably not, but then again I can't argue with the empire he built.

The next installment in the On Professionalism thread series can be found here:

Support and Guidance for Tribal Minds - Part 2
FTMO Trader Scouting