What is the secret to happiness in this world? Lots of people will be more than happy to sell you their purported secrets to enduring happiness. But you are about to find out what the scientific research says about the matter.
Subjective life satisfaction (SLS) is the researcher’s measure of well-being and is used commonly in what is known as “happiness economics.” It is also sometimes referred to as subjective well-being. There are formal scales that measure it.
SLS in essence represents how satisfied a person feels with life generally, as contrasted with positive affect (PA), which represents how happy a person feels at any single point in time. Overall life satisfaction involves people thinking about their lives as a whole, taking into account such factors such as whether they are achieving their personal goals, whether they are doing as well as other people around them, and whether they are happy generally, rather than just right now. Life satisfaction is thus a longer-term measure than affect.
The “big two” personality domains, neuroticism (N) and extroversion (E), relate to both SLS and PA. A study done by Costa and McRea1 (inventors of the NEO-AC) back in 1980 showed that both N and E scores are able to predict differences in happiness or life satisfaction and unhappiness or life dissatisfaction in people 10 years in advance! Yep, researchers can actually tell by personality testing who is going to be more satisfied with life and who is not.
But the science of happiness goes beyond that. There is a growing body of evidence that suggests that the three key components to long-term happiness (SLS) in life include:
1. The ability to pursue autonomous goals
2. A sense of mastery or skill in something that is meaningful
3. The experience of feelings of relatedness with other people
First off, it is interesting that making money is not one of the key ingredients to long-term happiness. Second, it should be noted that autonomy and mastery are two features that can be very compatible with market trading. The markets offer a great place to find and develop these.
Autonomy means that you are responsible for your own actions and decisions. The markets provide just such a venue. When it comes down to placing a trade, it is you and only you who can pull the trigger. You may have gathered information and advice from various sources, but in the end it is you who will make the decision. And it is you who will have to live with that decision, for better or worse. As a full-time trader, you are your own boss. You show up to work at the hours you want and the hours you think are going to be most productive. Thanks to modern technology, you can trade from the quiet and comfort of your own house, or you can trade from within the walls of a crowded and noisy coffee shop. You take trading vacations when you want to, not when the boss man tells you to.
Most important of all, as a professional trader, your job allows you to engage in trading the markets the way you want to and not the way you are told to by a superior. As a trader, you are running a one-person enterprise where you make all the calls. In fact, there is more autonomy working as a trader than just about any business startup you can imagine. Why? Because as a trader you have no customers to satisfy. No employees to manage. No overhead. No warehouse. Plus there’s minimal bookkeeping and minimal need for specialized equipment or technology. Trading is the ultimate private enterprise for the individual who truly likes to operate on her own.
As for mastery of a skill, there is no doubt that every human being has a built-in drive to do something well. When I was a child, my father told me over and over, “I don’t care what you do with your life, as long as you do it very well. Even if you are a ditch digger, as long as you’re the best ditch digger you can be, you will be happy.” How wise my father’s words were, and they are the same words I instill in my own children and indeed in many of my patients as well.
One of the key secrets to finding happiness in this world truly is in creating your own sense of identity, and the way you do that is by being a master at whatever it is you do. By becoming a master at something, you will have found success; you will define yourself as being successful. And this will make you happy. It doesn’t matter what it is: For some it may be mastering the art of homemaking, or restoring old hotrods, or learning a new language. For others that mastery may be in learning the most about the markets. Because the markets offer such a giant intellectual and psychological challenge, the happiness rewards reaped from learning about and understanding them can also be quite immense.
Often times people feel disappointed that they are not making as much money in the markets as they would like to or had anticipated making. But they fail to take into account that the vast majority of people who try to take on the markets end up failing miserably and losing money. So merely breaking even trading the markets, in a very real sense, indicates a certain level of mastery and competence. And yet nobody trades the markets to break even. So there’s a bit of a disconnect here. On a psychological level, once you can get beyond the making money component of trading and focus more on the mastery part of it, you will be a happier trader, no matter what your trading portfolio is doing. And in the long run, happier traders make for more prudent, careful, and successful traders.
The third component to long-term happiness, feelings of relatedness to others, is something that is going to be more difficult for many personal traders to experience. Usually they have to go out and seek it. If you feel you have an autonomous life from trading and are a master of the markets but are still not happy in your life, look here to this third piece of the happiness puzzle. Find ways to interact with others, regardless of whether this means socializing with others about the markets or simply getting involved with a volunteering project, going to a church or synagogue, or what have you.
For those who are lower in N and higher in E, SLS (happiness) is going to come easier to you. For the rest of us, we need to work on it a bit! Trading may not always be profitable (obviously), but it is crucial that your involvement in the markets contribute to your overall sense of autonomy and competence. We can hope that trading will also provide you experiences of personal relatedness and fulfillment, as well.
The act of trading simply as a way to make money likely will be an unfulfilling endeavor and not provide you with long-term happiness. If, as a trader, you find yourself struggling to be able to continuously dip your cup into the three wells of happiness (autonomy, mastery, and relatedness), this line of work may not be for you. If you consistently are experiencing negative emotions while trading (regardless of the outcomes of the trades themselves), you may want to ask yourself whether this is the right path or if some other pursuit may be more appropriate for you. Life should be fun. Trading should be fun. If you are not sensing fun in your career as a trader, a careful reassessment and reallocation of your resources may be needed.
A helpful technique to better assess and track your emotional responses to trading is to keep a daily journal or log of your feelings. There are fancy (and expensive) computer software programs on the market that you can invest in, but really all you need is a notebook and pencil. The best way to go about doing this is to track your emotions before, during, and at the end of your trading day. It doesn’t have to be excessively detailed, and you don’t have to worry about grammar; this is not going to be read or used by anyone but you. You can even develop your own scales for rating the different moods you have during your trading day. Also, make sure you take notes as to how your trading performance was each day and correlate it to your fluctuations in mood. Keep such a journal for at least a month, if not longer.
Some sample questions that you will want to ask yourself every time you make a journal entry include:
1. Did I feel either happy or sad while trading today? What was it that made me feel that way?
2. Did I feel anxious or stressed out while trading today? What triggered that?
3. Did I feel alert and energetic when trading today? Did I do anything different today?
4. Did I feel discouraged while I was trading today? How did I overcome it?
5. Did I feel capable of succeeding at my trading today?
6. Did I blame myself today when my trading didn’t work out as planned? Was I really to blame?
7. Did I feel satisfied with my trading results today? Did I meet my goals? Did I even have any set goals for today?
8. Did I feel angry, edgy, or frustrated when trading today? Who or what was I angry at? How did I deal with those emotions? Was it healthy how I dealt with my emotions?
9. Did I feel in control of what happened in my trading today? Was it sustained?
10. Did I make impulsive decisions while I was trading today? How could I have prevented that?
Once you have tallied your emotional responses for some period of time, you will get a better sense of whether your negative moods and emotions (anxiety, anger, hostility, doubt, guilt) emerge primarily in the context of losing trades, or if you experience such negative emotions no matter what your market performance is.
If, overall, you tend to have positive feelings while trading (no matter whether you are losing money or not and no matter whether it is still a lot of “hard work”), you can assure yourself that you are engaged in a healthy and appropriate activity. In this positive state of mind, you will be more potent and effective as a trader.
Mihaly Csikszentmihalyi, a Hungarian psychologist who has studied and written extensively on happiness and creativity, has shown that performance (and this applies to athletes, artists, chess players, managers, and anyone else) is optimized when one is experiencing himself positively.
If, however, you have a preponderance of negative feelings while trading the markets (again, especially if it is regardless of the outcomes of your trades), you need to appreciate that trading is detracting from your overall well-being as a person. Your performance will also be hindered, as your negative emotions are likely going to interfere with your cognitive abilities to master the markets (concentration, pattern recognition, judgment, planning, and calculations), and you will likely not be a successful trader. In the end, your negative emotions are going to get the best of you and your trades.
Finally, keep in mind that emotions are fundamental in investing and trading. Emotions such as greed, regret, fear, anger, panic, surprise, excitement, relief, and skepticism are all natural emotions that all traders have from time to time. Although these emotions can certainly sabotage the best-laid trading plans, these emotions can also be invaluable in helping you understand yourself and your trading habits better. Learn to accept these emotions (all of them), because they will help you learn faster about yourself, what style of trading best works for you, how you make the same mistakes over and over, and so forth. Do not shun the emotional part of trading. Recording emotions in a log or journal may seem “sissy,” but actually it is one of the best ways that you can learn to deal with your emotions instead of reacting to them.
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