Let us learn about the Greeks
Not a post on Options trading
Hello traders,
Every week I get around 20-30 emails and DMs from subscribers of this newsletter and my twitter(X) followers. And the overarching theme of the messages is “I want to get better at trading without doing the necessary work required or putting in the hours or learning to code”.
Late last year I wrote a simple 9 step process to tame the risk management game.
You can read it here.
But the problem with such posts is that they are easy to read and the research papers linked look cool to read but when you are down 7-9/40-60 ES/NQ points on the day, everything goes into the trash can and the self destruction of the trading account begins.
If the current research isn’t helping you much, can we use the Stoic philosophy to help sort out the mental aspect of trading?
Today we will learn about the Greeks not talked about much in the realm of daytrading.
1) “The chief task in life is simply this: to identify and separate matters so that I can say clearly to myself which are externals not under my control, and which have to do with the choices I actually control. Where then do I look for good and evil? Not to uncontrollable externals, but within myself to the choices that are my own . ”
—Epictetus, Discourses, 2.5.4–5
Today we are going to dissect the OG stoic Epictetus and how we can leverage his centuries old advice to improve our discretionary trading.
I can already see eyes rolling here but bear with me for a couple minutes (or don’t ,you can close the window and move on with your life just as the quote says).
“Focus on what you can control”
Epictetus emphasized the importance of focusing on things within our control because that is where our energy, effort, and emotions make a difference.
In the context of trading highly leveraged products like the Emini or Nasdaq, the only thing in your control is the dollar risk per trade.
Everything else is outside your control. Your level means nothing and it may or may not work. What Bowman or Biden or Powell is going to say is outside your control. What the NFP numbers will come at is also out of your control. Only thing you truly control is your risk and subsequently your entry.
2) “Every habit and capability is confirmed and grows in its corresponding actions, walking by walking, and running by running . . . therefore, if you want to do something make a habit of it, if you don’t want to do that, don’t, but make a habit of something else instead. The same principle is at work in our state of mind. When you get angry, you’ve not only experienced that evil, but you’ve also reinforced a bad habit, adding fuel to the fire.” - Epictetus, Discourses, 2.18.1-5
Trading consistently is the hardest part. Being great in spurts and then shuffling back to mediocrity is a bane for many traders.
Great trading habits other than managing risk is limiting the number of trades you take per day. If you do not have a soft-limit on the number of trades you take, you would end up taking any and every trade that shows up without it checking all your boxes.
But since discretionary trading is discretionary for a reason, some days you will invariably break your rules. It is best to account for these slip-ups in your edge.
3) “What upsets people is not things themselves but their judgements about these things.”
―Epictetus
Remember you have the power to have no opinion: The Stoics believed in the power of seeing things objectively and withholding judgment. this means not getting emotionally attached to trades and arguing with complete strangers on the internet about your positions. Just put in a trade and fuck off(Epictetus did not say this of course).
4) . "Everything has two handles, one by which it can be borne; another by which it cannot.” - Epictetus
- This quote from Epictetus suggests that there are different ways to approach a situation and we should choose the one that is most beneficial for us.
If you are not good at shorting, do not short. If you are unable to fish bottoms, do not do it. Use the trade analyzer in your broker and find out what you are good at and double down on it.
Do not trade something you are bad at just to “improve yourself” in the production environment.
Next week, if time permits I would write a few quotes from Marcus Aurelius and apply it to trading highly leveraged products in order to escape wage-slavery.
PS: Apex has an 80% off sale on its trading evaluations for another 3 days. If you click on this button, it will take you there.
This is an affiliate link and it pays for my starbucks addiction.
That is about it from me.
-Fin