Bulletproof Trader. Steve Ward
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in trading style or in trading a new product.
Managing the demands of trading and the demands of life outside trading.
Help with developing composure to manage big moments in the markets.
Learning to become more comfortable with the uncertainty and ambiguity of the markets.
Managing emotions such as fear, anger, frustration, regret and anxiety.
Strengthening discipline, or consistency, of trade execution.
Help with managing physical energy – reducing fatigue, overcoming exhaustion and burnout.
Managing impatience, dealing with quieter and slower-moving markets, overcoming boredom trading or reducing overtrading.
Struggling with being wrong, with losing money or making mistakes.
Finding it hard to stay in winning trades, running winners.
Before you read further, my question to you is: what brings you here?
Is there a particular reason you are reading this book? What would you like to get out of it?
2. The Bulletproof Framework
The key requirements
I am often asked what I believe are the key requirements for becoming a successful trader. One thing that I would say is absolutely critical is the ability to manage the highs and lows – but especially the lows.
That ability might be termed ‘resilience’, ‘mental toughness’ or ‘stress-hardiness’, but for this book I am borrowing the term bulletproof from my hedge fund client we met in chapter 1.
“Success comes to the lowly and to the poorly talented, but the special characteristic of a great person is to triumph over the disasters and panics of human life.”
— Seneca
The four foundations of bulletproof trading
The ability to perform under stress and pressure, to cope with the highs and lows of performance in high-stakes environments, has been thoroughly researched over the years. Traders are now able to benefit from the findings – and practice – of the military, elite athletes, law enforcement and performing artists. All of which feed into this book.
When it comes to helping my trading clients develop their ability to manage the challenges and difficulties of trading, my work is influenced by many different areas of study. They can be grouped broadly under the headings of psychology, physiology, philosophy and the all-important fourth component, pragmatism. I believe that a multidisciplinary approach is required to maximise trading performance, and to become a bulletproof trader.
The Bulletproof Trader framework
1. Psychology
Trading psychology draws on a broad field of research and practice, including decision science, behavioural finance, performance psychology, cognitive psychology and more. In this book, you will see input from all of these areas. But I have focused much of the psychological framework on contextual behavioural science and the development of psychological flexibility.
Developing psychological flexibility is the goal of Acceptance Commitment Coaching, a derivative of Acceptance Commitment Therapy or ACT (pronounced as ‘act’ not A.C.T.) which was originally developed by University of Nevada psychologist Steven C. Hayes. ACT is third-wave cognitive psychology. It is distinct from other cognitive approaches, such as cognitive behavioural therapy, in that its fundamental goal is not to change or control unwanted thoughts, emotions or sensations, but rather to be aware of them, and accept them, while keeping a strong focus on action.
Rather than focusing on the specific content of your thoughts and emotions, ACT is more focused on the context you are in, and the function (helpfulness or workability) of your behaviour in a specific context – as well as how you are relating to your thoughts, emotions, sensations and urges.
ACT-based approaches have helped people improve their performance in sports, chess and in music, and at work,1 including alleviating stress and increasing resilience. ACT is a core part of my trading psychology model. I believe that the development of psychological flexibility has a very positive impact on traders’ ability to stay focused on their trading process. It helps them manage the thoughts, emotions, sensations and urges that can cause them to drift from their process.
Alongside a focus on the development of psychological flexibility, I have drawn on the research and practice of developing stress hardiness2 and mental toughness.3 Specifically, on these core factors:
Commitment – having a sense of purpose for why you are doing what you are doing, and being disciplined and dedicated to taking action.
Control – largely centred around a person’s locus of control, whether internal or external; whether people believe they can influence how they respond to events or not. Being able to identify what you can and can’t control is a key skill.
Challenge – seeing change events as opportunities to grow, and being willing to work through challenges and difficulty.
Confidence – feeling you can cope with difficulty and setbacks, and seeing and seizing opportunity.
2. Physiology
An important part of the bulletproof framework is the role that our physiology plays in our ability to perform under stress.
At the physiological level there are some key areas that traders can really benefit from, including:
being able to recognise shifts in your physiology (e.g. breathing, heart rate) as indicators of a shift in your body’s physical state – stress response and energy levels in particular
recognising the need to regulate the stress response when it is too high and potentially impacting your decision-making
learning strategies to develop your physiological resilience to the stress response – increasing your stress capacity
managing your stress vs recovery balance so that you can strengthen your physiology muscles, reduce fatigue and sustain high performance over time.
3. Philosophy
While writing this book I became increasingly interested in the philosophy and practices of Stoicism and its potential application to helping traders deal with the challenges they face in trading the markets.
Stoicism was founded in Greece by Zeno of Citium (Cyprus today) in the early third-century BC. Zeno was a merchant who lost everything in a shipwreck and turned to philosophy in order to rebuild his life, and later taught his messages in a stoa (covered walkway), where his school became known as the Stoa and from where Stoicism gets its name.
I first came across the benefits of applying Stoicism to my work with traders after reading Ryan Holiday’s The Obstacle is the Way,4 a book that took the 2,000-year-old Stoic principles and practices and set them into a modern-day text, aimed at helping people to “turn adversity into advantage”. This book has become a popular read for athletes and coaches, and for people operating in competitive or high-stakes environments.
In an article discussing Stoicism in the NFL, Holiday states: “Stoicism as a philosophy is really about the mental game. It’s not a set of ethics or principles. It’s a collection of spiritual exercises designed to help people through the difficulty of life.”5
For many people, the word ‘stoic’ suggests being unemotional in the face of adversity. This is a modern and inaccurate misinterpretation.