In our modern society, money has become the number one stressor, ranked higher than work, health, or children. Most people are attracted to trading following the idea that it’s a way to increase wealth. But does the story really end there? What is wealth? You may not know it consciously but we all tend to attribute some kind of significance to money. Money has unfortunately become more than just a number. Money “talks”. In this blog post, we shall explore the various meanings that we attribute to money, and why aspiring traders are best to simply see money for what it is: a means of exchange, nothing more, nothing less.
Your Relationship With Money
We cannot deny that money is essential, but the irony is that more of it doesn’t automatically solve our problems or relieve
our stress. There is no direct correlation between level of income and happiness.
One of the main issues I find in most struggling traders is their tendency to give money an emotional value. Money becomes a magnifier: it reveals and exaggerates character. In the hands of altruistic and generous people, money generates philanthropy and is seen as a blessing. But for others it is a curse, as it gives form to fantasies and compulsions.
Most people in today’s society trade away time, health and relationships in the pursuit of money hoping that it will eventually buy back some of the very time they traded away. They do not realize the amount of emotional value they are attributing to an object. People often state they want more money, but it’s not the physical money they want. It’s what the money means to them, for example:
- freedom (since we can afford to choose) which is quite common amongst aspiring traders, gamblers and lottery-players;
- captivity, which sounds strange but is portrayed well by Scrooge, who went through life without truely living, as his sole scope was to protect his capital and make more. Effectively, he was enslaved by money;
- security, which means at it’s most basic form means having a house, enough food and clothing to keep warm. We could also stretch the meaning to include “teh capacity to face unexpected expenses”;
- love (but when money and love merge, the results are usually catastrophic);
- happiness, but of course we all know that money doesn’t directly impact the happiness of anyone. What it can do instead is allow people to afford safety, medical care, or occasionally leisure activities that can increase our mood;
- power, or getting what you want (which again is rarely a beneficial pursuit);
- self-worth, which is a key issue for many traders that cannot discern their own persona from their p&l;
- fear (of losing money, of losing control), that spill over into areas of our lives and impact relationships;
- altruism, when used for social benefit and charitable causes;
- shame, if we don’t live up to an internal ideal we have;
- control, over family as well as co-workers, friends, etc.
Whatever value you attribute to money, the end result will be largely the same: an impossibility to detach yourself from it and an impossibility to risk even small chuncks of it. For example, time ago I assisted a trader that had been nurtured by his family to become an enfant prodige. A very capable person, he was unfortunately unable to express his views in the market. After some exploration, it turned out that his family had a strange relationship with money – despite working in the financial industry. All decisions in his household (what to eat, when to buy clothing, what activities to pursue, etc) lacked spontaneity. Everything had to be reasoned out, and the concept of deferred gratification had become common practice.
What lies behind this behaviour is in reality a very strong aversion to risk. And naturally, the trader had grown to dislike anything related to financial risk/insecurity. It didn’t matter whether the trader was risking $10 or $100 or more – he was completely incapable of metabolizing risk.
Find a Balance
Money is the biggest stressor in our lives, yet having more of it doesn’t solve our inner problems. So what is the solution?
One possible solution is to not focus on “making more money” but instead on developing a better relationship with it. Remember that when we are stressed, our capacity to make rational decisions is weakened. This may be why most people are unable to make good financial decisions: the thought of losing money is just too much to bear. And the same goes for traders that are focused on the money and not on the process. Progress is impaired.
It is not money but the love of money that Saint Paul identified as the root of evil. It is not wealth and possessions or even the chase after these that creates problems in our lives: it is when we lose ourselves in the chase, when we give money a meaning it doesn’t really have, and then not realizing we made up our own money story.
The key is to see money for what it is: a means of exchange. We exchange it for goods & services. But it has no intrinsic value. This is extremely important for traders because if we cannot detach ourselves from any & all meaning that money might have, we will never be able to treat trading as the elaborate game it is.
Over To You
Fortunately there are some actions we can take, that will help confront and defuse any potential money disorders that block us in our trading, or in other aspect of our lives:
- keep things in perspective;
- focus on the present, because only in the present moment can we plant the seeds for a better future. Instead, just worrying about the future is futile;
- stay active: regular exercize will keep your mind & body healthy, and help you fight your inner demons;
- limit your screen time;
- invest in healthy relationships, and go out of your way to help others. Acts of generosity have positive effects on the mind;
- meditate on your blessings and practice gratitude daily: you will quickly find the difference between what is important and what is superfluous.
All this might seem distant and unrelated to your trading results – so I challenge you to try these suggestions on for size. Your relationship with money – and your trading – will never be the same, for the better.
About the Author
Justin Paolini is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.