A couple interesting excerpts to ponder from http://trenders.blogspot.com:

Perfectionism can be a great help to people in many professions, but can be fatal to a trader. Perfectionists, always trying to find the Holy Grail of trading go from one service to another, from one system to another, looking for a way that they can be right all the time. YES! Now, I found it. It’s this trading room, or this service, or this indicator! Wait… something is wrong here. Not all of these trades are working and I have draw downs! How can it be that this particular method failed and I actually had to take a loss? Must be something wrong. I will try harder and look for an even better system, a more expensive service, a new and improved guru, some absolutely no-fail software so that I can have ONLY WINNING TRADES.

This is perfectionism in action. Not only does this type of irrational behavior and belief undermine and demoralize a trader, but it takes away all the enjoyment and fun of being in the markets. It leads to depression with depletion of psychic and physical energy, and leaves the perfectionist to confront his basic and overriding fear — fear of failure. In the extreme, it leads to physical and mental illness, including addiction to prescription drugs, alcohol, or illegal substances as well as other addictions. The pain of failure or the haunting fear of failure is simply overwhelming, and one turns to whatever works to medicate the pain. I want to share something of my personal history with you, as I believe that many of you can identify with and learn from some part of this story (and if you do, please let me hear from you?) My parents were seriously ill from the time that I was born. I truly believed that if I was absolutely perfect, scored the highest in school, did the best at music and dancing and elocution and debating that I could make them better. So I did that. I had no life outside of study and learning.

I was the perfect little daughter and even became the perfect little doctor for my sick parents, even though I was only 13. Shortly after this, while I was still in my teens, both of my parents died. I was not good enough or perfect enough to make them better. So — I tried even harder and studied more and more, to the complete exclusion of any personal or social life whatsoever. This time, I was going to be perfect for my dead parents to show them how wonderful I really was and how much they should be proud of me. This reached absolute culmination when, after receiving two doctorate degrees, I still had to continue with more and more exams and more and more training. Can you imagine anything so ridiculous? Even after my parents died, I was still trying to get their approval by showing them how brilliant and talented I was. Many years later, I suddenly became critically ill, stopped breathing and lapsed into a lengthy coma. This was the culmination of years and years of unrealistic internal demands that I set on myself and which manifested as addiction to perfection. It was only when I awakened from coma that I started on a new road and a new path.

I was not superwoman…never was and never could be. Yes, I would continue to work hard and to achieve, but I could never in a bazillion years be perfect. I am not and you are not. So, when I tell you to “Get over yourself” I mean that I had to get over myself. I had to address the demons of perfectionism and move past them. I accepted that I am a flawed human being and acknowledged that I had certain real and wonderful strengths. I chose to concentrate on the strengths and stop beating myself up for the weaknesses.

What does this have to do with trading?

This is what happens with perfectionists. Perfectionists are made, not born. We are taught from an early age by demanding (and often well-meaning) parents that we have to be the best in order to win their approval and the approval of others. Unfortunately, this is totally upside down. Perfectionists share a belief that perfection is required in order to be accepted by others. The reality is that acceptance cannot be gained through performance or any other external factors. Self-acceptance is the root of happiness and the true beginning of personal evolution. If you have a perfectionist mentality when trading, you are setting yourself up for failure, because it is a “given” that you will experience losses along the way. You must begin to think of trading as a game of probability. Your losses (that you hope will return to breakeven) will kill you.

If you cannot take a loss when it is small (because of the need to be perfect), then you will watch that small loss grow into a larger loss and so on into a vicious cycle of more and more pain for the perfectionist. Trading on hope does not work. The markets can remain irrational for a lot longer than you can remain solvent. The object should be excellence in trading, not perfection. Moreover, it is essential to strive for excellence over a sustained period, as opposed to judging that each trade must be excellent. This is a marathon…not a sprint. The greatest traders know how to take cut losses and let winning positions run. Perfectionists often do exactly the opposite. They get in at the wrong time, stay in too long and then get out the wrong time. Perfectionists are always striving and never arriving. The market will find the flaw in a perfectionistic trader and exploit it day after day. The market is your greatest teacher and your most demanding critic, so take this wonderful opportunity every day to learn about yourself and make yourself strong. If you see in yourself this trait of perfectionism rearing its ugly head, it’s OK to get angry at it and even yell or curse at it. Do whatever it takes to acknowledge it and then find a way to fix it.

Why Perfectionism and Trading Are Incompatible

The personal history in this piece is the most powerful part. It demonstrates that perfectionism is not a trading problem. It is a life problem that trading exposes. The pattern was formed before the markets, in response to demands the person could not meet and needs the person could not satisfy through performance. Trading becomes the new arena where the same pattern plays out. The market becomes the demanding parent whose approval is sought through perfect execution. When the market produces losses, as it always does, the perfectionist experiences the same unbearable failure that drove the original behavior.

The specific trading damage perfectionism causes is described precisely: it prevents small losses from being taken. A perfectionist cannot accept a loss because accepting it confirms imperfection. Instead they hold, hope, and rationalize. The small loss becomes a large one. The large loss eventually forces an exit that produces the catastrophic outcome the perfectionist was trying to avoid through not taking the small loss. The fear of imperfection produced the very failure the perfectionist feared most.

The distinction between excellence and perfection is critical. Excellence in trading means consistently following sound rules across hundreds of trades and evaluating performance over sustained periods. A 35% win rate applied consistently with correct position sizing is excellent trading. It is not perfect trading. No perfect trading exists. The trader who holds out for a perfect system will spend their entire trading career in the Holy Grail search and will never actually trade. The trader who accepts an excellent but imperfect system and follows it with discipline will compound returns over time.

The markets, as Keynes noted in a different context, can remain irrational far longer than you can remain solvent. The perfectionist who waits for the market to validate their position rather than taking the defined exit is betting on rationality arriving before their capital runs out. It often does not.

Frequently Asked Questions

Why is perfectionism fatal to traders specifically?

Because trading is a probabilistic activity that guarantees losses as a regular feature of any positive-expectation system. A trader who cannot accept losses without experiencing fundamental psychological distress will make the specific error that kills accounts: holding losing positions past defined stops in order to avoid confirming the loss. The small loss that the perfectionist refuses to take grows into the large loss they are no longer able to hold, and is eventually cut at the worst possible time.

What is the difference between excellence and perfection in trading?

Excellence means consistently applying sound rules across a large enough sample to produce the system’s theoretical edge. Perfection means winning every trade, which is not possible. A 35-40% win rate with correct position sizing and a favorable payoff ratio is excellent trading. It produces consistent losses on most individual trades and consistent profits over time. The perfectionist who cannot sustain a 35% win rate because each loss feels like failure will never experience the long-run positive expectation that the approach generates.

How does the Holy Grail search relate to perfectionism?

The Holy Grail search is perfectionism applied to system selection. The perfectionist abandons each system when it produces losses because losses represent the system’s failure to be perfect. They move to the next system, which will also produce losses, and abandon that one too. The pattern continues indefinitely because no system produces only winning trades. The search ends not when the perfect system is found, because it does not exist, but when the trader accepts that an imperfect system applied with discipline produces better outcomes than the perpetual search for a perfect one.

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