By: Katie Gomez

Competition is all around us, from the sports games we go to, the tournaments we enter our children in, to racing the person who cut you off on the freeway. Although humans all possess egos, they come in all shapes and sizes. I’m not talking about ego in terms of self-centeredness or vain behavior, but the debilitating behavior it can evoke in all aspects of life, especially your finances. Unlike tournaments, games, or races, the only person you are competing against as a trader is yourself, more specifically, your ego. Your ego is always with you, but you’ll notice it becomes louder than ever when it comes to trading. 

Most of us grew up in an inherently competitive environment without knowing it through the sports we played, the accolades we received, and even the siblings we were compared to. Being competitive has its perks; it can help shape us into more focused, tenacious individuals in our endeavors, but it can also be our greatest weakness. An unchecked ego can be detrimental, leading to a superiority complex (the need to be the best at everything one sets out to do). When that is unfulfilled, the ego-driven mind sees normalcy as a failure and would rather give up than see it through. 

I noticed this pattern of competitiveness start bleeding into how I treat my finances with investing, satisfying the ego instead of following my long-term plan. Leading with ego left me vulnerable as a trader, as I began treating my trades as a competition, trying to “beat” the market or other traders. I soon learned it is much healthier to compete with my ego instead of the market and compare myself to my past trades instead of others’ current ones to break the cycle. This article further delves into how to get yourself out of the arena and outsmart your ego into working for you instead of against you as a trader. 

The role of ego in trading is a double-edged sword.

Ego, the sense of self-importance and self-esteem, can provide the confidence and resilience needed to navigate the ups and downs of the market. However, when left unchecked, ego can become a trader’s worst enemy, clouding judgment and leading to suboptimal decisions. The ego’s desire for validation, fear of being wrong, and need for control can significantly impact a trader’s ability to make rational, objective decisions. Understanding and managing the ego is crucial for long-term success in trading and investing.

Ego-driven trading can lead to several pitfalls that hinder long-term success. Overconfidence often causes traders to overestimate their abilities, take excessive risks, and ignore necessary market signals. The need to be right can result in holding onto losing positions, avoiding admitting mistakes, and failing to learn from past experiences. Additionally, the illusion of control leads traders to attempt to predict the unpredictable, overtrade, and micromanage positions while neglecting the role of chance and uncertainty in the markets.

The Dangers of External Competition in Trading

In the fast-paced world of trading, competition is often seen as a driving force for success. Traders are constantly bombarded with messages about outperforming the market, beating benchmarks, and surpassing their peers. However, this intense focus on external competition can harm long-term trading success. It’s crucial to understand the difference between external competition, which involves comparing oneself to others, and internal competition, which focuses on personal growth and self-improvement.

External competition leads to a constant comparison trap, where traders measure their success based on the performance of others, resulting in fear of missing out (FOMO), causing traders to make impulsive decisions driven by the desire to keep up with their peers rather than adhering to their trading plans. Additionally, the emotional rollercoaster of outperforming or underperforming others can harm a trader’s mental well-being, leading to emotional volatility that undermines discipline and consistency. Ironically, external competition can distance them further from their personal goals and trading plans, as they are tempted to deviate in pursuit of short-term gain, increasing the risk of financial loss.

The Power of Internal Competition 

Competing with yourself is really just competing against your ego, giving you the power to challenge its hold on you and your decision-making. By focusing on self-improvement and personal growth, traders can set realistic, achievable goals that align with their skills, risk tolerance, and trading styles.

By viewing challenges and setbacks as opportunities for learning and embracing the process of trial, error, and refinement, traders can cultivate resilience and persist in the face of adversity. Internal competition also emphasizes the importance of cultivating emotional discipline and self-control. Recognizing and managing emotional triggers like fear, greed, and frustration allows traders to maintain a consistent approach regardless of short-term outcomes.

Overcoming the Ego and Embracing Self-Competition 

To truly embrace the power of self-competition, traders must first recognize and overcome the influence of their ego. Our ego is the core of external competition, as it fuels our inherent desire to compare ourselves to others and seek validation through outperforming them. The more we feed it what it wants, the more it grows and becomes harder to tame. By developing self-awareness and humility, traders can detach from the ego’s demands and redirect their focus inward.

Reframing success as a personal journey allows traders to prioritize their development and find fulfillment in continuous improvement. By letting go of the need to compete with others and channeling that energy into self-competition, traders can cultivate a more grounded, resilient, and ultimately successful approach to navigating the markets. By setting specific, measurable, achievable, relevant, and time-bound (SMART) goals, traders can create a roadmap for success tailored to their individual needs and circumstances. Tracking progress and celebrating personal milestones help maintain motivation and reinforce the sense of accomplishment from competing with oneself. 

Another crucial aspect of internal competition is regularly conducting self-assessments and performance reviews, as it allows traders to identify areas for improvement and make necessary adjustments to their strategies. Finally, developing a support system of like-minded traders who are also focused on personal growth can create a positive, collaborative environment that fosters accountability, encourages knowledge sharing, and promotes a culture of continuous improvement. 

In conclusion, it’s easy to let our egos get the best of us, especially when we are fueling them with the immediate gratification “winning” gets us, whether that is winning more than our friends or beating the market; chasing these highs is not sustainable or healthy for our financial future in the long run. Instead of learning to compete and challenge the trader you were yesterday, you’ll see more long-term success. We must accept that the market is a complex and unpredictable entity and recognize that true success is a product of personal growth and mastery rather than competition.
When you become willing to sacrifice your ego and the short-term gratification it chases, you open yourself up to a journey of growth, learning, and a path to a more lucrative future. If you are willing to lose against the market or your peers sometimes, sacrifice the battle, you’ll garner enough strength to win the war against your biggest threat, your ego. To learn how to win this battle, join our team at Trade Ideas to get the tools you need today.