“People are like dirt.  They can either nourish you and help you grow as a person, or they can stunt your growth and make you wilt and die.”~Plato

I was on the phone with a developing retail trader (let’s call him Saratoga Slayer) who had impressive results in Year1. Why did Saratoga Slayer do so well in Year1 when most fail?  He wasn’t sure.  In fact Saratoga Slayer wasn’t even sure if he was doing so well since he was so green to the game (He was!).  But he shared a chat room with a High Performing Trade AND that trader “was the most positive person I have ever met.”  This got me thinking about the importance of a positive environment on trading performance.

After some research and tapping into my own 18 year trading career the benefits of surrounding yourself with positive people are:

• push you to perform better
• increase your passion about trading/investing
• make you overall happier
• drains away your negative energy
• creates opportunity you might have missed in a negative state
• improves your self-esteem
• there is a strong correlation between positive people and success
• heightens motivation
• improves your physical health
• ability to be resilient from setbacks increases
• more easily able to see a challenge as an opportunity
• able to see challenges through until the end

So surrounding yourself with positive traders like Saratoga Slayer has done helps performance.  But is surrounding yourself with only positive people best for you as a trader/investor? No it’s not.  And the why comes from the mouth and reasoning of the most positive person I know.

Seth Freudberg is the most wonderfully positive person I know.  I just love being around him and him sharing the most positive attribute about a trader or trade or teacher or student. Give him ten facts about a trading student and he gravitates and latches onto the most positive.  And he harps about it almost endlessly.  One of his former students who now trades for our firm has started a few companies as well.  Hearing this from Seth you would think the guy was Bill Gates.  His admiration for his student is infectious and energizing.

But Seth recognized that being overly positive can be dangerous.  In a former world he credits his success to surrounding himself with doubters and men of caution to counterbalance his optimism. As traders we must do that as well.  This is why trading firms have risk managers.  This is why you as traders must have stop losses.  That’s great that you are certain that LL is going back to 50 but it’s 37 and heading lower and lower and lower and now it’s time for a doubter to help your optimistic conviction.

If a trader has 400 AAPL short calls well past his stop loss having a group think that everything will turn out well is very dangerous.  This is not a healthy way to handle a position.

If you are certain the markets are about to plummet (we saw a 60m options bet to the downside Friday by one player on the tape for example) it is not in your self-interest to surround yourself with only those who will tell you you are right.  A challenge to your thinking and outcome breeds the best decisions.

A few years ago a veteran and accomplished trader at our firm was convinced the markets were headed lower. Each day he would put on full risk with his market bias.   He lost and lost and lost.   And he lost some more.  He chided the firm for not giving him more risk as the collapse was inevitable in his mind.  We had to let him go.  We doubted.

Further, as a trader some of my most important moments are when I say,”This trade is not gonna work out.”  Or banning a stock I don’t trade well (SNDK).  Or lightening up in a position that just doesn’t feel right.  Or getting totally flat when I sense I have all risk from this price.  Or passing on a trade because another trader on the desk disses the idea.  Tapping into my negative can be some of my best trade decisions.

So while there are benefits, numerous benefits to surrounding yourself with optimistic traders, there is also a real need to have traders of doubt and caution to make sure you are making the best decisions.  Some negativity around you can be very positive.

*no relevant positions