skip to main content
Trading Education Posted by Team Topstep May 17, 2021

Objectivity: A Step Closer to the Holy Grail

Chess Match

Traders tend to be confident people; in fact, it is a requirement to be successful. However, confidence does not equate to success; there are times when any of us can become overconfident and lose objectivity. Therefore, as important as it is to be confident, have a trading strategy, and the mechanics of discipline, it is equally important to maintain objectivity. 

Let’s face the truth; it is hard to be objective about yourself. Even those who value healthy critique still feel less comfortable when placed under the microscope. A lack of objectivity is a principle flaw that can damage many areas of life. For instance, if a military strategist is leading an army into battle, it is pertinent that the commander remains objective; after all, lives are at stake. Furthermore, in complex relationships, including marriage, when one or both parties lose self-objectivity, it is nearly impossible for the relationship to survive in any meaningful way. 

However, as easy as it is to acknowledge the principle of objectivity, it is more challenging to apply it. I can think of numerous occasions when traders severely suffered from a lack of objectivity. The first one that comes to mind is a very successful trader who became what we call a permanent bear, or “permabear,” during the stock market incline in recent years. 

For whatever reason, he was only willing to view the market from one bias and refused to take any positions other than shorts. He had a few victories, but over time, the markets ate him up, and this once-successful trader went back to his real estate career, all because he had lost his objectivity.

Keys To Objectivity

There is no secret ingredient to becoming an objective person. To accomplish this requires reinforced thinking. I do believe that it can be a cognitive skill developed over time. Below is a list of temperaments that create objectivity


On some level, traders are all open-minded. Let’s face it; we don’t know many people who chose this as a profession or even as a hobby. When we tell others that we are traders, their instant mental images are risk, gambling, and losses. Therefore, it is imperative to be open-minded when beginning to trade. I’ve observed “newbies” who quickly considered themselves experts, unprofitable traders at that.

We should be open-minded about the potentials of our trading habits—the rewards as well as the risks. The worst attribute for trading and a killer of objectivity is to become so biased that we refuse to consider the question “what if I’m wrong” before each trade.

Quickly Admitting When You’re Wrong

Not only should we consider beforehand the question “what if I’m wrong,” but we should also be quick to identify when the theoretical meets reality. In other words, to acknowledge when we are wrong. This is another tough one because people are naturally defensive. In fact, as traders, we are confident people, and it’s probably more challenging for us to admit when we are wrong than most people. 

Making excuses and placing blame elsewhere is a sure sign that we are struggling to face reality. For instance, when in a losing trade, if you are in the habit of blaming your broker or platform for bad fills, or you blame predator algo’s for chasing your stops, or high-frequency trading mechanisms for manipulating the markets, then you are falling into this category. 

The quicker we learn to identify and acknowledge when we are wrong, the happier and healthier life we will live. Frankly, it is tremendously hard to live life when we’re making excuses for mistakes. 

Furthermore, many traders I know who have known to blow up an account began to double down on positions. When they reached calamity, they blamed external factors rather than acknowledging that they should have identified very early in their trades that their thesis was inaccurate. Don’t be like those guys! Trust me, the more you admit you are mistaken, the easier it becomes, and the more people will like you!

Willingness to Learn and Grow

Just this week, I was sitting with a person whose vocation is in instructing others. I noticed this person because even though they are the teacher, one of their premises behind involving student interaction is that this person, as the teacher, believes he can learn from his students. This was a breath of fresh air, an expert who didn’t act like they knew it all!

Having worked in the industry of financial markets for well over a decade, I have identified that some of the most successful and objective persons are always willing to learn and grow from others, even from those who might be seen as inferior. 

Furthermore, because they are eager to learn and grow, they do so from every trade they make. How do you know if this is you? First, ask yourself how well you respond to advice! If you become dismissive and defensive over advice, you might have ways to grow in your objectivity. Sure, not all advice is good; however, there might be some accuracy even in poor advice.

Flexibility and Adaptability

The list of traits of objective persons might be endless. However, the final one considered today will be adaptability and flexibility. Rigid people might be mechanical, but sometimes they are no fun. Sure, there are some things to be relentless about; however, objective people generally tend to be more flexible and adaptive. This is because they have followed the three traits above; they are open-minded, admit they are wrong and are willing to grow. Therefore, such temperaments inevitably produce a response of flexibility and adaptability. 

This might be considered an end goal. As markets change, you adapt, your objectivity enables this type of flexibility. 

Your Objectivity Checklist

Next, I want to look at some items to be objective about in your trading:

Your Markets

If you always view a market with the same bias, chances are you have lost objectivity. Sure, some trends are sometimes unbendable, yet if you are never at least mentally considering your market from all sides, then you may be too locked in.

Your Strategy

I have observed many traders who become very unobjective with their strategies. If you are losing money with your techniques, then it is unfathomable that your strategy needs some strict objectivity. However, I’ve observed traders with productive methods who refuse to be flexible, adaptive, and willing to learn and grow by continuing to critique and improve, even successful strategies.

Your Success

Yes, most definitely, you should be objective about your success. One immediate scenario comes to mind. When traders go on a hot streak, we tend to think that this trend will become the new normal for us and will last with no end. I’ve seen traders become lazy during hot streaks, spend more money, or go “all in” thinking they had the “Midas touch.”  The problem is that the trader lost objectivity, and when reality hits, these traders will try to replicate a hot streak to their detriment, rather than admitting they were wrong.

Your Failures

It is just as critical to be objective with your failures. This is how you learn by admitting you are wrong, maintaining an open mind, and finding a way to grow out of failure, being adaptive enough to transform loss into success. If a trader cannot learn from losers, then this trader will never be successful. 

Your Potential

This is where it becomes hard for traders to maintain objectivity at times. Every one of us gets into the profession hoping to become wealthy with returns that are usually unreasonable. I’ve seen traders who could make a nice return; however, they felt instead of earning 5% in a month, they should be making 25% a month. If they had been objective in their assessment and maintained what was manageable, they might have lasted. Otherwise, their large swings doomed them.

Don’t Be An A**

Lastly, I will consider the big enemy to objectivity, namely stubbornness. This can manifest itself in many ways but almost always shows up in an insistence on being correct. This stubbornness refuses to consider ways to enhance or improve their strategy, instead of becoming defensive, thinking they have already located the world’s secrets. Stubbornness will refuse to view a market in any way other than bias, often insisting on revenge trading to show they were correct all along. Stubbornness hinders us from learning from our mistakes and acknowledging that we may have made many previous errors. 

If the previous paragraph describes you, consider this a wake-up call from one trading friend to another. No matter who we are, we all need this reminder periodically, because frankly, we are all prone to letting our objectivity get clouded by our confidence turning to overconfidence and eventually to stubbornness. 

Happy objective trading to everyone!