Rande Howell

This is a new excerpt from my forthcoming book: Mastering Trading Psychology. It is focused on another common fear that limits the capacity of a trader to develop his or her full potential. The set up was there; all Jim had to do now was pull the trigger. His hand hesitated as he felt the clamminess in his finger tapping the key. Jim held his breath. A cacophony of strident thoughts erupted in his mind as his gut tightened. A battle was going on in his mind. “You’re going to lose. What if you lose? You can’t win. Who told you that you could trade? You need to find a safer way to make money.” The battle in Jim’s mind raged on – his hand frozen, his gut in turmoil. This was a battle he went through every day. And it was taking its toll on Jim. He feared pulling the trigger because he feared losing. In his logical mind he knew that traders always lose a percentage of their trades, but Jim could not shake the sense of catastrophe that would happen if he did lose. He did not like admitting this to anyone, but he was trapped by his fear of losing. He grew frantic. “Just pull the trigger so it’ll be over,” commanded a thought in his head, “You’ll feel better.” Jim held his breath in anticipation and pulled the trigger on the trade just to escape the tension. What a relief! He could feel the tension drain from his hands and chest. Then the price took a nose dive. He stopped out. Then his growing sense of despair engulfed him, “What are you doing to yourself? Trading is killing you. Why don’t you give up?”, echoed in his mind. _________________________ Coming Face to Face With Your Self Doubt This is one of the most common fears that traders experience. A trader’s entire dramatic relationship with fear and future possibility are rapped up in his fear to pull the trigger on a trade. It is literally the moment of truth about whether you are emotionally stable enough to be trading at a particular moment in time. And like Jim in the vignette above, it is a time when fear crushes the possibility for a trader to be in a calm, disciplined, and impartial state of mind. It is also one that illuminates the inter-connectedness of body and mind. You can literally experience the body and the mind seized by fear. In this vignette taken from real life, the trader’s hand is frozen, and he cannot pull the trigger. Has this ever happened to you? Simultaneously, his mind is plagued by self doubt. Fear has seized the body/mind of Jim – just as it does for many traders. And here we see the closing of possibility for successful trading. Why? Jim’s fear has set up the expectation of loss in his mind. Now the awareness in his mind is focused on loss if he acts. He is literally caught in a catch-22 of his own making. Unfortunately we generally find what we are looking for – or at least what the attention of the mind is focused on. The fear sets up the state of mind, and the state of mind “sees” what is possible based on the force of the emotional state. The mind on fear sees loss which is exactly what happens in Jim’s case – and in many traders’ cases. Fear restricts the possibility that the trader can see. If he were in a calmer more disciplined emotional state, a very different range of possibilities would have been possible. But, locked into a state of mind rooted in fear, he loses his capacity to assess impartially the quality of his set ups. He became the bucking horse in a burning barn. Reacting instinctively, the horse is trying to defend itself from a source of threat – only to be devoured by it. Jim, like the horse, ultimately jumped into a trade impulsively simply to escape his fear. Managing Fear Managing this fear so that it does not hijack the impartial state of mind and the courage to act within the risk management guidelines of a trader’s methodology is a novel idea. Gut level fear is not something that can be talked away or ignored. There is no leaving your emotions at the door in trading – no matter how appealing the concept. But the capacity to manage the fear so that it does not sweep you into reactive patterns can be taught. When trading is simulated, this fear stays in the background of your awareness because there is no possibility of real loss. However, the moment your money is at risk, (and you will most definitely lose money and take draw downs on a percentage of your trades) the primitive emotion that the fear of loss is rooted into stampedes your rational mind. And just like in Jim’s example from above, the rational, left-brained (and well trained) mind of the trader is swept away in a flood of self doubt. To the emotional brain the fear of loss associated with pulling the trigger springs forth from the deeper, darker emotion – the fear of death. The emotional brain simply cannot discern the difference. Threat is threat. And loss is interpreted as a threat by this primitive, emotionally driven, part of our brain and mind. Until its power to hijack the rational, impartial thinking required for successful trading is managed, an anxious state of mind sabotages knowledge every time. Add to this our culture’s obsession with winning as a measure of our worth and importance as a human being. This creates a psychological pressure to perform to a set of expectations that are not realistic, or needed, for success. If you stay mindless to this pressure, you get stuck in the fearful pattern in which our friend Jim is embedded. Regulating the instinctive aspect of this fear of loss is essential. It is by calming down the power of this fear to freeze us from taking calculated risks that we gain access to the state of mind that accepts risk and loss as part of trading. It is this mindset that allows us to stack the risk so that it favors the probability of winning more times than losing. Beyond Calming the Body and Mind When the body and mind are calmed, your capacity to trade from an impartial state of mind becomes possible. Accessing this state of mind that self soothing skill sets requires re-learning how to breathe as a first step. It is your breath that either accelerates the fear that seizes the mind or regulates the emotional state so that you can trade from a calm state of mind. Beyond that though, after the body and mind are calmed, you can access the very emotional intelligence that leads to peak performance states of mind for trading. In the managed calmness, you can learn to call up the impartiality, discipline, patience, and courage required to trade consistently. Calming the emotion is the gateway for building these essential skills. Rande Howell

By our nature we evolve as we adapt our belief system to the challenges the world, or we resist evolving due to our nature to produce certainty. This is what biological systems, whether conscious or not, do in their dance with the world of uncertainty that we are immersed in. We develop "fears" that allow us to avoid the ambiguity of the uncertainty of change. These fears are in response to uncertainty. And at one time in our not so distant past, uncertainty and fear were glued together as part of our survival. It is the management of this ambiguity that must be faced head on in trading. In untethering uncertainty from fear, you open the door to the reorganization of the self in a purposeful direction. In this sense, trading becomes the labotorary of the design of self fulfilling beliefs about self and the world that we are part of. When we learn to face our fears from a position of calm assertiveness, trading becomes much easier. We are no longer living in our histories, but are creating our futures. Rande Howell

This is interesting. "Money well spent" would depend on whether either the nervous one or the bull in the china shop wakes up to their self deception. One person I have come to admire lost $500,000 before he cracked his self deception. It was a very painful wake up call, but he finally listened. He's had to go back to work to build his capital back up and plans to reenter trading at that time. But it will not be the same trading. He is a very different person now. He has developed a different set of eyes when he was forced to take personal responsiblity and confront his demons. As the Buddhist say, "You never step in the same stream twice." Arrogence is gone, a humility rooted in inward confidence in its place. This would be "money well spent". Otherwise you stay in self deception. Rande Howell

Ego is a slippery slope as a construct. I use the term to describe the adaptation of our brain/mind/personality to the world we live in. A self is constructed and organized so that the living system that we are survives in the world. Often the ego maladapts that can produce an organization of the self beyond healthy ego. It can become fragile or over inflated. In Jungian work the ego journey is to first create a strong viable sense of self that can endure the rigors of further development. From this strength the journey of life is launched. Trading will show the trader the very specific areas that the ego needs to be worked on to build a sense of self that can journey into the rigors of trading. Rande Howell

Learning to learn is a skill that passes us by when our mind has acclimated to see only a small slice of what is right in front of our eyes. In trading, you are forced into learning how to learn -- or you stay stuck in the old ways of thinking about things. Invisable biases, beliefs, and assumptions have to be brought into the light of awareness and new ones have to be incorporated so that you can "see" differently. It does take time, but developing what is known in Zen as Beginner's Mind really shortens the learning curve. We are not our beliefs; they are only assumptions that have taken on the power of truth because we have become blind to them. Trading really exposes this. Rande Howell

Guys are showing you important distinctions in learning to become a successful trader. But until you learn how to regulate your emotional nature, it is going to be difficult to learn the necessary skills. The second thing that you might want to consider is asking yourself, "Who do I need to become to produce effective trading?" As long as you are focused on losing money, the mindset your bring to trading is compromised. A trader needs to be in the NOW in each trade you are in. If you are thinking about prior losses while you are currently trading, you are not in the NOW. You are in the THEN or THE WHAT IF -- and this mindset is not giving your methodology a chance to work effectively. This takes training and reps. It is you mindset that trades your methodology. Make sure you train it well. Rande Howell

Imagine the market as the totality of possibility. Unlimited in potential in any direction at any time. Potential for profit. Potential for loss. Potential beyond your capacity to ever comprehend. What you know is that the market goes up and down. Rarely does it stay unchanged for any length of time. Then imagine you as an observer watching the market. The market is an ocean of possibility, while you, the observer, represent someone in a small boat navigating in this infinite sea of possibility. What do you, as a buyer or seller, see? The tide goes in, the tide goes out. Storms come and go. There is no telling what this ocean of possibility is really going to do at any given time. Yet, depending on the skill of the navigator of the boat in this ocean of infinite possibility, he either harvests what the ocean is willing to give him or he keeps looking for what he wants from the ocean. If his vision is locked on finding what he is looking for, he becomes blind to other possibility that the ocean presents. The ocean, as well as the market, does not know the fisherman is there. It is incapable of wanting to help or hurt the fisherman. Possibility opens and possibility closes irrelevant to the fisherman. The ocean simply is. Opportunity and disaster both exist as possibility to the navigator of the boat in the sea of possibility. It is the discernment of the navigator, beyond fear, that opens or closes possibility in the market. Until fear is taken off-line, the fisherman of possibility sees through the eyes of fear and can not see the potential of a long term beneficial relationship with the ocean of possibility called the market. The ocean of possibility does not know that the fisherman is using a structure (the boat) to navigate through this sea of possibility. In the same way, the market is obvious to the structure (methodology) a trader will use to help make sense out of the market. That structure helps the trader (the navigator and fisherman) of the market to make short term predictions about what the market might bring forth at any particular time. What the trader and the fisherman know though is that they have to be prepared for what ever the market (as an ocean of possibility) might do. He does not control the market, but he does control what he will do based on what the market does. A fisherman in a boat must bring skills to the dance between the ocean of possibility and him. He has trained himself to “follow” the lead of the ocean. By learning to respect and have reverence for the ocean, he is able to bring forth a bounty from the sea. He becomes attuned to the market. On the other hand, if he does not become an astute observer of the ocean and his beliefs about the ocean, he can easily get hurt. He can crash his boat and himself. The market, nor the ocean, would ever know. It just is. It is the trader, or the fisherman, who has to learn to stay calm and develop an observer of the market who can successfully read the signs of the market. This is attunement. Staying calm is the first stage into the journey of attuning yourself to the market as a trader. This is what we are going to examine now. We will first learn the fundamental skills of emotional regulation by managing our breathing and by generating a sense of calm. Without these valuable skills, you will not be able to stabilize your emotions so that you can develop the mindset of attunement. In that new construction of the self beyond fear, you will be developing the qualities of discipline, patience, impartiality, and courage. It is these qualities that allow you to claim the bounty that the market (as a sea of possibility) offers you. It is through these eyes a skilled trader sees. Rande Howell

The mammalian brain works on an instictual level rather than a thinking level. It is born into circumstance and adapts survival patterns to manage the business of staying alive in a dangerous world and to procreate. The problem is that it tends to keep on re-creating the circumstance to which it is born. This is adaptation. That's why people keep finding themselves doing the same ineffective things over and over again. A familiar pattern is created and that pattern takes over the creation of our lives -- totally out of our awareness. The next piece is that the mammalian brain does not distinguish between uncertainty, worry, and fear. So the uncertainty of pulling the trigger or being in a trade triggers a fear response to most traders. This is what has to be decoupled. Other people come into trading with very successful patterns from other domains where aggressiona and assertiveness have served them well only to find they really blow themselves up in trading. They have to change patterns to match up with what brings success in trading. Rande Howell

This is the first of a series of articles that cover the 9 forms of fear that I define as the Roadblocks to Your Trading Success. Each form of trading fear is explained so you can see if they resonate with you and your challenges in trading. The object here is to define the fear that limits the possibility of your being a more success trader. Many traders do not know how to diagnose the very problem that impells their trading. Well, here you get that chance. The point about fear that you need to grasp is that it constricts possibility. Because undefined fear causes discomfort, you try to avoid it as a way of dealing with it. That is how your biology would always react. It is also traders, caught in their mindless, will attempt to manage the situation. This mindlessness keeps them stuck in their suffering. The fear points points out where you need change. Yet, most traders avoid the fear that help them redefine their trading. It is a tradegy. When we learn the skills of how to face our fears and grow from them, a whole new world opens up. The market neither wants to take or give from you. But if you trade from a state of mind rooted in fear, you will always see the threat of the market taking from you, rather than the opportunty to see what the market will offer you. Fear has to be managed to achieve this Trader's State of Mind. Let's take a look at this Fear of Uncertainty. Let's see if you can relate to Steve's dilimma. _________________________ _____ Steve explains, “I’m actually a very positive and out-going guy. The glass is always half full to my way of thinking – except when I’m trading. It’s the craziest thing! In trading, I question my decisions and end up hesitating too long. Today I was looking at a set up and it met the conditions of my trading plan. Logically I had enough confirmation to pull the trigger on the trade, but a little voice in my head kept asking, “Are your sure? You need more confirmation. You gotta be certain.” “Well, while I hesitated to clear up the uncertainty, the trade got away from me. It’s not the first time either. That voice of self doubt pops up in my trading all the time. And what’s weird is that it seems to come out of left field. I mean, I’m trading to plan – I’ve got the risk management down. I know in my head these are low risk trades, but I hesitate in uncertainty anyway.” _________________________ ____________ Steve is experiencing the fear of uncertainty. And it is a fear (a certain anxiousness) that he has lived with, but covered up outside of trading, for years. After trading for nine years, he knows how to technically trade his system. But until he learns how to regulate his deeply embedded beliefs about the need for certainty, his emotions will continue to sabotage his potential in trading. Not only is he coming up against the psychology of his beliefs, he is also getting hijacked by this biology’s mandate to minimize uncertainty. Our human nature strives to make order out of chaos. Biological systems, such has human bodies, organize themselves to prevent the entry of chaos into the system. If the system is opened to the greater variability of the external environment, it is perceived as a threat to the survival of the system. Think of cutting your arm, and you will see this principle in action. The closed system of the body immediately starts patching up the wound to keep the unpredictability of the environment out. Closing the system (bandaging the wound and healing), returns the body to the state of preventing chaos from interfering with the body’s need for predictability (survival). The brain creates pattern to predict what will happen in the next moment, in the next trade, in the next economic cycle. This need to predict the future is deeply embedded into our emotional survival nature. We are wired to look for cause that creates a determined outcome – making order out of chaos. A great example of this comes from an experiment done with pigeons. Researchers threw a handful of grain into a flock of pigeons foraging on the ground. Then they repeated the exact behavior of raising their hand to throw the handful of grain into the midst of the birds. The pigeons, seeing the hand raised, took on the exact body positions they were in when the first “manna from heaven” was thrown. The pigeons were wired to find a causal relationship between their whereabouts and the arrival of food – certainty. This is how powerful the need to find predictability in the face of chaos is. Traders experience the fear of uncertainty in the form of hesitation. They are looking for the confirmation of the certainty that something is going to happen. In trading there is not certainty – in trading there is probability. In risk management the trader manages the uncertainty with the probability of success. The odds need to be in the trader’s favor. Unfortunately for traders, this is not the way our neuro-biology evolved. Your brain wants certainty even if there is little probability of something bad happening. This is called negative appraisal. What you can count on is that your brain is a negative assessment machine. Evolutionally speaking, this trait gave our species a real advantage for survival. It kept probabilities of survival in our favor. The problem for traders is that this very hardwired trait makes it difficult for the trader to distinguish between fear and risk management. To move from the biological mandate of deterministic certainty to the management of risk and probability requires emotional state management to overcome the body’s hardwired imperatives and the psychological mindset to manage risk. Our biological brain has to be calmed so that the fear associated with uncertainty does not overwhelm impartial thinking that is required for risk management. How Do You Manage the Fear of Uncertainty? There are 3 phases that you progress through as you learn to manage, then transform Fear of Uncertainty. First, you have to biologically manage the arousal of the emotion so it does not sweep the mind away into fearful thinking. It is all over then. This is down by diaphramatic breathing as a way to disrupt the emotional state and to calm the arousal of the body. In the specialized from of diaphramatic breathing I teach, the body and mind are calmed down so that thinking can come back on line -- rather than the reactivenss of fearful thinking. Then a specialized form of self soothing takes fear off line in the mind. This sets the stage for transforming the fear. The second phase is centered on locating the internal dialog of the fear. In a calm state of mind you can hear the thoughts running through your mind. It is important to manage these. If left to their own devices, these thoughts will spell destruction to your trading. There will be some psychological demons that will been to be found by becoming Mindful of them. This Mindfulness is taught as a way of observing inner thoughts and conflicts so we can start mananging them. Until you do this, they will manage your trading with limiting results and, as a result, your continued suffering. Mindfulness is then used to discover very powerful internal champions that live within you. It is these that you seek to trade from. This is where the impartiality, the courage, the discipline, and the patience are found that create the Trader's State of MInd. This is possible for everyone. And it starts by becoming away of the fear, approaching the fear, defining it, then re-organizing the inner game so that you trade from strength rather than weakness. How does the fear of uncertainty apply to you in your trading? Find out more by taking the Trader's Questionnaire. It will show you. Here is the link to the Questionnaire. Of course, coming to one of the free webinars will take you further. Click here for that. Rande Howell, MEd, LPC

We all live in different worlds based on the set of assumptions that we bring to the act of observing the world. There is no one world "out there". If my service to traders is characterized as a vending business, then may may my nourish and grow their minds strong. Peace be with you. Rande Howell

It's an interesting world you live in. The analogy works for me. Dem's and Republicans are so ingrained in their ways of thinking of the world and their fear of the other that new ways of being and doing in the world together are locked out. This is called cognitive dissonace. Pretty much the same way the historical mindset that a trader brings to the management of uncertainty in trading keeps him/her bound to inconsistent success. The brain is organized around fear and has to be re-built to create a mindset suited for trading. I call this mindlessness, rather than clueless. People come to trading with skill sets that they have learned in other endeavors. Many of those skill sets that worked adequately in other domains, simply do not work and are counter productive in trading. They have to be re-tooled for the particular rigors found in trading. Some of those skills are cognitive and emotion. Without re-invention, they are at a real disadvantage. Learning new skills, including mindset, are necessary for most. If this is friction, so be it. Rande Howell

What If covers a lot of group. If Republicans and Democrats could simply think clearly and act from a calm discipline mind, then we would not be having the problems we are having today in the US. Maybe we should send them home. The premise that people are rational is the problem. Getting beyond fear and into the state of mind you suggest would be ideal. The evidence is that that is not going to happen. Learning to manage emotion and mind is possible. First you have to recognize where the problem is -- it is the mindset that you bring to trading. Not the coach. Had a trader teacher explain that to me at Dallas Expo. He said that even when he barks out the trade, traders will do the exact opposite. Should he send them home. He would have an empty class. Should the trader train mind? it can be done if the trader is willing to let go of his preconcieved notions and reorganize himself. Rande Howell

This is a well traveled moniker. And like all things generalized, there is truth to it. A more rigorous way of describing the struggle behind the statement is that if we resist re-organizing ourselves to higher functioning by some sort of psychological defense that keeps a defined self limiting pattern in place, then yes the pattern will persist. Resisting takes serious courage to confront. And as SUIYA noted, not everyone is built to champion themselves. Some simply will not summon the strength to re-organize self. They shouldn't trade. I agree. It's the size of the universe that we precieve differently. The place where I would differ is that I hold that most anyone, willing to confront the self and the self delusions they have come to believe, can achieve this. I acknowledge that I've worked with a few OCD'ers that I've finally had to realize were not going to change, but for the most of us -- we are not genetically predisposed to these levels of resistance. Most of our resistence is within us. And all trading is doing is shoving our resistance to transformation into our faces. You really do have to decide if you are going to become the person who can trade well. It will not be the person who first starts trading. I am giving free webinar presentations on this very topic over the next two week either from my website or from some of our affiliates who carry our educational programming. If you are interested, seek them out. Otherwise, let's keep talking. Rande Howell

It is this brain/mind stuff that creates unexamined habits and patterns that limit the mindset that you bring to trading. It is hard to to observe, disrupt, heal, and reorganize self limiting way of interpreting the world and our participation in this dance. Trading requires this kind of re-attunement as you deepen your committemnt to building the mind for successful trading. Rande Howell

Here is a recent interview by Karen Gibbs of MoneyShow.com concerning emotions and trading. MoneyShow.com: Video Rande Howell

Here is an interview by Karen Gibbs on MoneyShow.com where the money script is explored. MoneyShow.com: Video Rande Howell

Until you understand the power of fear over thinking, it will dominate you. What You Need to Know About the Impact Fear Has on Your Trading Poised to pull the trigger on the trade, Carl held his breath and hesitated. A current of uncertainty swept him away into second guessing his decisions. Spontaneously thoughts began to rapid fire in his head, “Should I really take this one, what if I’m wrong, what if I lose again?” His confidence was melting like snow in a desert and was being replaced by his fear of losing – again. “Should I push through my fear or should I back off this trade?” he asked, trying to gather his wits. To no avail he gazed into his screen and tried to summon all the psychological tricks he had learned. But all he could hear was the continuing battle going on in his mind. And this was not the first time. It was déjà-vu all over again. Reaching for his antacid to calm the knot in his stomach, Carl realized that he found himself in this situation all too many times. The Biology of Fear and Its Impact on the Psychology of Trading What’s going on here? Carl is a conscientious trader. He uses a proven process and has his daily plan in place. Unfortunately he does not know how to effectively deal with the impact of his emotions on his personal psychology. Nor does he have an understanding of how emotions, particularly fear, impact perception and performance. Since 90% of trading is a balance between a trader’s emotions and his thinking, understanding the impact of emotions is an essential part of achieving success in the inner game of trading. The complicating problem here is that Carl (like most traders) does not know how to effectively regulate his emotions and consequently, does not know how to produce a peak performance state of mind specifically for trading. And this blind spot is the difference between success and failure (profit or loss) in trading. And until Carl learns how to deal with his emotional nature, his fear, self doubt, greed, and impulsiveness will dominate his thinking and performance. Thinking is EmotionalState Dependent Why can’t Carl, or any trader (including you), just push his emotions aside? It is because our bodies, our brain, and our emotions are woven together and are inseparable. If you are breathing, you are experiencing emotion. And they dominate the way we think and perceive – whether we acknowledge them or not. Deeply rooted in human evolution, emotions (including fear and greed) create our capacity to survive. To become a successful trader, managing your emotional nature is far more profitable than attempting to ignore or be consumed by your emotions. Taking it a step further, all thinking is emotional-state dependent. Emotions are biological (not of the mind) – and they overwhelm thinking and states of mind. The way we think and reason comes from the emotional state or mood in which we live. Thinking does not create emotions on a biological level. Rather, emotion determines our thinking and our perception of the world. Therefore, only to our detriment can we push emotions aside. Can you see why learning to managing the biology of fear is so important to successful trading? As an example of this principle, take a look at our friend Carl’s situation. Everything seemed okay until Carl was ready to pull the trigger on a trade – the moment where money entered the game. Suddenly uncertainty and fear clouded his judgment and his thinking got consumed by self doubt. The truth is that Carl had pushed his fear away from his awareness until the moment of commitment. Then it flooded forth and ambushed him. Not having the skill sets in place to deal with his fear, his emotional arousal generated his self doubt and indecision. Depending on personal history and adaptation, other traders in this situation could have resorted to impulsiveness and grandiosity instead. In either case the emotional ground from which behavior arises is fear of loss. Often traders jump impulsively into a trade decision to remove themselves (temporarily) from uncertainty. Others get consumed by a sense of grandiosity (false courage) to escape the fear of uncertainty. Pushed by the emotion, all these personalized adaptations to fear tend to divert us from trading our plan and sticking to methodology. Until we learn to regulate the fear our brain associates with uncertainty, our desire for a calm, dispassionate, impartial emotional state (essential for effective trading) is hijacked by our lack of skills to deal with fear of loss. The Trader’s Brain on Fear The brain is organized around fear – the most primal of survival emotions. To the brain any threat is a threat to life, whether it is a saber tooth tiger flashing his 6 inch canines at you or your fear of losing money. It is one and the same to the survival brain. It does not distinguish between biological fear (the saber tooth tiger) and psychological discomfort (the fear of losing money). Once the threat activates the emotion, fear sweeps away your capacity to think rationally and impartially – which is absolutely vital for trading effectively. Once triggered, the chemistry of fear is coursing in your body in .003 seconds while your ability to react to the emotion takes more than .5 seconds. For effective trading, this is too late. The trader, like Carl in the example, then finds himself in fear-based thinking (obsessive thoughts of self doubt, focusing on negative outcome, trying to make up for losses, and an urge to avoid the stressor). And until Carl, or any trader, learns how to effectively deal with and separate the biology and psychology of fear, he will not be able to produce long term success in trading. The Trader’s Brain Turns Avoidance of Fear Into a Self-Fulfilling Prophesy This is where well intended psychological techniques, without being grounded in emotional intelligence, fail. The biology of fear simply overwhelms the thinking process and creates a biological pattern based on the avoidance of fear. This is what has happened to our friend Carl. He has triggered a biologically wired pattern of avoidance based on fear. Until you can manage the fear, thinking is simply hijacked by the primal power of the emotion. Thinking is not king, emotion is. The point here is that the brain wires patterns of perception based on emotion. These patterns become so familiar to us that we do not see them. Yet, they are there – producing a self-fulfilling prophesy that dominates how we create the world in which we live. And once the brain creates the pattern, the pattern starts creating us. In Carl’s case, his fear now dominates his thinking and his expectations of the future. Out of this state of mind come his negative expectations of the future, his focus on the negative, his self doubt, and his growing impulse to avoid further stressful thinking – a vicious cycle. Managing this aspect of our biology that deeply influences our emotions, perception, and our trading is the first step to long term success in trading. So, How Do You Stop Fear From Taking Over Your Thinking? In a successful psychological plan for trading, the trader will establish a sense of calm authority before he begins to trade. He does this by first managing his fear before it can contaminate his thinking. If you imagine fear as a freight train, the first thing you want to do is to stop it from getting a full head of steam. If it gets beyond that, the best thing to do is to simply stop trading until the emotion has run its course through your body, brain, and mind. However, it is better to learn to interrupt fear’s capacity to cloud your thinking before it causes problems in your trading. Fortunately, because fear is biological in its nature, it will have an individualized physical signature for each trader – which the trader can use to begin to manage his emotional state. That signature is composed of several components including (a) a breathing style that supports fear and its escalation and (b) specific muscle tension. It is these two areas on which we will focus. A Little Experiment The following is a very simplified process that can be developed into a skill set. It is only for illustration and not intended to be a trick or tip that will change your trading on a short term basis. Think of a time when you were trading when you experienced fear, stress, anxiety, or self doubt. Really focus on the memory. Build it up for a moment so that you can feel the tension in your body build. Feel your mind begin to race. Build it up more. Notice what happens to your breathing. Now, while it is still fresh in your memory, write down how you were breathing and where the tension was concentrated in your body. Also write down your predictions of the future (or prediction of trading outcome) while in this state of fear. All of these combined are your individualized fear signature. Now let’s learn how to disrupt it for more effective trading. Most people find that they either hold their breath or breathe rapidly when they are in fear states. This is part of the biology of the emotion and is a barometer of the emotional state you are thinking from. These breathing styles maintain and accelerate the emotion’s momentum. Also notice where you experience tension in your body. The neck and shoulders, gut, and chest are common – particularly while holding your breath. The breathing and tension are parts of the physiology of fear. Also it is vital that you notice the connection between your emotional state and the kind of thinking you had (your predictions of trading outcome) while in the state of fear. This is where you can disrupt the fear and can manufacture a calm state of mind instead. The first objective to a successful inner game of trading is to disrupt fear-based states of mind and replace them with a calm state of mind. Out of a calm state of mind you can think and perceive the market impartially – rather than having your thinking clouded by fear. Let’s take the experiment a little further so you can see the difference in perception between fear states and calm states of mind. This time you will use diaphragmatic breathing as you bring the memory up. In this style of breathing, you will first pull air into your belly or abdomen and then let the air expand to your upper chest. To make it easier to learn, you can imagine that you have a bellows in your belly and that you are pulling air down your windpipe into your abdomen and allowing it to expand into your upper chest. Practice breathing diaphragmatically a few times and then bring the stressful memory back into your mind. Keep focusing on the memory and notice how easy it would be for the memory to influence your breathing. But continue pulling air into your abdomen and then letting it expand into your upper chest. Stay focused on your breathing so that the memory does not activate the fearful breathing style. Continue doing this for a few more moments. What do you notice about your ability to manage the emotional state and the resulting thoughts? Most people experience emotional regulation of the fear. They can feel the fear, but it never sweeps them away. And after a few minutes, they are able to establish a calm state of mind. It is this calm state of mind that you are looking for. From this calm state of mind, your perception of the market changes. Which is more effective - observing market data from a fearful state of mind or a state of calm? Notice how your decision process changes as you are able to interrupt negative fear-states and the thinking that comes from them. And notice that as you are able to establish and maintain calm states of mind, you are better equipped to think from an impartial and objective state of mind. Which is better for your trading? Moving beyond the First Step This aspect of emotional regulation is only one part of a successful psychological plan for trading. The calm state of mind is like a launching pad. Once you establish skills to regulate the biology of an emotion, the door is opened to much more. New skill sets become possible for your growing success out of this first step. Successful trading is a journey – and biologically being able to interrupt fear-states from sabotaging your trading plan is an essential part of that journey. This new skill, once developed, opens the door to increased realization of your trading (and human) potential. It will not work by itself. What it represents is a way for you to recognize fear dwelling within you (before it sabotages your efforts) and to mechanically disrupt fear’s hold on your thinking. Once you learn this skill set, you can begin to learn how to call up emotional states (calm impartiality and courage) as part of your inner resources that move your trading psychology beyond fear – and into peak performance. Rande Howell, MEd, LPC http://www.tradersstateofmind.com

SIUYA Actually I appreciate the rigor you bring to dialog. And your observations have helped me become better at serving traders. IF traders were able to trade their plan or even take and perform their trades as their mentors announce them, trading performance would be very different. As a consequence, I actually build in emotional regulation and visualization skills into the very fabric of a trader's plan. It's too easy for a trader to get ramped up and sweep away while in the management of uncertainty not to integrate emotional and mental management skills into the plan they are trading. Examining your beliefs about winning and consistence is fundamental to developing a mindset that can trade effectively over time. Short term loss or success is a dangerous notion to get stuck in. Rande Howell

I was very surprised when TL took all my post blogs entries, which I abandoned for the forums, and posted them as articles. That may be the source of prolificness. Generally, I post 1x monthly and enter conversations like everybody else. Rande Howell

by J .Rande Howell http://www.tradersstateofmind.com ___________________________ “I have finally concluded that the reason my trading is not progressing is because of what is going on in my head, and nothing at all with what is happening in the markets.” AS, Dallas TX ________________________ What Keeps You Stuck in Trading Purgatory? After a number of years of training yourself to trade, most traders find themselves stuck in the same predicament as the above trader. Inconsistent results follow no matter how much their trading system is tweaked or changed to create external discipline. Finally the trader comes to the uncomfortable conclusion that the problem is not in their methodology, their system, or the markets (these all work well in simulation) – the problem is in the 5 inches between their ears. Traders read about expert traders who seem to be born with the right attributes for trading. These expert traders trade dispassionately with a powerful discipline that allows them to park their emotions at the door. And students of trading, who read about these characteristics of successful traders, often try to emulate the emotional control and state of mind they read about. They, like Dorothy in the Wizard of Oz, click their heels and magically imagine themselves to have the “right” emotional and mental traits. They may even watch a trader psychology DVD, listen to a guided meditation, mess around with their brain waves, or learn some NLP tricks in hopes of an easy fix. Try as they might though, the emotional roller coaster ride of their trading persists. The mistake the student of trading makes is that they compare themselves with these rare people who are born with a genetic predisposition and emotional temperament that is well suited for trading. Though they are rare, many aspiring traders set these off-the-shelf exceptional traders up as the psychological model for their trading. The problem is these rarified traders come equipped with a very different emotional and mental predisposition than the vast majority of people who enter trading. Individuals may come equipped with a certain genetic inheritance that, under the right conditions, are expressed in such a way that it gives a person an advantage in certain domains. Taken to an extreme, you also see this genetic engineering in breeding dogs for certain traits. This kind of genetic engineering is simply not possible in humans. This does not mean that trait selection is not used to enhance performance though. Though humans are far more complex, the Russian and Chinese have used trait expression to steer young people with athletic promise to great advantage. And some traders win the genetic trait lottery for trading. The vast majority do not. They have to learn to develop a psychology built for trading. Nature vs. Nurture No matter how much they read about what the mind is supposed to look like to trade well, little is spoken about how the trader goes about building the very emotional and mental skills and attitudes necessary for successful trading. Just because nature did not equip you with the “right stuff” for your trading mind does not mean that you can not nurture your psychology so that you build the state of mind needed to successfully execute your methodology. Nurture is far more importance in developing a mindset than nature. Nature may give potential, but it is the individual that must develop that potential in order for it to become a talent. This means, even if you did not win the gene pool lottery, you can train your emotional and mental predisposition to your advantage in trading. Problematic emotional biases about money, worth, risk, and uncertainty are genetically handed down from one generation to the next. They are not deterministic traits. They are learned patterns that become wired into your brain/mind as habits. It's not genetics, but it is adaptation to circumstance. This is how the money narrative to which you adapted shows up in your trading. It is transmitted through the generations and your brain’s adaptation to circumstance. And fear-based habits and beliefs can be de-constructed and re-organized into a much more trader-friendly perceptual map. Deconstructing the Fusion of Uncertainty and Worry Most of us grew up in environments that exerted pressure on our developing brain that organized us to "not make mistakes" and to focus on certainty rather than the management of ambiguity. It is from this constantly adapting brain that our “mind”, the way we interpret reality, emerges. For the vast majority of traders, by the time that a brain has approached maturity it is biased to seek certainty and avoid uncertainty. This is simply a biological bias of the human brain that has been amplified by what we are taught about risk and uncertainty. This is an organization of the mind that is not going to work well in trading. That particular adaptation can work well in other domains, but not in trading, where the emphasis is on embracing the management of uncertainty and risk. Your brain fused uncertainty and the fear of death into a single construct (very appropriate for physical survival in a dangerous world), but was never prepared for trading markets. This particular organization of our perceptual map has to be de-constructed, de-fused, and re-organized from a fear-based interpretation of uncertainty to a probability and risk management based perception of uncertainty. This is the mindset that works in trading. The problem is that the uncertainty/fear construct has become the historical narrative that guides your perception of the markets. It is at this point that the assumptions about fear and risk to which your brain adapted you become embedded as unexamined self-limiting beliefs. They sink into the background of your awareness and contaminate effective perception without your ever knowing it. Out of Theory and Into the Trading Room What does all this theory look like in trading? Let’s take a look. Jim is a trader who is literally a rocket scientist. He has a deep working knowledge of computer systems, aeronautics, and mechanical engineering – and now he is an attorney who practices intellectual property law. In simulation his trading reflects the clear thinking and impartial state of mind that you would expect out of a person with this kind of training and experience. However, when he trades and risk enters the picture he does not “see” all of the options and patterns that are reflected in his charts and indicators. His training is highly biased towards certainty (remember people’s lives and expensive equipment were at stake based on his calculations) rather than the management of risk and uncertainty. He was trained that losing was not an option. This training became habitual and went into the background of his awareness. Now it is an unexamined bias that colors the perceptual world he sees. (Uncertainty = Fear of being wrong.) This assumption that uncertainty must be eliminated, now a belief embedded in the neuro-circuitry of his brain, became the unexamined belief (or historical narrative) that he brought with him into trading. This belief was highly effective for him both as a rocket scientist and as a patent attorney where a high value was placed on certainty. However this same thinking, so successful in one domain, was producing near panic for him while he was in a trade. As a result, he got out of trades too soon and he took his profits too quickly – long before he reached his target. Once in a trade, nothing was certain. Managing the trade was an exercise in the management of uncertainty in terms of probability rather than certainty. Uncertainty, still fused to fear, triggered and his rational and clear thinking mind was contaminated by fear. From this fear-based state of mind, options that would have appeared to him while in an impartial state of mind were swept away and replaced by the negative anticipation of worry. This is the impact of your historical narrative on your trading. And, of course, when the trading day is over and he reviews his trades, he cannot comprehend why he missed so many signals and patterns. All he knows is that, yet again, he made bad trading decisions resulting in more draw-downs. Changing the Historical Narrative of Uncertainty and Fear into Probability Like the trader quoted at the start of this article, most traders come to realize that their historical narrative, now embedded in their neuro-circuitry of belief, is what has to be changed. There are no tricks or magic bullets. Most traders muddle through years of desensitization (of their fears and self limiting beliefs) before finding consistent success in trading. This process rewires beliefs about self and uncertainty that eventually open the possibility of trading on a new level. Fortunately, this re-organization of the trader’s mind can become more streamlined when we begin to understand how meaning is organized in the brain/mind. There is no single organization of the self. There is no final “me” “Me” is simply the current organization of self beliefs that you hold as true. We do not see reality, we see shadows cast -- and there is always an observer interpreting what it is experiencing. Traders come to hold certain assumptions about the market. Some of these assumptions have been worked out and have become an effective way of dancing with the market. Yet, the market does not care what assumptions you attempt to place on it, nor does it have awareness of the "truths" placed upon it by men. Before traders recognize that they are the problem, they usually have traded for a number of years and are successful in simulated trading. They know HOW to trade a methodology that works in a classroom. It is when risk of capital is put in play that their "truths" about the market are challenged. It is at this point that the trader is not separating uncertainty from worry or fear. This situation is highly trainable. The assumptions of self that have become hardwired as self-limiting beliefs (their unexamined truths) are not failing because they don't know how to trade, but because they are not trained to operate in an environment of uncertainty. They will have to re-organize their beliefs about operating in an environment of uncertainty and their skill to manage it, which can be accomplished if the trader accepts full responsibility for the outcome. Fundamentally, traders need to learn a set of skills and tools by which they do brain surgery on their belief system. Trading becomes a great place to see "up front and close" the trader's beliefs about self in action. There is no hiding from the "truth" as it has been organized within the self. Yet most find that their "truths" are only unexamined assumptions about the world that drive their perception. It is at this moment that the assumptions behind the self limiting beliefs can be observed and re-constructed. Building your beliefs into managing risk rather than avoiding risk is then possible. Anxiety at this point can be regulated and listened to, not from an avoidant observer, but from a disciplined and impartial observer - with very different outcomes. The "truth" they see allows them to be present in their trading very differently. The gap between simulated trading and live trading narrows as they train their state of mind to embrace uncertainty from a perspective of discipline, patience, courage, and impartiality. A far cry from the anxious state of mind that had them hesitating or trading impulsively as fear swept their thinking capacity away. Very few brain/minds have been shaped to trade well. Getting to the impartiality and discipline necessary for trading is like trying to tell a horse in a burning barn to remain calm and simply walk out of the barn by carefully considering its options. Fortunately, belief can be changed. It begins with learning emotional regulation skills so that fear and greed do not sweep away your capacity to think from a disciplined and impartial state of mind. Then the trader must begin really examining themselves. This is done by developing the capacity to become mindful. Mindfulness, in essence, is the capacity to observe the coming and going of thought and to recognize that thought is not who you are. Thoughts, through the observation of mindfulness, become the voices of your beliefs that drive your trading. This is where the door to change opens. The observer that we bring to uncertainty is what allows the trader to see what they see. A really good trader, as a trained observer of market phenomena, is seeing distinctions through his skill and an impartial mindset that a fear-based trader does not see, much like the rocket scientist turned trader was experiencing...very different observers of uncertainty with very different outcomes. There is a great Zen koan that goes like this. “Things are not always what they seem to be -- nor are they any other way.” Becoming Architect of the Self that Trades Applying mindfulness as a tool to your trading allows you to bring the self limiting beliefs that sabotage your trading into your awareness where they can be worked with. Instead of drifting on the currents of unseen self-limiting beliefs that limit the way you manage uncertainty and risk, you become the architect of the narrative you bring to trading. Uncertainty becomes decoupled from worry and fear. And you develop inner resources that allow you to bring forth into your awareness the discipline, patience, courage, and impartiality that live as possibilities in the totality of your being. In the face of uncertainty, you no longer have to be compelled by your fears to produce inconsistent results. Instead, you bring a state of mind to the uncertainty that creates the probability of successful trading. Trading is a journey into the possibility of who you can be. The “you” that you brought to trading is rarely the “you” that will bring you success in trading. Emotional regulation and mindfulness are the cornerstones of re-organizing the “self” that trades. It is your passion that gives you the motivation to learn and use these tools to become who you need to be for consistently successful trading.

Though few people come to trading with this set of habits, the good news is that they can be developed. It gives a strong framework to strive for. Thanks Tim. Rande Howell

Ingot54 Good luck with your life. After 20 years of couseling couples and watching males avoid dealing with emotional conflict by attacking their fears with their spouses and those spouses seeking to reconnect emotionally to their distant husbands, any person with an observant mind can see the pattern emerge also in trading. I don't see anything different here. You're proof. Rande Howell Rande Howell

Emotional Intelligence and the Trader’s Mind An Emotional Braking System Failure “I left money on the table yesterday, and I’m not going to leave money on the table this time!” Harry silently declared, “I’ve missed out to many times – I’m going to ride this one and clean up.” Harry could feel the excitement pulsing in his veins – he could hardly contain himself. He pushed beyond his exit point, knowing that this one was going up. What a rush! Harry could feel the surge of energy. He almost became giddy as he saw the numbers climb even higher. That triggered even more excitement as he thought, “I’ve hooked a big one – I’ll show them who’s a trader!” In the blink of an eye, without explanation, the numbers began to drop. Harry kept waiting for the downward spiral to right itself. It didn’t. Harry moved the stop because he knew in his gut that it would go back up again. It didn’t. Finally Harry pulled the trigger and accepted that he had another draw down on his trading account. He felt frustrated because, in his irrational exuberance (some would call it greed), and he let a perfectly good trade go bad. He had sabotaged himself yet again. Now Harry felt shame and wondered, “What made me think that I could trade for a living?” You Trade Your Psychology What happened to Harry? How did he get suckered into bad trading practices? From the sidelines, it is easy to say that Harry neglected to trade his plan. This assertion misses one big point about humans (and particularly the ones who trade) – emotions rule mind. Out of your emotional states comes the kind and quality of the thinking of which you are capable. In Harry’s case the state of mind that he needed to trade effectively was swept away by a fear of missing out. Once this fear triggered and accelerated, his thinking became clouded and his rational evaluation process was blown out of the water. Like many traders, Harry did not have the skill sets to keep his emotions regulated as he entered the trade. Consequently, a guy who had diligently done his charting and was ready for the trading day got ambushed by unseen forces. His trading plan did not also include a psychological plan for managing emotions. This was a big mistake for Harry and for many traders. And until he learns how to make visible the unseen forces that hijacked his rational mind, his trading will suffer. The problem is age old. Since the rise of Descartes’ rationalism, people (traders included) have attempted to separate body (emotions) and mind. Today, even Western medical science is concluding that this separation is impossible. The mind and the body (emotions) are woven together life a garment. They are inseparable. Maintaining awareness of your emotional nature as a trader is, in fact, the first step to developing a peak performance state of mind specifically for trading. Before this is explored, let’s take a look at what just happened to Harry. The Anatomy of a State of Mind Hijacking Harry experienced the trap of an undisciplined trader’s mind. As he moved into the trade, he was not attuned to what his hardwired and primitive emotional brain was biased to sense – nor how to manage the impulse. He did not notice the excitement of emotional arousal of the hunt that evolution had programmed into him. The thrill of the hunt (and its companion – the fear of missing out) was mobilizing Harry to pursue the prey before it could get away. From a resting place where a calm, observant state of mind prevailed, Harry began to pursue the “hunt”, not noticing that his thinking was being compromised. (Remember, thinking is emotional state dependent.) The arousal of conquest or greed came to dominate his mind. He could no longer think rationally. Then he pursued his “prey”, consumed by the passion of taking no prisoners. In this emotional stupor, Harry overtraded and lost. This trait of Harry’s (a single minded pursuit of winning big and being the best) had served Harry well in many areas of his life. It had helped him achieve many goals in his life, particularly in his career before trading. What he was beginning to recognize was that it did not serve him well as a trader though. What is different about trading? Peak Performance and States of Arousal In this discussion we are focusing on the component of an emotion called arousal. Arousal is preparation for action that happens in your body as an emotion prepares us for action. Powerful levels of adrenaline and cortisol are pumped into Harry’s body as he becomes excited by the trade. That excitement, as the arousal increases, becomes fixated on the object of pursuit – bringing down the home run trade. This is called a high arousal and is a great component to some peak performance states of mind – particularly ones that more physical exertion and less cognitive functioning. Foot ball would be a good example of where peak performance demands high levels of arousal and reliance on instinct that has been trained into the athlete. A peak performance trading state of mind requires low arousal. Impartiality, discernment, dispassion, and calm states of mind are the emotional components sought after for trading success. This is because cognitive functioning is what is necessary for trading peak performance, rather than physical exertion. The moment that high arousal states become apparent in trading, the trading has lost his capacity to take a step back emotionally and think impartially. You can be passionate about trading, but you cannot be passionate while trading. Managing Arousal Until a trader learns how to manage their emotional arousal levels, trying to use the mind to manage emotions often creates more (not less) stress and fixation. As an example imagine a chocoholic attempting to talk themselves out of wanting the warm fudge just coming out of the aromatic oven. The more you try to talk yourself out of the fixation, the more you want the chocolate. The arousal has already kicked started the desire to acquire. Fortunately our breathing is both automatic and volitional – this is key to emotional regulation. If let on automatic, your breathing style will accelerate the arousal of an emotion as it triggers. In Harry’s case, his fear of missing out lead to the arousal of pursuit based on greed. He both held his breath and he then would breathe rapidly and shallowly. This excited breathing style accelerated his heart to beat faster adding to the excitement. The emotion greed and its motivation to grab all the profit he could, then took over Harry’s capacity to think impartially. And out of this emotional state, his thinking became compromised which lead to his over trading. It did not have to be this way. Breathing is both automatic and volitional. With training, Harry has learned how to stay in a calm, impartial state of mind, in part, by managing the kind of breathing he does throughout a trading day. Once he understood that peak performance trading requires low arousal state of mind, he began using diaphragmatic breathing to manage his emotions while trading. He has much better control of his overtrading. He does not wait to feel arousal kick in. Instead, Harry using diaphragmatic breathing to help kept his emotions in check. The moment he senses the triggering of arousal, he volitionally uses his breathing to cut off the gasoline supply to the fire of the aroused emotion. Rather than fear of missing out, greed, or a desire to pursue hijacking his mental faculties, he now is consciously able to calm the excitatory process of the emotional brain. Having learned how to manage the levels of adrenaline and cortisol in his body by managing breathing style, he is much less reactive in the management of his trading days. Harry now maintains a calm, impartial, and disciplined state of mind from which to trade. In the process, Harry has learned how to change himself. His focus is on developing the skills and tools that allow him to trade at peak performance levels. And to let go of habitual historical practices that hinder his progress. His first step was becoming aware of the power that breathing has over emotional nature to influence states of mind. Other steps to lead to peak performance states of mind will be explained in the coming posts. Stay tuned. Rande Howell MEd, LPC

Ingot54. This is really standard stuff. Search alexithermia in men. Then seach women's emotional achetecture. Not really worth the effort to respond beyond that. Rande Howell