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  1. You’re a reasonable person, right? And not stupid either – no one could pull the wool over your eyes easily. You work hard at becoming a better trader, think logically about problem solving, and are ready to address any gaps you have in your performance that are holding you back from becoming a professional trader (one that is generating a sustainable and abundant lifestyle), right? If this is true, then what is holding you back from the success you know is possible in your trading? The hard work, the motivation, the mental focus, and the willingness to learn SHOULD open the door to success based on your rational and unfettered calculations. Thinking from an assumption of rational detachment, this SHOULD give you the edge. But it doesn’t, even if you are doing everything right. That much is verifiable based on the health of your trading account – not by the story you keep telling yourself about your trading. BUT, rational evaluation SHOULD give you insight into solving the problem. Yet, another year passes and the pattern of choking in your trading performance still stays stubbornly in place. What gives? What if there were a blind spot in your exquisite mind that blinds you from seeing the problem that keeps you stuck in your current level of competency in trading? Essentially a blind spot in your cognitive perception that keeps you blind to what you are blind to. Well, there is. And what I ask you to notice, as you read this article, is how you analyze the information that is brought forth and what conclusions you draw about this information, me , your approach to trading as a logical and rational human being, and the status of your trading. Blind Spots in Perception Are the Norm – They Just Don’t Seem That Way to the Rational Mind. Mental (or psychological) blind spots are similar to their cousins – physical blind spots. Successfully driving a car requires that you anticipate where these blind spots are, or there will be trouble. Just about everybody knows about the blind spot that occurs when a driver is looking at his driver’s side rear view mirror. It only takes a few close calls for you to anticipate that you cannot see other vehicles in your mirror’s blind spot – and you compensate by either looking over your shoulder before changing lanes or have a concave mirror that expands the observable area accessed by the rear view mirror. That’s a physical blind spot that every driver (hopefully) learns to compensate for – or else. Human beings also have biological blind spots in their biologically derived perception that magicians and card tricksters have been taking advantage of since antiquity. The “sleight of hand” of the card shark is simply taking advantage of gaps in our evolutionary perceptual map even when the trick is being played out right in front of our eyes. Yet, we remain blind to the trick, even when we are shown how the trick works. So not only do you have physical blind spots and perceptional blind spots built into the very fabric of DNA, there are also cognitive blind spots built into the way the mind processes information and forms conclusions. And these cognitive quirks of our sense of self-preservation dominate our psychology and the world view we stridently hold on to – whether it makes sense or not. Social psychologists call this phenomenon Cognitive Dissonance. And once a person (a trader in particular) is settled into a world view, their perceptual cognitive map refuses to see any explanation that is inconsistent with that viewpoint. This cognitive blind spot is called cognitive dissonance. And it is what keeps many a talented trader from growing into the potential trader he could be. The Need for Self Preservation Gives Rise to Self Justification Human beings, traders included, fall into beliefs that support their need to maintain the integrity of their self image. This need is firmly rooted in the biological mandate to survive. For the sake of self (and biological) preservation, the brain will maintain a particular organization of the Self once it is formed, with single-minded purpose. When the brain becomes the mind, the psychology of the self has to be maintained at all costs. It has to maintain the belief that you are a rational being that can decipher the code of successful trading. And the code is “out there” and not in the psychology of perception. From this detached rational perspective, the trader comes to believe that the answer is “out there”. To take a mirror and look at the current psychological organization of the self for success in trading would be an attack on the integrity of current psychological organization. And since the Self Preservation bias of the brain/mind is on auto-pilot with a bias to be right, it will push aside any information or experience to the contrary. And it will make excuses that justify mistakes. This is how strong the bias to be right is – that it would cast aside evidence that the problem is not “out there” in systems, new gurus, new indicators, or new methodologies. After all, the brain and psychology says, we have a perspective to preserve. (i.e. "I’m a reasonable person, so I must be right.") And it creates an explanation that supports the continuance of the current “rightness” of perspective. So what does the mind do? It self-justifies its behaviors, actions, and beliefs – even if it costs money to do so. Let me give you a couple of examples of how this shows up in a trader’s language that supports his unwillingness to change. These are explanations that I hear ALL THE TIME – they are that common. “Yeah, I know that something is wrong in my trading and that I need to work on myself also. And as soon as I find out what is wrong with my trading, I will start working on myself.” “I’m still learning how to leave my emotions out of trading. Someday, when I finally do that, my trading will take off.” “I know that success is near – I can feel it. If I keep pushing, I know I will break through. I wish it would hurry though, I’m almost out of trading capital and may have to start looking for a job soon.” “I know that the problem is with my psychology, but I can’t afford to spend the money on my self-development. Until my trading improves, I simply can’t afford to work on myself.” “This psychology stuff is a bunch of BS. I was successful before and I will conquer trading also. I just don’t understand why it is taking so long” “All I need to do is to produce a purely mechanical trading system, so that my psychology is a non-starter. In theory I know this is right. All I have to do is build the system.” “I know that psychology is important in trading. I read about it and watch videos, but somehow psychology is not working for me. I’ve read enough to know what the mind needs to look like, but I keep waiting for my psychology to change with the knowledge I have.” “I’m going to eventually get to where my mind is right. I just need to work through it and keep working my system.” “Yeah, yeah, yeah – I know I need to do something about my head. I’m consistently losing money and realize that the problem is me. But I keep putting it off, thinking that things will get better. They have to. I can’t afford to go on like this.” Do you see the self-justification of maintaining losing ways and the need for self-preservation as expressed in the explanations that the traders give? It is so strong that the trader justifies his/her continuance of a limiting pattern despite the pain it is causing. This is typical with MOST TRADERS and it keeps them stuck in their self-limiting (but stable) beliefs. By the way, all of the statements above come from traders who are either losing money or are leaving chunks of potential profits on the table – and have been trading for a number of years. These are not newbies who don’t have the experience to know better. Can you also spot the self-justification that allows the trader to continue their self-limiting ways? Yes or no? (This is important.) You may even find the self-justification narrative that you keep repeating to yourself like a mantra. They don’t see the self-justification that blinds them to continued mediocrity. They are blind to what they are blind to. All of them create a narrative that continues their current self image or self organization, even if it is harming their performance in trading. The very rational and logical mind they believe in is causing them to be short sighted in their evolution as a trader. Yet, the “rational mind” they are using to solve their problems keeps them from seeing the very solution they are looking for. It has become the obstacle to their ability to learn. And they are perplexed by their continued lack-luster performance. But , like a repelling force, they cannot even begin to look at their current organization of self as a large part of the problem. If they did, it would produce the discomfort of dissonance. So, to preserve the integrity of the Self as it is currently organized, they stay stuck in beliefs that consistently show they are ineffective in managing the probabilities of uncertainty found in trading, evidenced by the health of their trading account. This is the self-justification of cognitive dissonance. Learning to See What You Are Blind to In Mindfulness, you learn to step back from your thoughts and beliefs and recognize that they are not you. In fact, you and your thoughts, you and your beliefs – are separate. But the Observer of the Self has fallen asleep and you have fused to your thoughts and beliefs as if they were you. And now through the psychological device of cognitive dissonance, you are blinding yourself to explanations that do not fit into your comfort zone. The first step though this is to notice that your rhetoric and your performance do not match up. Performance follows operating beliefs you hold about your capacity to manage uncertainty. If the desired performance is not there (and you can trade successfully in simulation), then become a detective. The detective knows he is missing a piece of the puzzle. And he is looking for what he cannot currently see. You must become the detective. But you are looking for something (beliefs about the Self) that are so ubiquitous, so familiar, that the belief flies underneath the screen of your radar. As a detective, you know it’s there – you just need to learn how to see what you have not been able to see. As a homework assignment for an awakening inquiring mind, I ask you to explore this question to help you break through the complacency of the self-justification of your cognitive dissonance that keeps you stuck in your trading performances, despite all that you have tried. What are the self- justifications that I use to maintain the status quo of my trading performance (that counter the black-and-white evidence found in my trading account)? And do these self-justifications allow for a current organization of the self that can produce an effective trading performance? You can use the explanations (quotes) I gave above as a starting point. The difference between trading and the rest of your life is that trading will not let you get away with ineffective, but well justified, beliefs. The drawdowns and the ticking clock of time eventually force traders out of their stupor. The key is to learn before you run out of capital or out of time. At the bottom a trader has to decide if he has to be right or if he wants to be effective. Letting go of ‘’being right” is uncomfortable at first. But by choosing to become an effective trader, you become humble enough to appreciate that mistakes were made – and you made them. And now you are going to learn from them, rather than justify the continuance of ineffective beliefs. Rande Howell www.tradersstateofmind.com
  2. The "Group-Think" of Traders that Blinds Them to What Really Matters Have you ever listened to groups of traders talking about trading? If you have, you’d think (particularly to yourself) that everybody was hitting homeruns and driving in runs. But that’s not the reality. The reality is that they all are covertly participating in a form of group-think called looking good to others. Have you ever noticed that no one talks about the real task of producing sustainable, consistent income from their trading? Instead, they talk shop in a vacuum refusing to address what they are ultimately seeking. The one thing that is most important to the financial health and long term survival of a trader, they do not talk about. Their eye is not on the ball – their eye is being distracted by talking about the minutia of trading, saving face, and the self-deception of looking-good. Meanwhile, another year goes by – and it’s January of another year already. Time is ticking by (do you hear it in your internal clock), chipping away at your capital (sometimes chomping) and your timeline (just how much time can you fritter away before you feel the financial noose tightening?). And, right there, hidden in plain sight, is the answer they you avoid acknowledging. This is the place where the vast majority of traders stay stuck – being blind to their blindness. And the cost of this blindness is their trading success. Their trading performance keep giving the struggling traders feedback about their performances in the form of drawdowns from their trading accounts, underscoring the real problem they are avoiding in their trading -- them. Yet, despite all the evidence, the "wannabe" traders refuse to look within themselves for the source of their performance problems. Instead, they focus on solutions outside of the psychology of performance. That’s not nearly as uncomfortable as acknowledging there is a chink in their armor that allows them to maintain their looking-good even while their trading capital erodes or stays stagnant. And the clock keeps ticking as the trader maintains their self-deception. Meanwhile, they stay where it is safe – they talk around trading as if they (the one who is actually doing the trading) were not a constituent part of their trading. They talk the details of trading and, listening to them, a by-stander might be led to believe that everybody is making money. But what you’ve got is a bunch of really good Monday-morning armchair quarterbacks talking about the game from a spectator’s vantage point rather than from actual performance. Waking Up to the Problem and to the Solution The real question for the life-blood of an evolving trader, “Are you making consistent money?”, is not asked. And, if you are not making consistent money, another question begs to be asked, “How do you diagnose the problem and fix it?”. Once a trader has learned technically how to do his/her business, these are questions that take you to the core of the issue. There is really no risk in the moment of performance to a spectator’s game face – only his looking-good in the fantasy league of fellow retail traders. What you will notice is that traders talk the game of trading, but not their performance in the game of trading. It is so much more self-effacing to talk about the game of trading (as if they were fans of the game, rather than participants), rather than to evaluate their performance as a function of their competence as a trader. This discomfort of evaluating personal performance is so ingrained into traders' thinking that they will avoid dealing with it as long as the capital they bring to trading will allow it - or until they have felt enough prolonged pain and discomfort that they come to the conclusion that they are the problem in their trading. (And they are also the solution to their trading performances.) For most traders to wake up to this pivotal moment, a tremendous amount of time and money may have been squandered needlessly. So much short-term energy was focused on saving face by looking -good that the long-term development of the mind that can embrace and manage ambiguity without a sense of dread of being wrong was never embraced. And this is what is required to become a consistently successful trader. Once this is recognized at a core level, it seems simple, until you realize that your biology and your psychological underpinning conspire against the development of this kind of mind. Your biology and the psychology that arises out of your brain’s survival adaptation to its environment is biased toward the self-preservation of the status quo, rather than developing a higher functioning human being. What Got You Stuck in Performance Limbo in the First Place The power of this primordial drive for self-preservation needs to be understood in a different context from a civilized conception of man’s recent history. The brain builds a self that is adapted to survive in a particular environment. It doesn't care if that self thrives in that environment or not. It cares that the self (the bio-cognitive system that you have been organized into) survives. To the ancient brain that self needs to survive until sexual maturity, prevailing in your environment, and perpetuating the species through your survival success. All successful strategies for dealing with the challenges of survival are hardwired into neural-circuitry as they are learned. Once wired they become an automatic response in the organism’s bio-cognitive repertoire. This means that successful adaptations to survival situations become a reactive dance between the environment and the self. This is called the stress response. And this adaptive response mechanism was essential to our ancestors where danger lurked constantly in their environment. That danger was biological and life threatening. And the stress response, being reactive in nature, allowed our ancestors to have a better chance at surviving in an environment loaded with saber-toothed tigers and other predators. The problem is that this biological system of stress responses was built for another time and another environment than the world that the trader now lives in. Unfortunately for the trader, the ancient brain (the emotional brain where all this stuff is wired), cannot distinguish between a biological threat and the psychological discomfort of uncertainty found in trading. And here is the kicker: When under stress, the brain is going to revert back to old familiar patterns learned long ago for the avoidance of pain. Remember, the emotional brain cannot tell the difference between biological threat (pain) and the psychological discomfort found in the management of uncertainty. The moment that the emotional brain perceives uncertainty (stress or the challenges of living life), it falls back to old familiar reactive patterns that have produced survival success in the brain's formative period. This is what the trader perceives as falling apart in the moment of emotional uncertainty. And an emotional hijacking is triggered instinctively long before the thinking mind can begin to manage the uncertainty of a critical moment, unless the trader re-trains the body and mind to respond differently. The Psychology of the Trader is Railroaded by Primitive Emotional Belief This is where the bio-cognitive system that “you” are (responding instinctively to stress) and the deeply held beliefs about your capacity to manage uncertainty (that give rise to your trading psychology) conspire against you. The Emotional Brain makes a decision and the Thinking Brain produces an explanation to support that decision, no matter how irrational. Your Emotional Brain on stress (managing the uncertainty in a moment of ambiguity in trading) reverts back to primitive stress responses learned long ago. And then, your Thinking Brain (rooted in beliefs learned in your family of origin, culture, and circumstance) demonstrates those beliefs under the stress of the moment. If you are a human being that trades who tries to save face by “looking good” to the outside world, you are operating from a belief system rooted in a sense of inadequacy, not mattering, unworthiness, and/or powerlessness. And as long as you avoid engaging those beliefs head on, your Emotional Brain will continue to hijack your performance mind in the clutch. It will instinctually avoid the danger of not being able to survive in the environment in which it lives. Short term, this strategy works because it avoids the threat - and that is all the Emotional Brain is interested in. Long term, this biologically induced strategy keeps you, the trader, locked in the limbo world of perpetual mediocrity. Toward a New Construction of the Self When a trader learns that self-honesty is the most powerful tool he/she can possess, then the game of performance can change. There is no shame in being a fallible human being. It is our nature. It is also our nature to learn from mistakes. It is this openness to making and learning from mistakes that must be cultivated. Attempting to avoid mistakes simply keeps us stuck in old self-limiting patterns. These patterns were successful solutions when certainty of survival was the driving force. But now, in the brave new world of trading, the trader has to step out of the old comfort zone that has become his prison. And now it is time to embrace self-honesty as a tool and reconstruct the mind that trades. It is your choice – stay stuck in old self-limiting patterns or intentionally and consciously grow new ones, adapted for the world of uncertainty found in trading.
  3. What mind do you bring to your trading day? Can you be specific about describing that mind? Have you intentionally organized your mind for the performance of trading centered in patient discipline? Is this carefully prepared mind rehearsed BEFORE you start your trade day so that you are emotionally and mentally fit for the rigors of the trade day? Or is preparing the mind for the performance of trading more of a hit and miss situation? And if you do bring an intentional mind to start your trading day, what happens to it once you begin your trading day? What is your plan to prepare the mind so that you maintain excellence of execution? Preparing the mind for the trade day is not a sprint where there is initially concentrated effort for a short duration. Rather, it is a marathon where the runner has to take stock of his faculties at various points in the race and manage them for the duration of a long race. As much as traders hear about how important emotional and mental attitude is in the performance of trading, very few traders actually manage the mind that trades as they move through the process of a trade. In the Traders State of Mind training programs I teach, a considerable amount of energy and training goes into preparing the mind for the trading day BEFORE the day starts. This becomes the foundation from which the trader learns to manage the mind WHILE he is in the process of trading. In order to achieve a calm, disciplined impartial mind from which to trade (the Traders State of Mind), a trader must be vigilant. This aspect of the management of the mind is focused on getting the brain and the mind ready to trade. Typically, preparation for the trading day begins the night before. And preparing the mind continues when the trader wakes up and before he gets out of bed. Then, always, a period of time is devoted to mental preparation and rehearsal that includes a prayer/meditation/centering period where the trader tunes his mind into the peak performance organization of self that is suitable for trading. It is here that the trader can volitionally construct a mind rooted in calm, disciplined impartiality. With his mind now calm and ready for trading, the trader starts his day. The earlier preparation readies the trader for the trading day so that he/she is fit to trade from a state of mind grounded in calm, disciplined authority. However, this is not enough. This calm, disciplined authority has to be maintained through the cycle of a trade. Now, let’s take a look at this cycle. Psychology and Process Conjoin All that preparation is washed away within a short period of time if the mind is not trained for the process of the trade. What I have found is that the early preparation stage of mental readiness is good for about 30 seconds to 30 minutes. This is where a particular psychology of performance needs to be integrated into your actual trade plan. Your trade plan and your psychological plan are not separate. Your mind is an integral part of the trading system. It is what drives your platform and methodology. So this driver has to be trained to drive his system proficiently. The following process represents critical stages while trading where you need to be psychologically prepared (trained) to manage the circumstance of the moment. Watching For Set-ups Many traders become immediately blinded by an insidious bias while in this stage. With an urgency to act, they approach their charts seeking set-ups. This very urgency to act contaminates the mind that is supposed to be patiently waiting for set-ups. Instead, believing that they have to be "doing something" to be trading, the skill of patience (necessary to wait for trades to come to them) is vaporized from the mindset in a flash and replaced with an urgency to trade. And, suddenly they are chasing trades that are dubious decisions at best. This bias gets them into trouble because it SETS THEM UP to take trades not in their trade plans or has higher risk to reward parameters than their trade plan dictates. Many a trader has done a good job of preparing the mind for the trade day, only to sabotage themselves at the beginning of the trading cycle due to this bias. Therefore, this point is critical to managing the psychology of the trading mind. Your job is to patiently wait for set-ups to come to you. Your job is not to make things happen. A Trade Warms Up Have you ever noticed what happens in your mind when you start seeing all the confirmation coming in as you watch a possible trade set up? The warmer the trade gets, the more an untrained performance psychology is tested or seduced. This is a moment to take pause and regulate your psychology so that, in your excitement, you do not get in early. Or, perhaps, in your anticipation (untrained performance mind) you keep seeking more and more confirmation until the trade potentiality is over. Is the mind that watches the set up calm, patient, and disciplined? If not, you need to train yourself to be. Trade Entry As you go to pull the trigger, what is your mental composition? Are you pulling at the bit to jump in (euphoria) or is your trigger finger paralyzed and incapable of clicking the mouse (hesitation)? This is a moment for which you must prepare. It is not a moment that is pushed aside until it cannot be ignored. All the "man-up"ing you can muster at this point is a dangerous exercise in futility if you have not developed the mind that is prepared for this moment. Order Confirmation When they hear that “cha-ching” of an order being filled, something dramatic happens in the mind of many a trader. They are now committed to the trade and there is no way out of it, except through it. Risk is real now and you could lose your money. This is where many traders start a downward spiral in their ability to manage a trade effectively. Their mind has not been organized to bring the proper elements together for trade management. Traders need to take a pause here and recollect themselves. They have now moved from looking for opportunities to exploit (offensive coordinator) to defending turf (defensive coordinator). It is at this moment that it is critical for the trader to reassert his performance psychology, or it is going to be a long ride down. In the Red There is nothing more unnerving for the evolving trader than to watch a trade in flux. The trade is bouncing around and spending a good bit of time in the red. You can see the red indicator light and can feel the fear and excitement. The mind starts really decompensating and the resolve to adherence to the trading plan is taking a beating. Preparing for this situation should be part of every trader’s practice. The trader must learn to regulate it, or the trader’s performance mind moves from focusing on execution to being fixated on losing capital. The trader’s job is to maintain the mind that is focused on the performance of execution. Yet, an emotional hijacking is underway. This is why this moment in trading needs to be anticipated and trained for. Otherwise, it keeps you from becoming the trader you could be. Taken Hostage by Marginal Profits This is one of the biggest moments that separates a scratch trader from a consistently profitable trader. If the trader has not managed the mind that manages the trade before this moment, there is a powerful urgency for him to take the profit early from the trade, while the trade is still profitable. Then when he cashes out and feels the temporary emotional relief, he watches the trades move to his targets – just like his trade plan outlined. The problem is that the trader’s emotional state has not been managed somewhere along the progression from trade entry, to being in the red while in the flux, to the moment of profitability. Any of these moments can become a signal that triggers the need for practicing emotional state management. Maintaining these critical trade management moments, to the trained mind, are planned for and practiced. The key emphasis here is training. The trader is taking the mind he prepared before trading began and reasserting it – anticipating these moments so that he is prepared for the stressful conditions of trade management. Exiting a Trade – Taking a Loss During the process that is being laid out here, the emphasis is on management of the mind that executes the trade – and not on whether you are winning or losing. If you manage the mind that trades so that you execute your trade plan from a peak performance state of mind, your methodology will take care of the winners and losers. Your job is to manage the mind that trades. The questions to ask when taking a loss are: (1) Was it a method mistake? (2) Was it a psychological mistake? Or (3) was it simply being on the wrong side of probability? If it is a method or psychological mistake, then you learn from the mistake (which is how the brain learns) rather than dwelling on the loss and deepening your fear of losing. If you don't learn from this, you bring this fear of loss into your next trade. And that contaminates the mind that trades. Exiting a Trade – Winning One of the most dangerous things that a trader can do is to get excited by a win while he is still trading. (After your trade day is over is the time to celebrate the win.) While trading, the thinking mind is greatly influenced by the emotional state that you bring to the act of trading – particularly to the evaluation of set ups. When you feel good, you are bringing a mind fed by euphoria into the evaluation of set ups. And euphoria will cause you to believe with certainty that the good times are going to roll and then you no longer can evaluate your trading risk effectively. When you win in trading, the calm, disciplined impartiality you worked to achieve before you started trading is maintained by regulating your emotions and mind. Until the calm, disciplined impartiality is re-established, you are not fit to trade with a mind designed for trading success. Reviewing Your Trades Particular emphasis and attention needs to be placed on the mind with which you review your trade day. Are you beating yourself up for the mistakes you made or the lost opportunities you now see in your charts and performance? Or are you acting as a kind, wise teacher to yourself? The latter creates an emotional space for learning to occur while the former creates an emotional vortex that keeps emotional reactivity at the forefront and compromises the capacity for learning Toward a Peak Performance State of Mind This is the work of the inner game of trading. Once you establish a process that brings forward into your working mind a peak performance state for trading (calm, disciplined impartiality), then you can begin to practice it in these specific moments in the trading cycle. The mind you brought to trading is simply not going to be the mind that is going to produce success in trading. The whole notion of winning has to change. Success in trading is not about winning (or losing for that matter). It is about the psychology you bring to execution. It is about the mind that you bring to the performance of trading, so that you execute the trade with excellence. There is no "need to be right" about the trade, only its execution. If you do this, your methodology will take care of the winners and losers – and the money in your trading account.
  4. Control Your Emotions.....!!! Did you Know that 90% of all forex traders lose money? Now I bet you are questioning my zeal for trading the spot forex market! If you are just starting out trading this market this not a very good omen. How do you ensure that you become the 10% that succeed, especially if given the fact that so many traders are willing to part with their hard earned cash? There are many reasons for these abysmal stats: lack of discipline, lack of money management skills, and many more. I think the reason for poor success rate is that 90% of the traders can't manage their emotions while trading.This is the demon I fight daily. Money management and discipline are the symptoms, but emotions are the root cause. From day 1 of trading currency markets i have heard every guru shouting at the top of their lungs to cut your loses and let your profits run. Or that anyone can put on a trade, but it is the professional trader that knows when to exit a trade. It seems like a simple concept to let your profits run and take those profits when the markets offers them up to us. But why can't we get this right? Emotions!!! The curse of all traders, the last and most difficult skill for us to overcome is to remove the emotions from our trading. Period !! Well i got news for you....You can!! You, my friend, are a human being and thus an emotional being. OK, so we must trade emotional-less, but that is beyond the realm of most traders. Letting emotions interfere with your trading can manifest in many ways. Let me just give you some examples of my past (and sometimes present transgressions). 1) Taking a loss and angrily reversing my position only to have the market resume in my original direction!the infamous revenge trading! 2) Listening to trade signals from members of my trading group instead of litening to my own signals and intuition (afraid I was going to miss the proverbial boat!) 3) And my personal favorite... Having the market retrace and return almost to my original entry point, exiting and having the market execute a classic continuation pattern to original target (a target that was selected in advance before the trade was executed). What do we do? i have been following traders that focus solely on trading the news or other fundamental factors. Although this has some merit it won't do sequal fr checking your emotions. Technical analysis should be your weapon of choice for keeping your emotions in check. Do you analysis before your trading session. Follow your trading plan (money management and strategy) as though your life depended upon it (your account balance certainly does!!). Visualize your trade execution like tiger woods does before every golf shot and above all, trust yourself! I repeat the following mantra before every trading session. " I am the world's most disciplined forex trader. I trade my Plan and I plan my trade. I trade with confidence and decisiveness. If the reason for me to be in a trade no longer exist I will cut my losses or take profits without any hesitation." I am an emotional person. It makes me feel alive, however when I trade I want to be a stone-cold, calculating pip capturing fool and leave the emotions for ehen I shank a drive into the water at the golf course. Thanks For your precious time.
  5. “We create the possibility of our future based on the way we interpret our world. Becoming a new observer of our world opens the door to new ways of being in the world.” Between the Crosshairs of Emotion and Trading Hesitation gripped Jack’s tensed hand. He couldn’t decide when to enter this trade. His trading plan said he had really gone past the entry point he should have taken. But he had hesitated – what if he was wrong? He decided to wait and track it just a little longer – just to be safe. This was the story of his trading life – waiting on the sideline frozen by his fear of uncertainty. “If I stay on the sideline, I’ll be safe,” he consoled himself. He watched the price go higher and higher. Still he hesitated. Ex-banker that he was – he wanted to be sure. But as he hesitated on the sideline pondering this trade, Jack also began to fear he was missing out on a profitable trade – he wanted in. He felt the urgency build. “Just a little more proof”, his tentative side whispered in his ear. “Get in this trade before it’s too late!” urged another impulse, “Sitting on the sideline isn’t getting you anywhere. You’ve got to get in to win.” This internal struggle in Jack’s mind escalated. Finally, to prove he had the courage to face his fears, he jumped in. The impulse to get in on the trade finally trumped his fear of uncertainty. In a matter of moments, however, the price began to tank and hit his stop. Because of his hesitation, Jack bought beyond the higher end of his entry range. He had missed the opportunity of profit. Instead, he took a small loss. Hesitation was fatal. Why Jack Can’t Trade An emotional roller coaster ride is not what Jack imagined trading was going to be like. Before he started investing in trader training, he studied the opportunity. With his deep institutional investing experience, Jack reasoned active trading was a skill set that he could learn and develop successfully. It was going to require practice and training – he was prepared for that. What he was not prepared for, however, was the role emotions play in trading – and the need to manage them. None of this was mentioned, or he did not hear it, before he committed himself to learning how to trade. No one told him that 90% of trading was in his head – putting himself literally on the line really fired up his stress level. After investing in a solid trading system and training to develop a methodology and trading plan, he was finding that he had a difficult time sticking to and executing his trading plan. And, it was the moment that he moved from simulation trading to having his money in the game that things changed. After all, this was his money he was risking now! In this new world, he seemed to be pulled emotionally in various directions at once. Fear and self doubt collided with a child-like impulsivity that left Jack stressed out and making poor trading decisions. Jack had spent a lifetime pushing emotions away like a nuisance. Now he felt emotional chaos and did not know how to get it under control. Whether it was getting into a trade or getting out of a trade, Jack was often confounded by a mixture of self doubt fueled by his fear of uncertainty or impulsiveness egged on by his fear of missing out. Caught in the crosshairs of these two emotional positions, his winning percentage was dismal. What he knew is that if he did not get a handle on his emotional nature soon, his trading account was not going to survive his learning curve. Thinking Hijacked by Fear A trader’s emotional state determines how he will interpret the market and what he sees as possible in the market. This is because all thinking is emotional state dependent. What does this mean for the trader? Everything – because we trade our psychology. And emotion drives psychology. In the example above, Jack was being pulled in different directions by competing fears. Initially his thinking was contaminated by a fear of uncertainty that kept him tentatively on the sidelines of trading. As he sat out watching the price climb, a fear of missing out on a profitable trade fueled an impulsive entry into a trade. And with no understanding of how to manage them, he sabotaged his trading plan and himself. Without a capacity to manage his emotional states, Jack’s thinking historically fell into self doubt and caution. When he was in the corporate world, this was never a problem. He was always able to steer clear of having to deal with the messiness of having to deal with emotions. In business, there was little need for introspection and he could always hold other peoples’ behavior responsible for the way he felt. It did not work this way in trading. There was no one responsible for his trading but Jack. In taking full responsibility for his trading successes and failures, he discovered that he had developed a habit of avoiding emotional discomfort. The breakdown for Jack, and many traders, is that there is no room to avoid the fears and self doubt in trading. They had to be dealt with head on – a talent he had never developed. Its time had come. Distinguishing Biological Fear from Psychological Discomfort To help him identify and resolve issues that affected his trading performance, Jack found a trading coach. By taking responsibility for his profitability, Jack came to recognize that he could develop himself into the trader he needed to be. The first thing that he learned to do was to separate biological fear from psychological discomfort. This is critical. The brain cannot distinguish between a real threat to life and psychological distress. Jack’s biological fight-or-flight system had been triggering him to avoid risk because the body interprets all risk as a threat to life. His brain’s hardwired motivation to avoid uncertainty (biological risk) put Jack on the sideline. But risking capital is not a biological threat – it does produce psychological discomfort though. When we are faced with the trials and tribulations found in life (particularly trading), our motivation needs to shift from avoidance of the threat for short term gain (biological fear) to approaching the source of the discomfort (it is not going to kill and eat us) in an emotional state of calmness, curiosity, and impartialness. It is in these emotional states that we become capable of long term problem solving. By learning how to calm his body and mind down so that fear did not sweep his thinking into negative appraisal and catastrophic thinking, Jack was able to learn how to take biological fear (and its avoidance motivation) off line before it swept him into reactive behavior. And he was able to replace it with the confidence of a risk manager. A risk manager knows that there will be losses – but there will also be a higher ratio of gains. His job was to reasonably manage risk over a larger number of trades. He had to develop a longer term view rather than a biologically driven, emotional, and short-term knee-jerk reaction to risk. Before, Jack placed life or death significance on each and every trade. With training he was using his psychological discomfort as a reminder that he needed to trade from a calm and impartial state of mind. His ability to take a step back from his automatic fear response into a calm state of mind allowed him to develop the qualities of a successful trader. Freed from habitual triggering to fear and dread allowed him to access inner resources within himself. By cultivating these aspects of his psychology, Jack developed his inner game of trading to a new level. Creating and Managing Peak Performance States of Mind He now mentally rehearsed his trading day, rather than just allowing it to hit him with full force. He used breathing and relaxation to calm his body and mind so that accessing calmness, discipline, patience, courage, and impartialness became a possibility – he achieved emotional state management. And with a disciplined daily practice of keeping the body and mind calm and mental rehearsal of calm assertive states of mind, he was prepared for the trading day. His inner game was in the zone. Developing this part of his inner game of trading led him deeper into his ability to manage his emotions and his states of mind – and it positively impacted many other areas of his life. He had come a long way from being stuck on the sidelines by his fear of uncertainty and then impulsively entering trades out of a fear of missing out. Jack’s decision to take responsibility for his states of mind and to learn to manage them created a very different trader. As a result a very different psychology of the self was deciding when to enter and exit trades – calm, relaxed, impartial states of mind rather states of mind rooted in fear. J. Rande Howell, MEd, LPC http://www.tradersstateofmind.com
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