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  1. What does this discussion open or close for you as a trader? Trading does not come natural to the human brain. For the vast majority of traders, it has to be learned. From an evolutionary perspective, just a few short years ago we were all cavemen. In your ancestor’s world there was no reason to separate uncertainty from fear. The world was a dangerous place and if you experienced uncertainty in your dealings with your environment, there was a good chance you were facing a mortal threat. Uncertainty became glued to fear and anxiety as a survival trait. And that trait got transmitted to future generations -- long after the usefulness of glueing uncertainty and fear together. Your inner caveman still lives within you as you trade. Your limbic brain (caveman’s inheritance to you) still is still watching his environment (your trading screens now) and interpreting from an evolutionary bias that locks uncertainty and fear together – rather than distinguishing them from one another. This deeply embedded trait has also been uploaded into your psychology. This is the psychology of self that trades and experiences worry and fear when you are supposed to be impartially managing risk with your trading plan. Separating uncertainty from worry and fear (more primitive parts of your survival brain) – caveman – is what is required for a trader to evolve from fear based interpretations of uncertainty to risk management interpretations of uncertainty. So if you're having difficulty moving one set of psychological skills that proved okay successful in one domain of your life to success in trading, welcome -- this is typical. There is nothing "wrong" with you. But it does indicate that the "you" that your brain has organized you as needs to be changed. And that new psychological skills will need to be developed to replace your inheritance from caveman. Otherwise caveman will continue to participate in your trading. That's all. The mindset for the vast majority of traders has to be developed. Particularly the management of uncertainty and the meaning that becomes embedded tin he meaning making pathways of your brain (that's your perception). This is where you will find your self limiting beliefs about yourself. If you experience hesitation as you evaluate set ups for risking capital, if you are seized with fear as you try to pull the trigger, or if your heart pounds as you enters a trade (particularly when it goes against you), you are experiencing a biological predisposition that has shaped your personal psychology to avoid uncertainty -- that's your caveman trading along side of you, perhaps even taking over. It is the mindset that you take into uncertainty (that's trading) determines the probability of success. Evolutionary and psychological bias, in the vast majority of traders, will have to be examined and changed for this to occur. It takes emotional labor, and that's the price for re-development of the self designed for trading. It's a great personal development adventure. Traders often invest years in learning to know the self and developing a psyhology that trades effectively. This process is unavoidable. Where are you in the evolution of this process? Rande Howell
  2. One thing that really gets me is when people say that a trader should spend the majority of their time working on themself and their own psychology. However, the common ambiguity of such a statement leaves those who are new or fairly new to trading not knowing where to start. It's equivalent to saying you should spend your time on technical analysis. How though?!?!? What in particular is a useful way to go about "spending your time concentrating on yourself"? I’d like us to explore specifics of how someone might work on their psychology.
  3. Fear, fear, fear is what I hear when traders are talking about their psychological problems with trading. Sure, fear is a problem when you have a crappy trade on and whilst it needs to be dealt with appropriately, but it is NOT the underlying problem. Fear is created in situations of unknown risk. It is our evolutionary mechanism for telling us that there could be big trouble ahead. The way we act subsequent to feeling fear is of course something which needs to be scrutinised as it's clearly all to often in a way which is detrimental to our accounts. But as a trader I know this. Although there are indeed uncertain situations which markets do throw up from time to time, the vast majority of fear and uncertainty is created by lack of preparation, biased views, inconsistent monitoring of markets and indecision. In other words, YOU BECOME FEARFUL IN A TRADE BECAUSE YOU KNOW YOU'VE MESSED UP AND HAVEN'T A CLUE WHAT IS REALLY GOING ON. Or you just can't help but take impulsive trades where you know you shouldn't. If you don't have rigid enough risk mechanisms in place to exit the trade and the fear builds even more as the market prints against you. This explanation also covers those who are fearful of pulling the trigger to enter a trade. If haven't assessed the market, indentified trades and assigned proper risk parameters to them, there's every reason to be fearful as if you do take a trade, you know you'll be floating in a sea of chaos very quickly. I hope I'm being clear here. Whilst it's important to manage fear when it appears, it's imperative that you manage day-to-day trading objectives properly and thus evade potentially fearful situations in the first place.
  4. This post is an excerpt from my book, Awaking the Mindful Trader: Mastering the Inner Game of Trading. In this series on the Eight Roadblocks to Successful Trading, we are exploring the role of fear in trading. In particular, the way your fears shape your perception and create the results of your trading. What ever you fear, owns you. If you are acting from fear, you will always create self limitation in your trading. As long as you are mindless of your fears or believe that you can ignore your fears while trading, these very beliefs will betray you in your trading. In the example below, a trader has built a large-and-in-charge attitude to mask the face of his fear. He deceives himself (for a while), but not his trading account. Have you ever experienced the fear of missing out and traded impulsively? How much has it cost you? The Fear of Missing Out Getting Control of Impulse Trading “Just a little bit more, just a little bit more – I can milk this one!” whispered Mitchell under his breath. He could feel his excitement build as the trade kept trending upward. “Move your exit point higher – this one’s a homerun,” a thought inside his mind encouraged him. And why not, this one had all the signs of a big one. Mitchell did not like letting the big one, the ones with potential beyond what his trading plan called for, to get away. Instead of taking smaller profits on any of his positions after the first ping, he decided to move his exit and let this one ride. “Another one like this might not come along again in quite awhile,” Mitchell silently reminded himself. The trend continued and he was ready to grab all the profit that it seemed to be offering. He felt energized, his confidence grew – and that confidence began to blind him. Pushing aside his risk management rules because he did not want to miss out on this great opportunity, his trading plan parameters got pushed out of his awareness. The exhilaration of hooking and riding a big one blinded him to the down side of managing risk. In the clutches of greed, he did not notice the historical trend in this trade – it would drop like a brick suddenly. Having abandoned his stops to ride this trade, the deception in his mind caused him to fall hard. Another draw down. Later that day, as he was reviewing his trades, Mitchell was puzzled. Stroking his chin he was chagrined. He pondered, “What happened? I know better than this. I have no idea why I behaved this way. I started out with the intention of trading my plan, and, somewhere along the way, I got sidetracked and forgot about everything I know. It’s like I fell into a trance and my evil twin started trading.” He chuckled to himself because he had no other explanation. It was confounding to him. He was smart enough, skilled enough, and confident enough to trade well. But there he was, getting into trades that were not the right set ups and then his good sense disappeared like dust in the wind. What Happened to Reason? The fear of missing out urges you to push aside risk management tools that keep a trade within acceptable low risk parameters. The temptation is real. Instead of hitting a safe single or double on a trade, the allure of hitting a homerun or hitting the jack pot (with just a little luck) sweeps good sense off the psychological playing field and leaves the enticement of greed whispering in your ear. Real time temptation. Why not swing for the fences? It feels great when you take all the money on the table. And you get to feel powerful. You get to feel like the hero in a movie. Occasionally when you move your stops and exits, you do win. You also move your trading into the arena of gambling – not risk management. Actuarially a casino knows the odds much better than the gambler – and they are sticking to their trading plan for the gambler. On a few occasions the gambler does win and experiences the thrill of winning the jackpot like a drug. Then he is hooked, much like our friend Mitchell is in the vignette above. What the casino knows is that the gambler will ride his euphoria and never see that the odds are stacked against him. He, like the trader, becomes entranced by the chance of hitting it big. As the greed kicks in, it takes over reason. Once under the ether, the trader becomes mindless and sees only through the eyes of greed. This is what happened to Mitchell. And he wins some – at least on paper. He starts out with the intention of trading to plan. But he is seduced by the allure of greed. Soon, any semblance of an impartial, disciplined state of mind is eroded. Gambler and trader have already lost at this point. Psychological management is really this important. Ultimately he gives back his earnings (and then some) to the house. The casino is playing by the rules of risk management while the gambler sacrifices his sensibility to greed – the house wins consistently and the gambler, though he has a couple of great thrills, loses consistently. Trading in a market can be done from a position of impartial and disciplined risk management (which is what the house is doing) and a trader can win consistently. Or a trader can be sucked in by his fear of missing out of big money and get corrupted by his greed – which is what the gambler does. The only difference is that the casino wins consistently and predictably over time, while the gambler wins sometimes (in the short term). But he gives back his gains and loses capital over time. Greed and fear of missing out, from an evolutionary survival perspective, is a very useful emotion. It pushed our ancestors to consume more than they needed NOW so that they would have the resources to survive in leaner times. Acquiring food on a regular basis could not be depended on. Nor was there an assurance of other supplies needed to survive. So, over countless generations, the capacity for greed was bred into the human genome. At some moment in our biological history, humans developed a psychological self – and this is where greed and fear of missing out got disconnected from their biological roots. Suddenly humans were not only putting on fat for the winter and putting away supplies for leaner times (survival motivations), they were putting away money for a rainy day. Eventually the power to survive and prevail became associated with money. By accumulating money we find external validation for our sense of power, our mattering, our importance, and for our power In trading, if this fear is not recognized and managed, it will blow up your trades and trading account. You have to build the psychological strength and discipline to resist it. In the case presented above, Mitchell does go on to develop the internal strengths to resist the temptations of striking it rich quickly and the euphoric rush that takes over the mind of a trader sucked into a mindset controlled by greed. He had to work on it and re-organize the way he understood success to accomplish this victory. By doing so, he actually achieved the success in the longer term that his greed promised in the short term. This is a classic internal war where a biologically based emotion outlives its usefulness when it takes over psychologically the state of mind of the trader. Untethering Your Sense of Identity from Your Historical Dialog What you are afraid of, owns you. Your fears cloud your thinking and color your perception of circumstance. No where is this more important than in trading. Your historical internal dialog (all those thoughts running around in your head) exposes these very fears – the fears that limit your capacity to trade at a higher level. Go back to the vignette with Mitchell and see if you can spot his internal dialog. It is easy to see how his thinking, so dominated by his greed, set him up for failure. This kind of thinking is not a given. It was his mindlessness of his internal dialog that blinded him to its impact on his trading. This was far more than idle chatter or internal noise in his mind – it was a set up for failure. Without discipline and knowledge of these unseen forces at work in his mind, he is led to slaughter. It is his lack of awareness of the power of the internal dialog that set him up. Unlike your capacity to hide from your insecurities in most of the other domains of your life, trading cuts to the very core of your being – there is no place to hide. Trading exposes the internal dialog that comes forth from your fears. Becoming Mindful of your internal dialog during trading will show you the very fears that you must conquer to become a consistently profitable trader. When you are able to separate your thoughts from your sense of identity, becoming an observer to your interior conversations takes on a different nature. You move from avoiding acknowledging the existence of hidden parts of yourself to becoming a detective solving the mystery of your capacity to trade. You become the author of the story of trading in which you are a participant. And you realize that the character who has been trading is flawed, and you (and only you) are going to have to redevelop the character as a peak performance trader. In developing the capacity to slow the body and mind down so that you can become mindful of the composition of your Internal Dialog, you learn to use the internal dialog to become aware of what you have been hiding from yourself. It is through this practice of mindful introspection that you develop yourself as a trader. You will discover that there is far more to develop within your mind that you ever expected. The tiny discomfort you experience when you begin to be honest with yourself and confronting self limiting beliefs gives way to something new. That something new is the re-invention of the self. There is so much empowerment to be discovered and developed. The historical dialog has blinded you to possibility. Now, with the blinders of fear removed, you are now going to explore how to bring forth the empowered self in your trading. In the next chapter you will be exploring instinctual potentials living within you that have been held hostage by your fears. Now you will learn how to name these elements of self that will empower you to zone into peak performance trading. Rande Howell
  5. 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
  6. I did an advanced search for threads with the word "ego" in the title. I got no results. I did an advanced search for threads with the word "fear" in the title, and the search returned 12 threads with the word "fear" in the title. If I search entire posts, there are 404 search results found for the word "fear". With the word "ego", there are no results. Actually, I think there is something wrong with the advanced search because I know of at least one post with the word "ego" in it. There seems to be a lot of focus on fear, but I'm wondering if there isn't a deeper issue. An issue that maybe people don't want to talk about. So if nobody wants to talk about it, I do. :rofl: My initial thought is that a vain ego is worse than fear. You must be humble to eat those bitter losses and admit that you were wrong. And of course, I am right about this, because I am always right. :rofl: (Just a little joke there). I think that one of the most important lessons I've learned is to take immediate action if I made a bad entry and the market starts going against my position. (Stating that really boosts my ego. I'm really feeling quite superior now.) I find it almost fascinating how difficult it is to admit that I'm wrong. I seems to be "hard wired" into my brain. It's as if the admission of being wrong is something that I will automatically deny and avoid with great resolve. Who wrote this stupid program anyway?!!! I need to be re-programed. LOL.
  7. "Dale grew up in a hard working farm family in Arkansas. His parents, while growing up during the Great Depression, had nearly lost their farm. That experience really changed them. They hoarded what little money they had and came to believe bad things can happen if you can’t be certain about the future. And Dale was born into this legacy. Leaving the farm for greater opportunity, Dale became a banker in a trust department of a bank where he protected the value of assets placed under his care. He was a natural at his job of maintaining certainty in the face of threats to his clients' capital. As time went on, the bank was gobbled up and Dale was fed up. In a career change, he moved into day trading. He learned a proven methodology to control risk well and was prepared to trade. What he was not prepared for over the next several years was the hesitation and anxiety he experienced, and could not overcome, when he risked capital." ________________________________________ The brain, memory, pattern, and the unconscious mind make unlikely partners to your trading methodology. Like Dale in the case study above, after investing a number of years learning and tweaking a methodology that should provide an edge, traders often discover that something is still missing that limits their success. It’s not their methodology, they conclude – it’s them. Though they strive for success, they keep falling into the same self-limiting patterns over and over again. No matter what they try, who they train with, or who they listen to – they stay stuck and they do not know why. If they want to make money and are willing to invest the time and energy into learning, you would think that they would achieve their goal, even only by perseverance. It is as if something seizes control of their mind and their capacity to dispassionately trade their plan is hijacked. After the smoke clears, and they come to their right mind, most traders feel as if their bodies and minds were kidnapped by unseen forces. If you have ever thought this – you are not alone. What Really Drives Your Perception of Money In a capitalistic culture such as ours, our sense of personal worth, adequacy, meaning, and power get woven into our perception of money. As an example, a trader (who has not been successful for several years) is at a cocktail party. He strikes up a general conversation with an unfamiliar man. And the man asks, “What do you do?” Right there, the trader’s identity is tied to trading. The next question is, “Can you really make money at trading?” Though the trader has yet to be able to support his family on his earnings from trading, he answers, “Yes.” Then the trader proceeds to create a fiction that paints a rosy picture of his life as a trader. Actually the trader feels shame erupt and he feels “less than”, so he lies to cover up his embarrassment. The trader’s notion of being a successful human being and his sense of mattering in the world is so tied up to how much money he should be making that he finds himself lying. His worth, his importance, and his social standing are tied up in his relationship to money. Money has become the yardstick by which he measures his value as a human being. And as long as his perception of money is the measuring unit by which he gauges his worth, he will continue to struggle with finding success in trading. External validation by performance in trading becomes the judge of his character. His ability to make money in trading moves from competency of performance in a certain domain (where mistakes point out where he needs to learn in order to become better) to judgment of his worth as a human being. Where does this come from? We Are Born Into a Money Script Go back to the case study of Dale. Dale is born into a certain history and his brain adapts him to the conditions of that environment. His parents had been devastated financially by the Great Depression. Life had become very uncertain for his family’s financial survival. They were scared that they would not have enough money to put food on the table and a roof over their heads. Money was scarce, and they could not afford to lose anymore. This was the mantra by which they lived. Like many of their generation, they became savers and avoided risk at almost all costs. They were risk-averse and had developed a way of seeing the world as a dangerous place where things that could go wrong - and did, in fact, go wrong. This became their mindset. And it governed the way they saw life. Their mindset for managing the uncertainty of life was that of a victim of circumstance beyond their control. And into this mindset their son Dale arrived. He was born into this perceptual amalgam of risk, money, inadequacy, powerlessness, and possibility. His brain adapted him to this circumstance. No one noticed that this way of seeing the world had taken over their perception. It was like water to a fish. It was a set of assumptions that had become so familiar, so true, that they were never questioned. And these assumptions of risk, capital, power, and worth became woven into the neuro-circuitry of Dale’s brain and mind – and became his beliefs. This is the money narrative. The Money Narrative All Grown Up Like many people who eventually become traders, Dale grew up and came to trading as a second career. He, like other traders, physically left home and never realized that he was taking the money narrative rooted in this history with him into his adulthood (think about the first career he drifted into). And into his trading. Most traders, just like our friend Dale, have never questioned their beliefs about money – the money narrative. Understand, you do not have a money narrative – rather, a money narrative has you. It is not yours – you belong to it. In particular, traders rarely ask themselves, “What is money to me? What does money mean to me? And where do these beliefs about money come from?” Money will form a certain symbolic representation that connects your sense of power/powerlessness, your sense of adequacy/inadequacy, your sense of mattering/not mattering, and your sense of personal worth/worthlessness into your personal money narrative. And all at the pulling of the trigger where capital is put at risk. In Dale’s example money was connected to his sense of power/powerlessness and to his sense of adequacy/inadequacy. He had avoided confronting these carefully hidden self-limiting beliefs about himself until he started trading. He came face to face with this money narrative (what money and risk means) every time he attempted to pull the trigger on a trade. His money conversation of losing everything and being powerless (that he was born into and adapted to without his knowledge or consent) came rushing into the forefront of his awareness like a ton of bricks every time he attempted to pull the trigger. By becoming aware of this hidden money narrative, he began to alter it. The biggest problem with traders is when they resist acknowledging the presence of the power of their personal money narrative. Most traders are not so fortunate as to be born into a thriving money narrative that balances capital with risk management. Most grow up in families that attempt to avoid uncertainty and risk by not making mistakes. Yet, a money narrative that incorporates management of the risk of uncertainty is vital to successful trading. Finding the Hidden Money Narrative What’s your historical money narrative? One of the most effective ways of discovering the assumptions that have become self limiting beliefs that drive your trading is to ask two simple questions: First - what personal assessments, criticisms, and judgments do you have when you beat yourself up after a loss? This will tell you how your worth, mattering, power, and sense of adequacy is connected to money. Second - observe your personal assessments of yourself when you are on the winning end of a trade. Notice how your performance becomes a yardstick to measure your worth, your sense of value as a human being, or your personal sense of power. Money has become a symbolic representation of who you are. (Confusing net worth with self worth.) The problem is that this narrative has you, you belong to it – and you are its captive. Enormous freedom becomes possible as you learn to be mindful of your financial narrative. It no longer has to control the way you connect money, performance, value, and adequacy as you begin to de-construct the narrative to which you were born. The most powerful part is that at this moment, you can begin constructing a much more empowering narrative about money, worth, meaning, power, and possibility. And your trading just becomes a performance to assess and improve, rather than a judgment of your being. Rande Howell
  8. 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.
  9. With the tremendous leverage Forex trading offers, you are frequently exposed to the basic emotions of fear and greed. At certain times throughout your trading career these emotions can make you completely and absolutely irrational, oblivious to what is really happening. It can make you rely on hope; hope that the market will do what you want it to do because it "must"! Otherwise, you will lose all of your trading capital.
  10. A Time for Self Reflection: Why do so many traders stay stuck in painful self limiting patterns rooted in fear and self doubt? It's not like your trading account will allow you to live in comfortable denial for long. Hold this question in your mind. The trader can see that what they are currently doing is not working. They acknowledge they need to do something about their fear-based trading - "they talk the talk" - but they, for some reason, can not push themselves into "walking the walk" of actually doing something about the power fear has over their trading. What's at work here? I asked a very successful trader and teacher this question, and his reply was: "Because the trader has not suffered enough pain." What!? I asked him to go on. "It takes tremendous pain for a trader to seek help and decide to change his ways. It was the same way for me. I'd been trading for 7 years before I finally cried out "UNCLE "- I've had enough and sought help for the psychology I was bringing to the trading room - I had blown out several large trading accounts, had declared personal bankruptcy, and was staring at my family starting to fall apart. That is what did it for me." "Until then, I had way too much pride to admit that I was the problem - not something outside of me. It just wasn't me I was destroying - it was my family. That was rock bottom for me. I couldn't allow that - the pain was just too great. Finally, I knew I had to do something. Avoiding my pain wasn't worth it anymore. It was just a short term fix anyway. The fear kept coming back. In getting beneath the hood of my mind, I found the courage, plus the skills and tools, to face what I had spent my entire life avoiding. I know now that my fear of not measuring up created a bigger than life personna that tried to protect me from feeling my wrong-headed sense of unworthiness. " "What's crazy is why it took me so long. I was really invested in "looking good". I much prefer who I am now than the trader I used to be. Losing is not longer a statement about me anymore. Anyone who trades professionally trains themselves to emotionally think in terms of having an edge in probabilies as they approach the uncertainty of a trade. Over time they are going to have more winners than losers and the winners will be much bigger than the losers. Calm, detached, confident, and humble. Losing or winning is no longer emotionaly charged. Confronting my fears allowed me to separate fear from uncertainty. This psychological freedom is what has allowed me to develop the trader I am today. But I had to experience pain beyond my threshold before I was willing to push through my denial and face the demons roaring like a hungry lion in my mind. Once did that, I wondered why it took me so long to do something so simple." What can you learn from this trader's journey into financial success and personal growth? What I want you to notice about this trader's story is how long he stayed in the denial that continued his march into pain. I also want you to notice the enormous pain he shouldered. What was the cost of his not acting to master his fear? Hundreds of thousands of dollars for sure. But you, as a trader, know the cost of not confronting and mastering your fear is much greater that dollars alone. It is the loss of your potential as a human being that is really robbed. The tragic part is that it is not the market that robs you. It is nothing outside of you. It is your fear that robs you of the potential that trading offers. This is what keeps the unsuccessful trader locked in the comfort zone of his self limiting beliefs. How do you or how have you broken out of this biologically-wired spell fear has entranced you? Where are you at in the evolution of the trader in you? Rande Howell
  11. One of my biggest stumbling blocks in trading is getting scared out of a winning position. Sometimes just covering your P&L screen just isn't enough. Sometimes you have to put a trade on and walk away from the screen. Using the iPhone with the Logmein app, I was able to put on a position on the YM on infinity platform, move the remote screen to just the chart and then put the phone down and go take care of something else. I would only take a glimpse once in a while to look at the chart. When I see it pass my target or stop price, I know the trade is done. I made +10 on the day. Using the iPhone makes it difficult for you to jump in and out because the screen is so small. You also have to be a little careful or you could accidentally fire off a trade in the wrong direction. Make sure you are first acclimated with the Logmein app first. I know, some of you are saying "what" that's crazy, but I feel it is helpfull. Feel free to share your thoughts.
  12. As we all know, Fear and Greed drive the stockmarket - and life in general. The fear of failure and the pursuit of more (Greed). What drives you most in your trading ? I must admit that I am slightly more driven by fear, than I am driven by greed. There are a few times when I have sold stocks too early, in a knee jerk reaction to a short term fall. I am however starting to balance the fear and greed factors, which is helping my trading performance.
  13. Yes, I am starting yet another thread So most of my life, friends and family seem to have decided that I would be the "successful" "rich" one. I would grow up to be very wealthy, blablabla. Although it's nice to constantly hear, "when you make it and you have tons of money" I am starting to wonder if it's actually holding me back. I hear it so often, I sometimes wonder if I really can be wealthy? I feel as if I have a lot of boot to fill, sorta speak. This crosses over to trading. I have noticed (yet not said anything until now) that I greatly understand many concepts, charts, etc. Yet, when it comes to doing things real time I hold myself back and let myself get emotional. Like Soultrader said in another thread that the successful trader has a constant hunger to be successful and come out on top. I am a very competitive person at heart, at work I always strive to sell the most and be on top no matter what I do, sports, selling, whatever. But at trading, I seem to want to prevent myself from being successful. For example, I will make some great trades, then doubt myself and make some stupid trades. After this eats me away, I feel like I don't know enough and I want to learn more and I set myself aside. I get so close to a goal, then I somehow purposefully take a step back. I can honestly say I've never accomplished a true long-term goal. I set them, get halfway, then I get bored and do something else. For my age (19), I am probably pretty successful. I have a $30,000 car that I pay for myself (loan is in my name). I wear designer clothes and not Abercrombie, things like Armani, Prada, etc and it all comes out of my own wallet. But I refuse to believe I am actually successful, I always feel like there is something eating me up inside and I'm not quite there. But when I get "there" I purposefully miss the opportunity. It's like some self destructive path (better yet a game my subconscious mind plays with me), and it's been going on my entire life. Take high school, I didn't do anything the entire 4 years (except study the markets) because for some reason I unconsciously thought getting an A was overrated so I opted for the easy C - I never did my homework yet I always got an A on the tests. I knew that was enough to get by, I never wanted to be the good student. When I used to work at Best Buy my goal was always to work in Magnolia Home Theater. I would get very close, then something would click in my head and I would stop striving for the spot - thus missing it. This went on for nearly 2 years. I did so well selling Digital SLRs they sent me to Dallas for a training - yet after the training I slacked off and felt no more reason to keep going - I was bored. Again, people always expected me to be moved back to Magnolia, yet I kept doing something to prevent myself from going back there. This constant pressure of success from everyone close to me, almost makes me scared to be successful. I know I can be a good trader, but I honestly feel like I hold myself back from being successful on purpose. I don't really know how else to explain it, maybe someone has gone through this in their lifetime and can give me some tips.
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