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Rande Howell

The Glitch Who Stole the Mind That Trades: How You Sabotage Your Best Efforts Without Understandin

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Hidden Beliefs Taking Over the Performance of Trading


(Vignette adapted from a recent consult with a trader)

“This happens all too often to me – it’s a repeating pattern that I can’t see happening until it’s already too late. I don’t even see how I fall into this trap. And it is the missing puzzle piece that keeps me from becoming the trader I know I can be. It just seems to happen to me automatically and it occurs most often after I’ve had a few good trades and am feeling good about myself. At the start of the day, I’m prepared and have a positive attitude. I’m ready to trade; I’m ready to get it on. I know what I’m looking for – it’s well defined. I’m looking at my screens and waiting to jump on the kind of set-ups that are called for in my trading plan. I’m ready to trade.


I’ve got to be trading to make money, so I need to be trading – not sitting around. Time ticks by as I wait for acceptable set-ups, but I stay ready – poised to act. Often after initial success, it takes what seems like an eternity for another set-up to appear. I want to trade but nothing appears that’s workable. Time passes. I’m waiting, waiting, waiting for a set-up to appear so I can trade. Time keeps crawling by as I anticipate a set-up showing up – I’m ready to trade, I’m just waiting for it to happen so I can trade. Finally I see a set-up – I’m ready. I pull the trigger.


It’s only then that I realize that I’ve jumped into yet another trade that, in hindsight, was not a good set-up for me. I don’t understand why I keep on doing it. I know what my rules are and, if things are going well, I’m on it. But I’ve been doing this for years and it is what keeps me from getting to the next level in my trading. I don’t have a clue why it keeps happening.”


The Glitch: The Brain of the Trader is Wired to Pursue, Not to Wait for the Trade


There is both a biological underpinning to this common problem in trading and an untrained mind blinded by mindlessness that keeps getting sabotaged by an unseen self-limiting pattern. First, let’s take a look at the biological bias that sets the trader up for having his trading mind ambushed.


A common trait that is burned into human DNA is to pursue prey. This adaptation was powerfully successful over eons of time with our ancestors so that it was folded into our genetic predisposition. This hardwired trait shows up in trading as “chasing the trade”. First, the hunter is poised for action and ready to act just like our trader in the vignette above. Once the hunter spots the potential prey, he (and the untrained trader’s mind) reactively becomes fixated on the prey and begins pursuing the potential prize.

Everything becomes focused on the readiness to chase down the object of fixation. Because his focus is so absorbed by the object of the hunt, the rest of the world around the hunter/trader disappears. The arousal caused by testosterone and the thrill of the hunt overwhelm the disciplined impartiality needed to assess market criterion effectively. In the world of trading, this is a set-up for sabotage. Ancient advantage, burned into DNA because of its success, has been turned into a liability in the new world of trading.

This is simply a biological bias that has to be anticipated and managed to maintain control of the mind that trades. By developing emotional regulation skills and awareness of the precursors in the hardwired pattern that leads to the fixation to chase the trade, the trader can learn to spot the arousal of this instinct. It does take work to change old deeply-habituated patterns burned into DNA that were once useful, but are not effective in the environment of trading.


But this biological bias is usually not alone in creating problems in trading. The mind that the trader brings to trading also acts as a co-conspirator.


Our Notion of Work Sets the Trader Up for Sabotage


Going back to the vignette, notice that the trader wants to be trading, not standing around waiting. If he is not trading, he’s not making money, right? And there is an urgency to get into a trade (so you can be working) rather than to manage the mind that observes and assesses the quality of probability. What is being exposed here is a faulty assumption (turned unquestioned belief operating out of conscious awareness) that "working is doing" – taking care of business. If the trader is not busy doing the business of trading, then he is not working.


This is the typical unexamined assumption that drives many traders' inability to trade effectively. Work is not about how much you get done. Work is about your capacity for the coordination of effective action. It is not about being busy, accomplishing a bunch of stuff, or taking action when it is not warranted. The work of trading is about coordinating and effectively assessing the elements necessary to produce high probability trades. It is not, by itself, about the act of taking a trade.


This understanding of work has as much to do with waiting purposefully and patiently for conditions to set up as it does with pulling the trigger so you can get into a trade and manage it. This is the work of trading. This is called waiting for the markets to show you what it will give you – rather than attempting to take from the markets.


In this notion of work, often not trading is actually doing the work of trading. This requires a seismic shift in the way many traders understand work. The old notion of “I must work hard for my money or to be successful” simply does not bring success in trading. In successful trading, bringing an effective mindset to the performance of trading includes a patient, observing mind. There is no urgency to act before conditions are met.


Notice how the biological bias burned into the trader’s very DNA to chase the trade combines with a faulty cultural (turned personal) belief that to be good in trading, you must work hard – rather than effectively. It is this “perfect storm”, where an ineffective belief about what constitutes work becomes fused in the trader’s neuro-circuitry with a biological predisposition to chase prey that sabotages the mind that the trader brings to the act of trading.


How Do You Solve This Problem?


First you notice the pattern. The brain creates programs that, once built, run automatically and out of working awareness. That is the job of a brain that we inherited from our ancestors. These programs are rooted in pattern-recognition and reactive response to the fear of missing out (in this case jumping into unwarranted trades). You have to be able to observe the problem pattern before you can begin to change it.


If you are just beginning to investigate Mindfulness in your trading (learning to observe the pattern), start by observing your body (i.e. your breathing, your body tension, and your heart rate). That will eventually lead you to the trading mind where self-limiting beliefs are given voice. You will clearly hear these “voices” when you berate yourself after a loss. All these programs and self- limiting patterns created by the brain are emotional in nature.

And because emotions are biological in nature, they show up in the body and can be observed as physical phenomena. Fear of missing out will show up in the body as accelerating pulse, faster shallow breathing or holding the breath, and the build-up of tension in the body. This is the arousal of the emotion, and this is when the emotion can be interrupted and regulated before it hijacks the trading mind.


When the emotion is calmed down, you can begin to approach the mind (your beliefs about your capacity to manage the uncertainty that you bring to trading). It is in observing the mind that you discover what beliefs actually are driving your trading. If they are effective beliefs for the performance of trading (the management of uncertainty), you will see your trading account grow. If they are ineffective beliefs, then you will see your trading account stagnate or shrink.


It is here that the trader will find it necessary to commit to self-development of the mind that trades. You discover that no one comes to trading with a mind ready-built for success in trading. This is a myth. Instead it has to be developed with the same rigor that you use to develop a sound methodology. What you do discover, though, is that in the same way that the brain has built programs for avoiding the fear of uncertainty found in trading, it also has programs burned into DNA (and accessible) that provide the discipline, courage, patience, and impartiality needed to build, block by block, a mind capable of managing uncertainty, risk, and probability.


The programs are there. Your contribution to your trading system is to develop the mind that runs your methodology and your platform. It starts with simple awareness of problem patterns in your trading, learning emotional regulation as a skill, and then developing applied Mindfulness so that you gain access to the empowered programs that lead to a mind re-engineered for the rigors of trading.


And what you discover is that trading forces the issue. In many endeavors in life where a trading account does not measure the effectiveness of the beliefs you bring to the management of uncertainty, you can get away with fooling yourself for long periods of time. In trading, your trading account is in your face, bringing into stark relief what separates you from success. And your job, as a designer of mind, is to re-organize the existing programs that your brain either inherited or created into a mind built for the management of uncertainty and probability.


Who would have guessed that trading was the ultimate avenue to personal development?

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Finally I see a set-up – I’m ready. I pull the trigger.


It’s only then that I realize that I’ve jumped into yet another trade that, in hindsight, was not a good set-up for me. I don’t understand why I keep on doing it.


The OPTIMAL decision window is often very small, . . . not a lot of time to make the correct decision. (You can make a bad decision anytime you want.) It is impossible to make a perfect entry on every trade. So, there must be an acceptance of imperfection. I'm imperfect, and will always make some percentage of bad trades. It WILL happen. There is no way to avoid it. But I can get better at recognizing when I get into a bad trade, and manage it well. How well I manage the bad trades is at least 50% of the determining factor of whether I'll make money that day or not.


The rules of the trade must be prioritized. If your setup needs 5 criteria to be met, which one is the priority? Which one happens at the very last second? Are there any that happen ahead of time? If 3 of the 5 criteria happen first, then 2 happen at then end, practice the order in which you evaluate your criteria. Cycle through the criteria in order by priority.


It's very boring and tedious to be constantly monitoring the same things over and over and over again, the same way, in the same order. Your mind can wander. You can be undisciplined, careless, and impatient.


So what is the motivation to stay focused and pay attention? Without the motivation, there is no energy to draw on. The mental discipline requires mental energy. The mental energy has to come from somewhere. There are positive and negative motivators. You can be so fearful of making the wrong decision, that you are hyper attentive. That can provide the energy to be disciplined, but the fear is also very harsh on your nerves and mind. It's better to want the satisfaction of knowing that you executed your trades with precision and competency. If you executed your trades with precision and competency, and you loose money, then your strategy is no good. But at least that way, you know it's your strategy, and not you. If you execute your trades with imprecision and doubt, and you consistently make money, you probably have a really good strategy. (As a side note, if you consistently loose money all the time, consider what would happen if you had always done the opposite of what you are doing. The issue is consistency)


Why do we make the same mistakes over and over and over again? Partly, because we are undisciplined and unmotivated to change. If I am motivated to change, there is a good chance that I'll change. This is why I think that searching for motivation is critical. I can't just wake up one morning and use my willpower to become disciplined. I can wake up one morning, and make the decision to start the process to become disciplined. It's a process.


People who make New Years resolutions, and break them 2 days later, started the process, but lacked the motivation to sustain the effort. You can make the decision, and engage your will power to initiate the change process, but without the motivation you can't sustain the effort. That's why no real progress gets made. The long term energy to sustain the effort has to come from somewhere. Where are you going to get the energy and motivation to sustain the long term effort? That's the critical issue.


I do believe that we are genetically programmed to behave a certain way, and we often behave more like wild animals just trying to individually survive today, than civilized people trying to insure indefinite existence into the future.


The point is, we are flawed. Trading brings those flaws to the surface. Being in denial about personal weaknesses and flaws that affect trading makes it almost certain that you will fail.

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Excellent post!

What methid(s) would you recommend to acquire the mindfulness you refer to?


The place I like to start with a trader is where he develops an awareness (mindfulness) of the connection between emotion and body (awareness of the subtleness of thought is often a real stretch in the beginning). By becoming aware of the biological signature of emotion, they can catch the rise of an emotion before it takes over mind. The elements they become mindful of are: breathing style, tension in body, heart rate, and degree of fixation to the trading screen. Simple volutional management of breath and tension relaxation can go a long ways in emotional management of the mind that trades.


There are a number of good books and guided meditations regarding becoming mindful of thoughts. I use and teach a process that is derivative of Zen, where the witness to the thought becomes aware that they and their thoughts are not the same. In the way I teach it, the trader learns to understand the mind as a committee where various competitive elements of the self compete for dominance. And that you, as the Chairman of this trading committee, need to wake up (mindfulness) and reorganize the mind that trades.


Rande Howell

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The point is, we are flawed. Trading brings those flaws to the surface. Being in denial about personal weaknesses and flaws that affect trading makes it almost certain that you will fail.


I tend to view it as that we are fallible human beings. I don't see being fallible as being flawed. It is just our humanness we are facing. It is when we come face to face with our imperfection, there is an option to face the mistake and learn from it or to maintain a denial of it. Trading will offer a way through the denial. Mistakes become the avenue that we learn to grow from, not what we hide from. Developing emotional intelligence and mindfulness equips us with the tools we need to face our historical organization of self that keeps us from pushing into our potential. It allows us the grace and the tools to move beyond our comfort zone.


Rande Howell

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