How to Build a Calm Patient Trader Psychology


8 ratings



Rande Howell

07 Jul, 2017

in Psychology

The moment that real capital is put at risk in trading, everything changes.  Trading goes from an intellectual exercise where loss is abstract and not personal to a visceral experience where potential loss unhinges the rational mind and primitive emotional responses take charge of the trading mind.  After experiencing real losses, the emotional survival brain even starts anticipating potential losses (rather than gains) and hijacks the trading mind BEFORE action decisions are made.  If you have dealt with fear of entering a trade or fear of pulling the trigger on a perfectly good set-up, you have experienced the baffling power survival emotions have over rational thought. 

Or if you have perceived that a trade could be getting away from you if you just sit there and wait for it to shape up properly, then muscled your way into the trade, only for it to collapse – you, too, have experienced survival instincts overriding rational thought to create a mind incapable of trading effectively.  Others are primed for over trading when their desire to experience the feeling of winning big (and feel that squirt of dopamine creating euphoria in the brain) mesmerizing the rational trading mind into the gambler's mind – where restrain is forgotten in the pursuit of a dopamine rush (winning money). 

It seems like these emotions take over your trading mind out of nowhere.  But that’s not the case.  The case is more about a lack of understanding your emotional nature and knowing what to do about it.  And particularly about not understanding how the survival instincts of the emotional brain overwhelm the rational thinking from the neo-cortex.  Let’s step back a few steps so that you can begin to understand what is actually happening when you experience fear of loss or experience the greed associated with over trading or impulse trading (what I call gambling).

Emotions and the Act of Trading
Traders try to control emotions without understanding them.  And this oversight gets traders in trouble all the time.  Because of that most strategies for emotional control work only in the very short term and collapse when put under pressure.  The most misdirected common emotional control methods involve denying the emotion, resisting the emotion, or using positive affirmations (I am a disciplined trader!, I am disciplined trader!) to control the unwanted emotion.  This is an attempt to push the emotion aside as if it were not connected to your capacity to think.  As we develop more understanding of emotions, you will come to understand why these methods (though popular) are both misguided and add to the problem of dealing with emotion and mind.  In essence, you will discover that you have been attempting to push a 600 pound silver-back gorilla around.  Full of testosterone, but misguided.

First, what is an emotion?  For years Cognitive Behavioral Theory held that emotions happened after thoughts.  This theory holds that the way a person thinks about an event creates the emotion that arises out of the experience.  Actually the reverse is true.  What Neural Biology has established is that emotion is first – thought comes forward out of emotion.  And that all thinking is emotional state dependent.  But this idea that thought comes before emotion and thought is the king came much before CBT.  It started with Renee Descartes, who opined, “I think therefore I am”.  So, people have for centuries held the belief that thought was king and that emotion was of secondary value.  And that is the very same bias that most bring into trading.  They want to push off the relatively unimportant element of emotion so that they can get to the rational mind – and trade without emotion.

Unfortunately, we have put the cart before the horse.  In reality, the horse is emotion and the thinking is the cart.  Emotions are not even psychological in nature – they are biological.  But they take over psychology.  All thinking is emotional state dependent.  It is the emotional state that governs what kind of thinking you bring to the performance of trading.  There is no freedom from them as Descartes envisioned.  No matter how appealing this notion is, the facts demonstrate that logical thinking (Spock thinking) without emotional support is an illusion.  The problem is that unwanted emotions keep popping up and hijacking the trader’s mind.  And they don’t see the hijacking coming because they are denying the power of emotion and trying to control the emotion by will power.  (Remember that 600 pound gorilla?)

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Re: How to Build a Calm Patient Trader Psychology

Another 10 rating. Very helpful. Especially in the aftermath of my recent trading mistakes. Excellent guidance for the future!

Jul 20, 2017

Member (3 posts)

Re: How to Build a Calm Patient Trader Psychology

What market/s do you trade, and what was your biggest ever loss amount?

Jul 14, 2017

Member (818 posts)

I have rated this article 10 stars .It would be difficult to understand the mind in trading , for many traders , unless this article showed a practical relationship with trading .This would take a long time to write.As an example it should demonstrate the practical relation ship in trading , I put on a trade long , as the price broke lower , I re-actively put on a short trade , this was a subconscious reactive pattern to avoid losses.I should not have done it , but fear of loss triggered a subconscious automatic trade.

Jul 07, 2017

Member (3620 posts)