Discovering the Historical Narrative that Sabotages Your Trading Mind


3 ratings



Rande Howell

08 Sep, 2017

in Psychology

“Man is not a rational animal; he is a rationalizing animal.”

                                                                                 Robert A. Heinlein

Jeff had been here before.  After working real hard, he had finally gotten funded, traded well for a while, and then it all fell apart – again.  And he lost the funding he had worked so hard to get.  He had cycled through this pattern a couple of times over the last several years so he was no stranger to it.  Each time, he thought he had it beaten. Jeff would double down on his effort, work real hard at getting his head back together, and trade confidently. 

Then “it”, ever so subtly, would creep back into his trading and, before he knew it, he started making mistakes he knew better than to make.  Then his confidence would erode.  And he would give back his profits.  It was baffling.  The problem is that Jeff did not know what “it” was.  He knew something was going on.  Somehow a confident, disciplined trader had degraded into a frustrated inconsistent performer.  But when he looked for the reasons for his collapses, he just could not see the seeds of his own destruction before his trading became derailed. 

Yes, he was baffled and a little more than just frustrated with himself.  Jeff had substantial time, energy, and money invested into this thing.  What he had envisioned as a learning curve to master several years ago seemed more like a roller coaster ride guaranteed to have few ups and too many downs.  Why couldn’t Jeff figure the problem (“it”) out?

Learning to See the World through New Eyes
The situation with Jeff (and many, many other traders) is that they see through eyes that are incapable of seeing and understanding the problem with their performances in trading.  Their point of reference (their historical narrative) actually renders them blind to see what is right in front of their face.  They literally cannot see what they cannot see – not for lack of effort, but for lack of understanding the brain (as an adaptive organ) and the mind that emerges out of the brain.  It is this missing understanding that is called Emotional Intelligence (EI).  And it is Jeff’s EI quotient that inhibits him from being able to define the elusive “it” (the problem) that he has in his trading.  He is not seeing that he is locked into a historical narrative that primes him for repeating self-limiting patterns.

How can Jeff begin to look at his situation differently so that he can better understand his predicament in order to solve it?  First, let’s take a look at the obvious.  He recognizes a reoccurring pattern of sabotage in his trading.  He works hard, earns a funded account, trades well for a while, and then relapses into poor trading habits without noticing how he got there.  What does this have to do with Emotional Intelligence?  A lot.

An organism (that would be Jeff…and you) operating in an environment (that would be the markets you engage on a routine basis) is seeking to solve problems that it encounters in its world (that’s Jeff and you going about the business of trading in the markets).  And when this organism (or trader) finds a successful solution for dealing with a problem in that environment, that solution is quickly wired into pattern so that it becomes habitual.  This allows the trader to automatically trigger to the successful solution without the timely effort of re-thinking about the problem every time it shows up.  This is called adaptation. 

Then, as habituation occurs, the pattern becomes so familiar that the trader’s brain (remember it is an adaptive organ) pushes the problem-solving-solution pattern out of working awareness.  Remember the brain has to process a staggering number of computations and would become bogged down if it had to keep every pattern in working awareness.  This simply is an evolutionary short cut that has proved successful and become part of your functioning brain and mind. 

Now anytime that Jeff (or you) encounters a similar problem or circumstance in the trading environment, the pattern automatically triggers and takes care of the problem.  (This is the power of a historical narrative.)  Neither you, nor Jeff, have to think about it.  It just happens without your ever knowing it.  The brain has adapted you (the organism) to respond to various environmental pressures automatically and without thinking. The rub is that the pattern-making process is designed for short term survival success and works on an instinctual level, well below a conscious threshold.

This process acts like a self-fulfilling prophesy, where you are engaging the world from emotional programs that have a life of their own.  Part of it is purely biological adaptation, but another part is when the brain creates the mind – and suddenly an explanation is created to make sense out of what the emotional brain has decided.  All this is happening on automatically without your conscious participation.  Jeff, and you, fall into this explanation without ever examining it.  It is like the air we breathe.  It is so familiar, so ubiquitous, that you do not see that it is there.  Yet the historical narrative, created as an adaptive response to environmental factors, begins to create your experience and shape the world you live in.

Now back to Jeff’s self-limiting pattern.  Learning from Emotional Intelligence theory about how and why the brain creates patterns and locks them in without your awareness, Jeff is simply living in a programmed pattern set up for another time and circumstance.  The modus operandi of the pattern was short-term survival without regard for long-term benefit.  (This would be a probability-based solution, which the brain is not built for.)  Jeff has a deeply embedded pattern that is highly resistant to change that is driving the way he interacts with the markets and circumstance.

It was a highly successful pattern in another time and another place that has taken on a life of its own.  Therefore it has become Jeff’s default programming – this is his historical narrative.  Unfortunately, as useful as it may have been in the past to ensure survival in the moment (what your brain is designed to do), it is no longer useful in the probability-based world of trading.  Jeff’s brain (and yours also) has created a perceptual map of its old world (a historical narrative) and insists upon continuing to project it upon the world of trading.  Until Jeff is able to disrupt the default survival programming of his brain, he is stuck in this boom and bust cycle of his historical narrative that has epitomized his trading for years.

All his hard work; All his will power; All his determination – cannot force the life pattern in which he is stuck to change.  But as he comes to understand pattern and emotions, he begins to see what he has been blind to.  He is starting to observe his biology, brain, emotion, and mind as a working whole, rather than as disconnected parts.

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Have you heard about FL?

Have you heard about " MERCHANT ADVANCED" trading method?

Don't know anything about all that above! I'm just a simple trend trader that takes money out of the market and have found the psychological stuff quite useful. I've always found it beneficial to listen to what other people have to say, because occasionally there are some nuggets. :)

Sep 08, 2017

Member (1065 posts)

Good Article

Not necessarily new ideas but well explained and I suspect highly relevant (can see myself there in the past). Looking forward to the next instalment.

Sep 08, 2017

Member (1065 posts)