Claiming the Power within You: Mastering the Mind that Trades
Finding the Blind Spot Sabotaging Your Potential
You know it’s possible. You feel it inside you. Every day you see the potential in the markets just waiting to be tapped. And you know you can do it. But even with your best effort, you consistently face the realization that achieving your trading potential is far more elusive than you initially figured. It’s up and then down. You think you finally have your act together – then you give it all back and more. Consequently, time and capital drag on without achieving the kind of success you know is possible. What are you missing that could be the defining difference in your trading or active investing?
No one warned you about the mindset problem you were going to run into when trading or active investing. Or if you were warned, you were not listening with ears that could hear the truth. You assumed that you had trading psychology down – that it was simply not a problem area for you. You wanted to believe that success in trading could be mastered by hard work, good education, and a winning attitude. And so once you had the knowledge and figured out trading, you were going to make things happen. And, like so many before you, you dismissed the need to develop your mindset for the unique conditions of trading.
At first, you believed that your inability to keep a level head under the pressures of trading was just part of the learning curve. You were going to get through it – you had confidence in your abilities and your knowledge of trading. It was just a matter of time. And with your winner’s attitude firmly in control of your mind, you knew you could do it. Then the weeks, months, and years of that learning curve kept unfolding into the future – meanwhile your results didn’t show the progress you were seeking. At some moment you came to realize (perhaps not admitting it to anyone else) that there was something fundamentally wrong with the way you were interacting with the markets.
Trading performance did not produce consistently profitable results. You still came unhinged at exactly the wrong moments. If you could only follow your rules, everything would be fine. But you kept breaking your rules without even realizing it. Damage was done without your ever knowing it – until it was too late. And you were left with the trader’s refrain – what was I thinking? Out of nowhere the self-sabotage bug struck again. Your results stayed inconsistent despite all the knowledge you had acquired and your desire to win.
Does this sound familiar? It should. Traders at all levels stay limited by a glass ceiling that limits the potential of their trading all the time. And it does not go away with all the “winning mindset” stuff you throw at it. If the power is within you to build a mind for trading, what is it you are missing? The questions we want to address here are: What is the Glass Ceiling that Limits Potential? How Do I Break Though the Glass Ceiling and Reach Greater Potential? Where Is this Potential Found and How Do I Develop It?
Re-examining Success and Winning in Trading
Success in trading requires a completely different mindset than the one used outside of trading in other areas of your life. At some point in their journey into trading, people discover that the laws of success, so useful in other endeavors, do not apply to trading. A very different kind of success mind is required for trading. Visualizing success, a positive mental attitude, persistence, force of will, and a focus on winning, (so central to a winning mindset) do not generalize to trading well. If they work so well in other areas of your life, why don’t they work in trading?
The answer is the illusion of control. Your brain, inherited from our Caveman ancestors, was built to control your environment and to control outcome in a dangerous world that included saber toothed tigers, big bears, and potential starvation (conditions that a trader never experiences in today’s world). Short term survival was the name of the game. So the human brain adapted to making decisions lightning fast for your immediate survival. Any and all challenges were life threatening, rather than psychologically uncomfortable. When successful solutions to short term survival problems were found, they were locked into automatic response patterns (called emotions) that did not require thinking as part of the solution. Thinking required too much time. And when thinking finally did show up, it simply supported what the emotional brain had already decided. Responses to perceived threats had to be faster than thinking allowed…good for survival; bad for the probability management needed for an effective trading mind.
This adaptive response got rooted in emotions that by-passed thinking - called your survival instincts. And it worked in those pre-historic times as an advantage for your survival. And the survival instincts became locked in as the default programming that drives short term survival success, particularly under stress. This is very good news for the survival of our species before the advent of modern times. It is also the bane of every trader trying to get control over his emotional responses to uncertainty and risk. And it is an inescapable need for trader development.
Why? The emotional brain, where all this survival instinct programming is situated, does not distinguish between biological threat and psychological discomfort. To it, all uncertainty is dangerous because it is no longer in control. And not being in control of outcome in a dangerous world means only one thing – a threat to biological existence. The survival instincts of the emotional brain trigger and hijack the thinking brain in nanoseconds. The brain reacts for short term survival rather than for long term benefit. You face this dilemma every day as a trader.