Article Forging a Disciplined, Patient Mind for the Uncertainties of Trading

Rande Howell

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Numbers and logic had always come easy to Steve. Throughout his career he was always the “go to” guy when technical problems confounded others. Computer systems made sense to him. That expertise had served him well, both in compensation and career advancement - until he hit a wall beyond his understanding.

He had been promoted from technical services to management where he oversaw projects rather than worked on them. And he found managing people to be very different than handling technical problems individually. While he had shown brilliance with the technical side of computer systems, working client-side and gaining cooperation among competing interests showed limitations in his capacity to do his new job. What once was easy and natural was now falling apart. Despite that “left brain know how” that had wowed people around him, he was now foundering.

And he had had enough. He figured that this was a perfect time for him to pursue trading – a love he had been tinkering with for years on the side. In his mind Steve would be back where he had talent – the technical grasp of trading. It seemed logical until he tried to do it. His emotions keep sabotaging his best laid plans. He knew what to do until he tried to do it in the heat of trades. All his knowledge, so dependable in the past, simply flew out the window when he risked capital on a trade. It was crazy. Steve would find himself falling apart over risking $50 – no big deal. It was not the size of the risk. It was risk itself that crippled his perfectly good, number-crunching, left brain.

Suddenly, the recognition of the probability of “not winning” (not controlling outcome) had become an obstacle. He could talk the talk of probability or say that no one trade mattered, but walking the walk of probability was proving to be a different matter.
The Mind You Bring to Trading Is Not the Mind that Will Bring Success in Trading
Steve’s problem is a very common problem in trading. The journey into trading is littered with the casualties of technically smart people who see that a major key to success in trading is the very rational thinking that comes so easy to them. It seems like a no-brainer until they attempt to use their gift of rational thinking in the emotionally explosive world of uncertainty found in trading. And it is not the size of the risk that triggers self-doubt and fear of loss. Many traders with strong logical capacity falter even under small levels of capital risk.

What’s the problem? Clearly it is not the capacity to think logically. Steve had a proven track record of success solving daunting problems. There was even a sense of reverence about his ability to solve problems logically. So what went wrong?
Go back and study that vignette about Steve’s rise and fall in the company where he worked before trading. The common problem pattern is evident there. Notice that his technical acumen is noticed and praised there. He was able to solve problems through his individual effort and the gift of his talent for logical thinking. And based on his track record of success, he was promoted into management. This is where he hit his wall.

The very mind that was so gifted at solving technical problems on an individual basis through sheer brilliance was not prepared for the new set of skills required to work with fallible human beings to produce effective action on a group level. AND THOSE CAPACITIES WERE NOT DEVELOPED BY MENTORSHIP AS PART OF THE TRANSITION FROM THE TECHNICAL SIDE OF THE BUSINESS TO THE MANAGEMENT SIDE.

Left to his own devices, Steve did the best he could. He fell back to working hard and pushing himself and everyone one around him. But despite all that technical skill, he did not know how to emotionally connect with his colleagues and the teams he managed. That was not part of his history, and it did not come natural to him. It was a world that he did not really know existed; much less know to develop it. And the company he worked for did not invest in him so that these interpersonal skills could be developed.

Instead, Steve became unhappy, blamed others because he knew no better, and later left the company looking to regain the edge he had lost. And that landed him in full time trading where history was repeating itself. The difference is that in trading there was no one to project blame onto. Using the same strong logic skills that had served him well as a technical problem solver also pointed out that the problem in his trading was HIM.

He still did not understand why emotions like fear of loss arose when he tried hard to keep emotions out. He just keep watching as these emotions happened anyway and blew his logic out of the saddle regularly when he was risking capital in live trades. What he was beginning to recognize is that the mind he brought to trading was not going to produce the success in trading that he knew was possible. Applying logic to the problems of hesitation and early exits kept him mired in mediocrity. No matter how successful his mind had been in the past, skills were missing that he needed in order to truly trade effectively.

Mastering the Skills Necessary for Trading Success

Steve is similar to a host of other traders that come from technical backgrounds. Those professions include computer programmers, IT guys, accountants, engineers, air line pilots, most MDs, and more. The very training and discipline required for success in each of these past professions becomes the obstacle to creating success in the new environment of trading. Simply put, the skill sets for success are different. Fortunately they can be learned.

Essentially the problem is the training that creates the need to be right and the motivation to control outcome. Personally when I am flying as a passenger on an airplane, I want the pilot to be fixated on doing everything right. The same with an engineer’s drive to make sure the bridge he or she is designing meets critical load bearing standards. I also want my accountant to be right. Those skills are drilled into the work ethos and become the habits that drive performance. However, that black and white thinking, “got to be right” thinking – so desirable in one domain – becomes the problem in the environment of trading – where the trader has to give up control of outcome and of being right.

But what do you gain by giving up the need to be right (or the need to not be wrong) and control over outcome? First, you let go of something that cannot be controlled no matter how hard you try or how predictive your methodology is. In doing that, you are no longer figuratively banging your head against a brick wall hoping the wall will crack before you do.

The biggest advantage you gain is the ability to turn your attention to controlling something that you can, in fact, control – the mind you bring into the moment of performance. By giving up control of outcome as an illusion, you focus on your process rather than outcome. This is where you begin developing the probability-based mind. Instead of defining your worth by trying to control something that you cannot, your notion of winning is re-taught to focus on the quality of performance. The mind is no longer scared of losing. It is focused on the process of trading. You regain a sense of control – over long-term probability instead of short-term winning.

This is the missing skill that most very bright rational traders need most. In probability you are no longer focused on short-term gain. Fortunately, this skill can be developed. It requires a change in the process you use to approach uncertainty. Emotions have to be regulated first. Until this is done, emotional hijacking continues to happen regularly. Then you have to learn how to step back out of the trains of thought that drive you to make short-term survival decisions over long-term probability. Then discipline, courage, self-soothing, and impartiality have to be developed to replace the reactive mind that was programmed by default.

It comes down to a decision of whether you really are willing to become a successful trader. Are you willing to change the way you interpret the unknown of uncertainty? After proving to yourself that the mind you brought to trading is not going to work in bringing success, are you motivated to building a new mind for probability management? This is the gap only you can bridge. It will not happen by itself. Your brain and psychology are totally against the development of the probability mind. Only a motivated trader ready and willing to change is going to bridge that gap. It is so easy to stay stuck and comfortable. It requires mastery of self to change into the person needed to bring your dreams into reality. That is the edge in trading.

Finding the Courage to Act

The real journey in trading is about developing a mind suited to embrace “not knowing”. Talking about trader psychology will never work. It requires re-training emotions that give rise to the trading mind. Success is about developing new emotional tools to deal with ambiguity and the lack of certainty that is your constant companion in trading. The old mind that you brought to engage the uncertainties of trading is still stuck in acting from survival instincts. Whereas, the Probability based mind (needed for trading) exists as potential. As you trade, notice how your respond to uncertainty. Are you trying to control the uncertainty, or do you embrace the uncertainty as a learned response to ambiguity? Your brain wants control and consistent trading performance requires controlling the one thing that you can control -- the mind you bring into the moment of performance.
 
Randy

I have valued all your posts , articles ,videos and knowledge and I thank you for the knowledge and wisdom.

The human brain is wired to lose in the markets due to stress response, amygdala hijack , biases ,information processing handicap etc etc

I really believe it is going to be difficult to change an old dog and teach him new tricks .Instead it would be better to evade or avoid the negative handicap of wiring of the human brain in trading activities .I have been past all this evade or avoid the negative handicap.

The easiest way is to avoid the negative handicap by set and forget trading strategies.Set and forget makes it far easier to stay emotionally disciplined and it also allows you to go about your life as you normally would, because you will not be spending hours in front of your computer.

It is the best way of trading , but trader needs loads of patience to wait.This makes your task much easier.

Please let us know your views.
 
Randy

...

.Set and forget makes it far easier to stay emotionally disciplined and it also allows you to go about your life as you normally would, because you will not be spending hours in front of your computer.
....

Well thats not how it works for you.
You spend hours in front of the computer spamming online forums, so using a "set and forget" strategy isnt achieving your goal. :LOL:
 
Numbers and logic had always come easy to Steve. Throughout his career he was always the “go to” guy when technical problems confounded others. Computer systems made sense to him. That expertise had served him well, both in compensation and career advancement - until he hit a wall beyond his understanding.

....​


This is a cut and paste of an article on traderkingdom.com from March this year, did it go down well on their website?
That was a trading education website, so i'm guessing you sell training for traders.
Dont you need a vendor badge for that?​
 
This is a cut and paste of an article on traderkingdom.com from March this year, did it go down well on their website?
That was a trading education website, so i'm guessing you sell training for traders.
Dont you need a vendor badge for that?

I can appreciate your concern. The moderator has encouraged me to send articles to him for better traction with your folks. I will do that. I used to post here a few years ago, but drifted off.

I believe you will find my articles to stand independently for themselves. Many people read articles from me because of their educational value and never seek more. You will notice their is no mention of products or services.

Trader Kingdom has permission to grab any article on my website and publish it -- as do other organizations. Again, you will they are educational in nature and not promoting. Trader Psychology is missing piece in most trader's education. I write into that void.
Rande Howell
 
Randy

I have valued all your posts , articles ,videos and knowledge and I thank you for the knowledge and wisdom.

The human brain is wired to lose in the markets due to stress response, amygdala hijack , biases ,information processing handicap etc etc

I really believe it is going to be difficult to change an old dog and teach him new tricks .Instead it would be better to evade or avoid the negative handicap of wiring of the human brain in trading activities .I have been past all this evade or avoid the negative handicap.

The easiest way is to avoid the negative handicap by set and forget trading strategies.Set and forget makes it far easier to stay emotionally disciplined and it also allows you to go about your life as you normally would, because you will not be spending hours in front of your computer.

It is the best way of trading , but trader needs loads of patience to wait.This makes your task much easier.

Please let us know your views.

If it works for you to produce consistent profitability, who am I to have an opinion? I just don't find many who continue with such a process. I find platform, methodology, and performance psychology are an integrated whole when engaging uncertainty. The trading account is the final arbiter.

Rande Howell
 
If it works for you to produce consistent profitability, who am I to have an opinion? I just don't find many who continue with such a process. I find platform, methodology, and performance psychology are an integrated whole when engaging uncertainty. The trading account is the final arbiter.

Rande Howell

Thank you for another very informative article.

What is the process in the mind , that makes you want to control the market , when market becomes chaotic?
 
Thank you for another very informative article.

What is the process in the mind , that makes you want to control the market , when market becomes chaotic?

Your brain was built by evolution to control environment and outcome. They are primitive drives that became wired into us as traits. So, no surprise, they show up in trading. Traders notoriously try to control what is going to happen in the markets (the environment) as a complication of this survival strategy. Winning, as most understand it is trading, is making money on a trade. This is trying to control outcome (another primitive, and successful, survival drive) showing up in trading where the rules of the environment simply don't favor it. Traders need to start questioning these drives -- moving from trying to control outcome to controlling their process.
Rande Howell
 
Hi Rande Howell,

I appreciate your posts and I like your attitudes as laid out in post 6 of this thread.

I wonder if you would be kind enough to share if you have any ideas on how I could work on my problem.

I am a trend trader of the Turtle ilk, acting on end of day data and just following the trend. I often find myself quite profitable.

My problem is that I find the money comes quiet easily and I feel I can do anything. Also I believe because of this I do not appreciate that winning it was a task and an easy come easy go attitude kicks in. I feel that money gained “is the markets money, so let’s use it in the market”. This feeling is enhanced by the compound growth effect of trading.

As the account grows I take greater and greater risks out of proportion with the growth in my account. When this works out, which it often does (until it doesn’t) it just encourages my bad behaviour. So I start to overtrade and trade with bigger size. In a bad circle, which inevitably will not end well. The greater my account grows the greater the problem becomes. This manifests quite quite subtly in taking trades prematurely, going slightly over my risk per trade and being over correlated (which is particularly tempting for a trend follower)

I hope you have some ideas on how I can work on this.

Kind Regards

Jason
 
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Rande

I have been curious about the amygdala , if it is over responsive/reactive , it is not regulated or controlled.I found it tends to overreact in positive situations by overexposure based on positive sentiment ,it subconsciously(like human autopilot) takes over and place larger trades.
 
Rande

I have been curious about the amygdala , if it is over responsive/reactive , it is not regulated or controlled.I found it tends to overreact in positive situations by overexposure based on positive sentiment ,it subconsciously(like human autopilot) takes over and place larger trades.

Ok I understand that our psyche is slave to the physical brain (we can't choose to stop breathing) and the amygdala is part of the primal brain. But if your so convinced that it helps trading have you considered taking drugs to dull the effect such as Propranolol or even Gamma knife surgery to remove it. It has the added side effect of increasing empathy for others, which I believe would benefit everyone.

So you talk the talk but do you walk the walk, are you willing to DO SOMETHING about a primeval part of the brain that you have no control over.
 
Ok I understand that our psyche is slave to the physical brain (we can't choose to stop breathing) and the amygdala is part of the primal brain. But if your so convinced that it helps trading have you considered taking drugs to dull the effect such as Propranolol or even Gamma knife surgery to remove it. It has the added side effect of increasing empathy for others, which I believe would benefit everyone.

So you talk the talk but do you walk the walk, are you willing to DO SOMETHING about a primeval part of the brain that you have no control over.

My emotional brain is faster than my rational brain ,it takes over faster than I can control anything. I am trying to let it perform effectively ,for the purpose for which it is designed , rather than mess with it.Messing with it can make things worse for some ,unless there are scientific studies to prove it.

I rarely open my platform unless I have to , too many tempting trades when I open my fridge of goodies.Maybe the answer lies in avoiding the zone , the alternative is to evade your hijackings , but which is better?
 
My emotional brain is faster than my rational brain ,it takes over faster than I can control anything. I am trying to let it perform effectively ,for the purpose for which it is designed , rather than mess with it.Messing with it can make things worse for some ,unless there are scientific studies to prove it.

I rarely open my platform unless I have to , too many tempting trades when I open my fridge of goodies.Maybe the answer lies in avoiding the zone , the alternative is to evade your hijackings , but which is better?

But you ARE trying to mess with it. It is there doing a perfectly good job and you are trying to suppress or remove its response to stimulus.
You are trying to stop millions of years of evolution by using your 'conscious brain' which is considerably less developed and as you say yourself 'slower' than your amygdala. Do you see the futility of the task you have set yourself. You cannot succeed.
 
Hi Rande Howell,

I appreciate your posts and I like your attitudes as laid out in post 6 of this thread.

I wonder if you would be kind enough to share if you have any ideas on how I could work on my problem.

I am a trend trader of the Turtle ilk, acting on end of day data and just following the trend. I often find myself quite profitable.

My problem is that I find the money comes quiet easily and I feel I can do anything. Also I believe because of this I do not appreciate that winning it was a task and an easy come easy go attitude kicks in. I feel that money gained “is the markets money, so let’s use it in the market”. This feeling is enhanced by the compound growth effect of trading.

As the account grows I take greater and greater risks out of proportion with the growth in my account. When this works out, which it often does (until it doesn’t) it just encourages my bad behaviour. So I start to overtrade and trade with bigger size. In a bad circle, which inevitably will not end well. The greater my account grows the greater the problem becomes. This manifests quite quite subtly in taking trades prematurely, going slightly over my risk per trade and being over correlated (which is particularly tempting for a trend follower)

I hope you have some ideas on how I can work on this.

Kind Regards

Jason

Jason

You would be wise to examine the beliefs that lie behind the initial "feeling good" at winning that are precursor to the self sabotaging behaviors that grow as your account grows -- until it doesn't. Fundamentally self-sabotage (that's what I calling the pattern you describe, which may not be the way you understand it) is rooted in 4 self-limiting beliefs. A sense of inadequacy, a sense of not mattering, a sense of being unworthy, or powerlessness. I suspect the worthiness box, based on the way you describe your pattern (you build things up only to burn them down to a level that is familiar pattern to you). I have seen this pattern many times over the years. It is particularly common as traders gain competence and master the initial skills needed to produce a certain level of success. Getting past that would be your next stage in your evolution as a trader.

This is a guess or hypothesis -- not the truth. I don't know you. So I can easily be far off base. But check it out and see if this explanation has validity or not. Let me know.

Rande Howell
 
Rande

I have been curious about the amygdala , if it is over responsive/reactive , it is not regulated or controlled.I found it tends to overreact in positive situations by overexposure based on positive sentiment ,it subconsciously(like human autopilot) takes over and place larger trades.

Technically, the amygdala is an ancient part of the emotional brain that governs responses to threat -- usually fear responses. It also, interestingly enough, is involved in letting down our guards so that pro attachment kinds of behavior can occur. The amygdala (fear response) is governed by the hippocampus -- as interpreter of in incoming information related to past experience embedded into limbic memory. It is the signal from the hippocampus that activates the amygdala.

This "positive sentiment" you speak of is probably what I would call a dopamine fix associated with reward. This is more about the impact euphoria (feeling good) has on perception rather than an amygdala related event. Euphoria, while trading, leads to over trading. Trading is about managing the emotions and meanings of assessments that create the mind that engages uncertainty.

Rande Howell

Rande Howell
 
But you ARE trying to mess with it. It is there doing a perfectly good job and you are trying to suppress or remove its response to stimulus.
You are trying to stop millions of years of evolution by using your 'conscious brain' which is considerably less developed and as you say yourself 'slower' than your amygdala. Do you see the futility of the task you have set yourself. You cannot succeed.

Just to clarify, the above post is not from me.
Rande Howell
 
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