T2W Trading Community

As traders, we soon come to realise and appreciate how difficult it can be to take money consistently from the markets. We learn that to have a chance of doing so  requires us to make a lot more effort than we may have imagined. We need to have extensive knowledge of the markets and instruments we intend to trade, a sound grasp of technical analysis, a thorough macro-economic overview and also to have secured for ourselves an appropriate amount of “risk” capital.  However, most importantly, and the issue this article seeks to address, is the effort that is required to  study ourselves when we trade and specifically to understand how the patterns of behaviour we come to observe in ourselves whilst trading, once identified, can be reframed so as to be appropriately aligned to the demands of the market.

It is the character of this effort that separates the winners from the losers. The market will always frustrate us until there is both clarity regarding, and application of, the necessary effort [ which paradoxically, once accepted and integrated, becomes actually quite easy to implement]. Having ascertained the stringent demands of the market we must find a way to develop the qualities in ourselves that best model the requisite qualities for trading success then build and sustain the self discipline to practice these so as to tilt the unforgiving odds slightly more in our favour.

Patterns of behaviour
For most of us, especially the more independent, discretionary type trader, and best efforts notwithstanding, our rationality can easily be displaced and overwhelmed by the tug of underlying emotion. What we discover is that the very process of engaging our beliefs, hopes, expectations and money with the market leads to the emergence of inner drives, propensities and perhaps compulsions that do not easily dovetail with the requirements for trading success and often appear to sabotage our best intentions.

Becoming aware of these patterns requires a willingness to confront aspects of ourselves we may have chosen to suppress, [for probably perfectly sound reasons], and then uncovering the coded messages or scripts they carry. Being a successful trader presupposes a toughness and tenacity born from having grappled with and overcome the inner demons that plague our every step towards success and having integrated these appropriately so that we are in charge of them rather than vice versa.

As we find ourselves performing at well below our imagined par we acknowledge that certain aspects of our approach need something of a radical overhaul if we are to pursue the evidently elusive success we crave. Here is where we may initially deduce the solution be found in a myriad of externals such as a better charting package and a deeper knowledge of technical analysis, more screens, different markets, more capital etc. Of course, these may all be helpful and we need all the edges we can get. But to look for the keys to success through these avenues alone can encourage the erroneous belief that just doing more of what we already do will somehow engender a transformation of trading results.

Most trading journals carry seductive adverts for market beating software and systems and I’m sure many of these companies make a good living in the picks and shovels business. Perhaps there are actually people out there who truly believe that the path to riches is going to be sold in a magazine for five hundred pounds. Frankly, we have to ask ourselves to what extent, if any, this attraction to a ready made package is still some residual grail hunting that promises to relieve us of the need to actually think for ourselves.  In my experience, what is actually needed is a thorough shift in approach that originates in how we structure our beliefs about the nature of trading. Clearly, this is something that cannot be bought over the counter and has to happen deep inside ourselves and is usually a long and onerous process.

Process of change
So, how might we begin the process of change that will equip us with the tools for eventual success? There is not necessarily a seamless, unbroken chronology here but we could reasonably suggest that the following steps are all essential

• Awareness of repeating behavioural patterns that occur whilst trading, emotionally, mentally and somatically
• Identification, naming and crystallisation of these patterns
• Commitment to changing any behaviours and patterns that are incompatible with trading success
• Formulating and nurturing a vision of yourself as a successful trader
• Devising strategies and techniques that will support the realisation of this vision
• Practicing market actions that are in line with this commitment and vision
• Persisting with these actions until they have replaced the previously less productive actions and become automatic
• Continuing this process indefinitely from top to bottom

Say, for example, that you struggle to run your winners for as long or as profitably as your methodology / intuition suggests. Perhaps you are still encumbered and controlled by a set of fear based trading beliefs that reflect experiences from the past.  On the surface, the reasons could be properly and justifiably ascribed to the fear of losing profit. But fear, of course, has many subtle nuances, idiosyncratically structured and expressed according to the early messages you received from your family and upbringing. 

Many traders I have spoken to find leaving the lions share of the potential profit regularly on the table to be even more painful emotionally than actual losses. Continually closing winners early, irrespective of whether this is the right market action to take at the time, betrays a lack of understanding of and respect for the probabilistic parameters within which success happens.

Inner messages
Bringing your awareness and attention to these moments of “decision” can reveal some interesting and potentially beneficial insights about the storehouse of inner commands and injunctions that presently serve as a significant determinant of your trading behaviours. As you become increasingly familiar with these repetitive and very powerful patterns of belief, thought and behaviour you may want to begin to consider them as potential allies in disguise, if you like. For although you may not have approved of the actions they apparently compelled you to take, nevertheless they are acting purely as servants to some earlier, perhaps no longer appropriate, commands you gave them. They have been unfailingly doing as they were told / informed and usually represent key expressions of the ongoing narrative that you have created about yourself.

The more you gain clarity about these messages the better. Maybe you can come to find the inner voice that each of these messages communicates to you, usually to be found as a short, simple phrase. It can also be helpful to give an injunction or command a name so that you develop a relationship with it and gradually bring it into the realm of awareness that marks the beginning of its demise as a potent force in your life. So, for example, you might discover that you have acquired a “poverty consciousness” which may considerably limit your risk taking abilities and may manifest as an inner voice saying something like “ there’s never enough” . Or maybe as a child you picked up that “it’s all my fault” and how you have come to hold and express this in a trading context has been to feel guilty by saying to yourself “ I am a loser” , with predictable results.