Article

Awareness is Vitally Important to Trading….But Why?

‘You can’t change what you can’t face, and you can’t face what you don’t know.’  This obscure but very important quote was coined by my friend, Jackie in a conversation we had some years ago.  We were discussing the challenges that all humans face with initiating and managing change.  Within this conversation we both agreed enthusiastically that, embodied in this simple yet deeply profound statement is a principled truth about how acutely and pervasively awareness plays into your ability to detect and repair issues.

The speed and effectiveness with which you become aware that you have initiated an error in the sequence of behaviors needed to secure an effective outcome to an endeavor…like trading… will determine whether you get stuck in a negative behavioral loop or proactively negotiate your way out of it. In other words, if you can’t identify your point-of-failure in a circumstance, that means that you don’t have the data to address it and initiate a course correction.  This being true, then you will continue to do the same thing and, yet, expect a different result.  This is a tenuous position because you can get caught in a loop of behaviors, either unwilling or unable to do something different.  But, how could you be expected to do something different if you aren’t aware of the offending variable?

A few years ago, I had some critters in my basement.  They were field mice that had come in through a hole in the wall.  After a number of them had found the hole, no doubt alerted to its existence by their cohorts, (they had become aware) the mice began to attack anything that remotely resembled food.  They ate through baseboards, got into the food cupboards and generally had a good time before I identified that 1) there was a problem, 2) that they were rodents and 3) what to do about them.  However, was this the end of the issue?  No, because I had yet to realize the breech and then find exactly where it was.  Until this additional data was available, for every mouse that was eliminated there were 2 or 3 more that gained entry.  It became like the game Whack-a-Mole; they just kept coming and the problem continued. Ah, but once that critical piece of data was uncovered (the location of the hole) the problem was effectively resolved…at least that one!  So, this notion of awareness is not only crucial for identifying where you’ve gone wrong, but also to discover what must be done to have a genuine resolution.

Another critical factor is that most experiences in mind, brain or body (95 – 97%) are out of awareness (unconscious).  Take a moment to consider the trillions of communications that go on in your brain, mind and body in each moment, down to the cellular level, and all but a few happen below the surface in the subconscious. This includes the higher functions of thoughts, emotions and behaviors.

Now, let’s drill down a little deeper.  In the formula for getting results, you may remember that there are three variables that are always present in any outcome; and even though there may be other variables present from time to time, these three are vital and they always impact upon the result.  Those variables are, T + E + B = R where T = thought, E = emotion, B = behavior and, of course, R = results.

Largely, people erroneously believe that thoughts are mostly both conscious and rational.  Neither is true.  Thoughts are mostly unconscious and include mind movies, verbalizations, beliefs, biases, values and attitudes. All of these thoughts can be either supportive, or highly toxic.  Toxicity, unfortunately, is typical for many people across the planet due to political unrest, dire living conditions and violence.  From the earliest moments in life, negative experiences have led people to create meaning and beliefs about those experiences that are limiting, negative and irrational. These belief structures are deep in the unconscious and continue to negatively impact upon conscious thoughts; for example, I can’t do this; I’m no good at math; I’m stupid, you must be lucky to be a successful trader; and so on and so on.  Now, these conscious thoughts that are triggered by deep seated subconscious beliefs generate emotions like fear, greed, anger, anxiety and doubt, to name a few.  When these and similar emotions are activated they drive behaviors causing you to do the very thing that you promised you wouldn’t do, for instance moving a stop, chasing a trade, or premature exiting! Herein lay the financial death traps that will eventually blow up your portfolio.

So, what must you do to train your brain to monitor, and address negative subconscious thought/emotion issues before they become fiscally lethal? First, it’s imperative to become self-aware.  This means that you are periodically scanning your mental, physical and emotional location in space/time (this can be done by simply taking your attention into the breath).  When you locate your being in the present, you are effectively rooting yourself in the NOW. When you are in the NOW it is more likely that you can mesh mental and emotional parts (for example the inner child, the critical parent, the strong adult) in order to become aligned in body, mind and emotions to go in the same direction and for the same goals.

This position cannot be overstated.  If you are in the NOW you are less likely to become frustrated, frazzled and fragmented. In fact, if you do find that you have fallen prey to the three F’s, when you become focused in the NOW with all parts aligned you can and will shift from the 3 F’s to become centered, grounded and focused on what matters most.  When this happens, then you are on your way to deliberately designing how you want to respond to the issue at hand rather than default to an automatic reaction based in limiting beliefs and negative patterns of thinking, feeling and doing.  In this aligned position you are poised to deliberately identify any errant negative thought that won’t support your desired results and change it to a positive thought that is in-line with your purpose and goals. This position will also help you to become aware of other aspects of mind and body (delinquent memories, biases, urges, etc.) that can distort judgement and distract your focus.  As you increase the ability to scan, detect, address and resolve toxic variants, you will create consistency in executing your process, and you will also develop the capacity for emotional strength and endurance in the trade.

Dr Woody Johnson can be contacted on this link: Dr Woody Johnson

Dr. M. Woodruff Johnson (known as "Woody") is the author of "From Pain to Profit: Secrets of the Peak Performance Trader". He has actively and successfully traded stock options, forex and futures for around 10 years. He was a former Executive Director of the Kaiser Permanente, Watts Counseling and Learning Center and holds certificates in Accelerated Learning, Neurosensory Development and hypnotherapy as well as others. He is dedicated to helping others achieve their goals and get the results in trading and life that they desire.

trendie

Well-known member
#2
I am probably being a tad thick here, but I dont get it.

I thought having a strict set of rules to follow was a logical means to overcome any kind of personal flaws . Having a set of rules prevents random trades, sets specific entries/exits, SLs, etc.

I always thought that NOT "being in the moment" helped more.
This helps to remove attachment, or any sense of importance on any specific trade, and allows you to take your individual losses and individual wins, and see the big, aggregate picture.

I hope others can make sense of it, but I am none the wiser with this article.
 
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dbphoenix

Well-known member
Aug 24, 2003
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#3
I am probably being a tad thick here, but I dont get it.

I thought having a strict set of rules to follow was a logical means to overcome any kind of personal flaws . Having a set of rules prevents random trades, sets specific entries/exits, SLs, etc.

I always thought that NOT "being in the moment" helped more.
This helps to remove attachment, or any sense of importance on any specific trade, and allows you to take your individual losses and individual wins, and see the big, aggregate picture.

I hope others can make sense of it, but I am none the wiser with this article.
There are a lot of psychologists churning out articles on trading even though they themselves either don't trade or aren't particularly good at it if they do (for example, Van Tharp). I assume they do it to drum up business for themselves. But, as always, caveat emptor: make sure that whomever you're reading or listening to knows what he or she is talking about.

Db
 
Likes: Mr. Charts
Jan 14, 2003
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#4
Being in the present moment means that you are less likely to allow thoughts / feelings that would cause you to not follow your rules / plan. There are a huge number of traders that don't do what they plan when in a trade because of attachment to previous thoughts and emotions.

I agree that the logical thing to do is to follow a strict set of rules but logic often goes out of the window when in a trade as many traders will attest to.
 

NVP

Well-known member
Jun 21, 2004
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fxcorrelator.com
#5
There are a lot of psychologists churning out articles on trading even though they themselves either don't trade or aren't particularly good at it if they do (for example, Van Tharp). I assume they do it to drum up business for themselves. But, as always, caveat emptor: make sure that whomever you're reading or listening to knows what he or she is talking about.

Db
if you cant trade ...then teach trading

if you cant trade or teach trading .....then teach Trading psychology

if you cant do any of the above ......... ?

:smart:
 
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Mr. Charts

Well-known member
Sep 18, 2001
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www.nasdaq-nyse-trading-courses.com
#6
Self-control, focus and having the will power and determination to ignore your emotions and concentrate on the evidence in front of your eyes are all key to me. When you are very experienced there might be times when your sub-conscious is remembering similar situations in the past and that gives rise to a "gut feeling" which you might well choose to follow, but that's not for beginners.
Objectivity and and some seasoned judgment are what matter in my opinion. When the facts change, your view of them and your actions should follow on.
A lot of trading psychology is waffle and navel gazing - imho.