Emotional or energy management is crucial to your ability to focus on the important matters, plan your trades, trade your plan, follow your rules and keep your commitments.  There are many who would tell you that you should trade like a robot; that is, without emotions, and you would not be unduly influenced by fear and greed.  Well, if that were possible, it is true that you’d avoid feeling fearful, greedy or any of the other negative emotions that drive unwanted bad behaviors.  Now, it’s also true that you would be void of positive powerful emotions like determination, inspiration, joy, love and curiosity that greatly support decision making and therefore you would not have the resource of these strong positive emotional energies either.  The research is clear that emotions, to a large degree govern decision making, not rational thought.  Many would argue that logic is what determines how and what they decide; but when you make a choice of which way to go on just about anything substantive, the final determinant is how you feel.

Let’s look a little closer at curiosity one of the more potent positive emotions.  I would argue that next to love, joy and happiness, curiosity will serve you longer and in more situations.  Additionally, the satisfaction of curiosity will add greatly to your joy and happiness.   One of the facts of the universe is the ubiquity of information or data.  Data are at the core of physics; from the sharing of information as in cellular communication throughout the body to actions like photosynthesis.  In other words, information and data are at the heart of everything…and that includes trading.

Armed with curiosity you will be able to tolerate the discomfort of both physical pain and emotional turmoil associated with fear, anxiety, greed, and anger to name a few.  With curiosity, you will yearn to see what happens if you allow the plan to unfold as written thereby increasing the information… the data.  Through curiosity you will be open to trial and error to learn how various indicators and/or moving averages would work.  As you create consistency in cultivating and using curiosity you will develop the capacity for greater emotional strength and endurance to sit with the discomfort in whatever form it may take and remain there for the sake of achieving your highest and best goals.  Once that happens you truly are on your way to becoming a consistently successful trader.  Developing and using curiosity is a way to learn more as you find out the “why” something will or won’t work.  If you are learning more about both the trading process and yourself you will put yourself in a position to do more as you are increasing your capacity to perform at ever higher levels of effectiveness and efficiency.  In other words you become more productive.  Furthermore, it follows that if your productivity is increasing and you are more effective overall then you are also in a position to “be” more.  So, it is safe to say that you are expanding not only as a trader but as a human being.  You are no longer held hostage by the “tyranny of certainty;” that is, the phenomenon that takes place when an individual only has a hammer, everything looks like a nail or when someone has limited alternatives that seem plausible then they are closed-off and limited in the ways that they can respond to that situation…they then have become tyrannized by the certainty of what to do. They have lost their ability to be flexible given that set of circumstances in that instance.  They are doing the same thing over and over and expecting a different result!  This is what we teach in “Mastering the Mental Game” Online and On-location and courses.  Ask your Online Trading Academy representative for more information.  Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.

Joyful Trading

Have you ever had a “bout of doubt” or were worried and anxious to the point that you couldn’t pull the trigger on a trade, or you violated a rule like prematurely exiting a trade to take a small profit?  These are classic examples of having a crisis of confidence.  Confidence is an essential component of your ability to plan, execute said plan and follow all of your rules while keeping commitments.  And, when you begin to question your capabilities, that is, you fail to trust in you, the fallout can greatly affect your focus and the ensuing distraction can cause you to become even more frustrated, frazzled and fragmented careening you out of control.  So, it’s safe to say that confidence is an integral part of the trading process and most traders understand that.  But, what exactly is confidence?  Merriam-Webster Dictionary (short form) defines confidence as: a feeling or belief that you can do something well or succeed at something; a feeling or belief that someone or something is good or has the ability to succeed at something; the feeling of being certain that something will happen or that something is true.

Of course, there is a major difference between having a belief in yourself and being arrogantly over-confident with hubris.  For instance, consider the person who takes a novice weekend trading course and thinks on Monday that they are an expert.  This is an example of false confidence which is quite dangerous to one’s trading account.  There are countless illustrations of this relationship between an individual’s misplaced “beliefs” that they have the skill to do something which is not backed-up by true expertise.  Research studies have demonstrated and Malcolm Gladwell shares in his book “Outliers: The Story of Success” that to become a true expert in something – say trading – takes about 10,000 hours of education, training and practice.  In fact people have lost more than money, like their lives, thinking in this way of false confidence.

Constructing self-confidence necessarily means building your competence.  As you learn, train, apply and practice your trading in ways that build skill, what also happens as you expand your competency is that you also build self-esteem; mouse click by mouse click and trade by trade.  True confidence is directly related to and is a precursor of self-confidence and personal trust/belief in you. For those of you who have been afflicted with “lack-of-confidenceitis”, here are some additional of the ways to begin to build and support “self-confidence” in order to maintain a laser-lock on doing what it takes to get you closer to trading success.

Focus on what matters most:  Your strategies, routines, rules, macro trade business-plan, and micro (everyday) trade plans are just a few of the things that belong on your what-matters-most list.  You must maintain a fierce focus on these crucial items.  Just as air, water, food and shelter are critical to your survival; the aforementioned are critical to building self-confidence

Document:  In order to effectively uncover what’s not working in your trading you must measure and document your issues as they surface so that you can begin to address and resolve them one trade at a time.  Keeping a trade log of your mechanical data set-backs and a thought journal that identifies internal data problems will not only make you a stronger trader they will also bolster your confidence.

Celebrate private victories:  Private victories are those times when you didn’t move a stop even in the face of fearing that you’d be stopped out, or when you didn’t chase that trade even though part of you was lobbying fast and furiously to do just that, or when you didn’t double down on a loser despite the voice inside that shouted “but you can get your money back faster!”  In these instances and others like them you stayed the course and you deserve to be recognized…so give yourself a good pat on the back and uplift your self-confidence.

Attend to details:  More times than not what makes the difference in success equates to the small rather than the large things.  The details matter…much.  Pay attention to what you are doing in order to remain on-task and on-top of important items in your trading process.

Avoid comparing yourself: Everyone is unique with different backgrounds, personalities and predilections.  Even people of the same family of origin have different mindsets, attitudes and approaches.  So, be sure to cultivate an independent outlook and avoid comparing your results to someone else.  It may take you a little less or longer than someone else to achieve the same or similar outcomes.  It simply doesn’t matter.  Maintain your focus on you and your path.

Manage your emotional state: Negative thinking creates negative emotional states. One of the ways to do this is to monitor your thoughts and change negative ideas when you become aware of them.  Also, make a list of your past accomplishments and use this thoughtful reference as proof that you deserve success; you’ve done it before and you’ll do it again.  And, those achievements that represent a particularly huge challenge are especially effective for this.   This will counteract the tendency to beat yourself up after making a mistake.

Cultivate patience with yourself:  We are all works-in-progress and you deserve a gentle hand as you negotiate the difficulties of trading.  As the cliché goes, “…Rome was not built in a day”; and as well your skill levels will take time to develop.

Confidence and trust in yourself is vitally important to doing what it takes to remain focused and trade with your A-Game, your highest and best trader.  These are some of the things that we teach in “Mastering the Mental Game” Online, On-location and XLT courses.  Ask your Online Trading Academy representative for more information.  Also, get my book “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading

 

When we think, feel, say, and do in a way that is congruent—meaning that we have internal and external consistency, perceived by others as sincerity or authenticity—then we are in alignment.  It can also be termed an ‘intra-rapport’, moving in tandem with self, in sync and balanced, also centered and grounded.  We can also be described as having integrity and ‘walking our talk’.  Alignment cannot be overstated in its importance to trading or anything that involves performance, for like a wheel alignment, or the congruency and alignment of the moving parts of an engine or piece of machinery, if integrity and alignment are compromised, even in minute ways, the object will either not reach its destination or it will, due to wear, become off course and disengaged to the point of disruption and destruction.  On the other hand, when alignment is true, optimal performance is all but guaranteed.  All parts are moving towards the same goal and in the same direction with precision.

Have you ever tried to ride a bicycle with loose or uneven wheels?  They begin to wobble; the gears don’t shift right, and the brakes rub, causing severe resistance and can even stop you.  Humans are often out of alignment, but sadly, many don’t recognize it.  They trudge along trying through force of will to achieve desired outcomes, and when they descend into mental and emotional fatigue due to the stress of moving against themselves, they often wonder why and search for the answer to their issues from every vantage point but the one that matters—inside of themselves.

There are many parts that are involved in alignment.  Some of the more important parts are:

• Purpose
• Beliefs
• Values
• Identity
• Capability, and
• Behavior

Purpose is first on this list because it’s of vital importance that you’ve identified the reason why you are in pursuit of any goal, objective, or desire.  You must be able to answer the “why” question.  A compelling reason will not only move, but catapult you to achievement.  There are categories of reasons that form the context for being compelling, such as:

Marriage or family—when you associate the thing you want with the people you cherish, that thing you want also inherits a large degree of that energy.  Spirituality is another of the “compelling” reasons that might be used.  By tying what you want to your notion of the Creator and devotion; that is, to do things on a higher plane, for some holds great force.  Also, the concept of community and one’s desire to be an agent for positive change would be a powerful reason as well for some people.  Additionally, your reasons may have a strong tie with personal growth, to be the best that you can be.  Knowing the underlying gripping reasons why you want to trade will greatly support your success.  Know what your purpose is for trading and it will go a long way in the service of you goals.

Next, you’ll want to have beliefs that support your purpose.  Of course, you must first know what your beliefs are.  Many of your beliefs are unconscious and must be discovered through a process of introspection and reflection. An excellent vehicle for this process is a Thought Journal to be used with your Trade Journal.  For instance, by using your Thought Journal, if you discover a belief that you lack the intelligence and analytical skills, or if you think that the markets are based on “luck” and you are not lucky, then it doesn’t matter much how compelling your reason is for trading.  You are out of sync and the prospects of becoming successful—as long as you harbor those notions—are slim to none.  You should be able to answer the question: What are my beliefs about the market, my abilities, and my worthiness?

Values are also critical.  As with beliefs, values must, for the most part, be uncovered.  You may want to “choose” values that are lofty and noble, but if you aren’t already “living” a value, it is not a personal value; it’s a personal principle, no matter how much you talk about it.  Personal principles and values are similar but not the same.  Personal principles are what you hold as important, and you aim to be true to those standards and maintain them.  Personal principles are what you “want” to live by. Values are how you are living – how you roll, so to speak.  Once you identify a personal principle and incorporate it into your life by committing to it as a behavioral standard and using it as a mantra of movement, then you transition to holding it as a value.  That is why values-clarification is misunderstood by some.  They think that, given a list of salient-sounding concepts like honesty, charity, health, wisdom, learning, diligence, integrity and so forth, they would then include in their personal values list the ones they “like.” However, you can no more declare a value than you can declare good health without doing what it takes to be in good health; this would be out of alignment and incongruent.  Here is how it works taking for example good health.  You would have to declare your commitment to good health, then eat, sleep, and exercise to finish the equation to take it from personal principle or aim to a personally held value.  Personal principles are chosen; values are discovered.  You can change a principle into a value once it is assimilated into the fabric of your being and reflected in how you live.  So, true personal values are reflected in where your attention flows and what your behavior shows.

Identity is another important aspect of you that must be in alignment.  It is the description of who you are.  Of course, you must first figure out which person in you we’re talking about.  Who are you first thing in the morning?  Who are you when you are really stressed?  Who are you when things are going well?  Who are you when you’ve just entered into a trade with an oversized position?  The fact of the matter is that you are not one personality; rather, you are an amalgam of any number of personas fashioned by your experiences taken from all manner of influential figures throughout your life.  The trick is to identify the person you’d like to be and begin to incorporate courageous change works into your daily routine to activate the strong, healthy parts of you towards being that person.  In this way, you can use the treasure from your wounds and focus on the goals of your highest and best self. When you are able to do this, you are on your way to becoming, step by step, the person you aspire to be.

Mission is connected with Identity in that the mission drives the ‘who’ you are aiming to be.  Mission is also vital to being in alignment.  For instance, you could have a family and friend’s mission, a work mission, a play mission, a business mission, and a trading mission.  A mission might be to “participate in the markets and be successful in personal terms and as a community partner.”  My mission and motto is “helping people grow.”  It encapsulates the picture that is driven by my purpose.

Capability is another important item of your “self” that must be in alignment.  In this sense, capability doesn’t have as much to do with what you are capable of at this moment as they do with what you are building capacity to accomplish in the future.  However, every person has a set of strengths, improveables and limitations.  Get to know them intimately.  As a starting point in aligning your capability, you would first need to identify what improveables were critical to the goal, what strengths were supportive and a change strategy that would address all of the critical mass issues so that your capabilities would then be in line with the desired outcome.  What are your trading strategies and what is your trading profile?  The answers to these questions are critical.

Finally, what are you doing in the service of your alignment?  Are you focused with a purpose that encompasses the desired outcome?  Behaviors are the test of alignment.  In other words, are you doing what you said you were going to do, like keeping commitments, following through with projects and following up on task items?  Do you have a trading plan and are you following through on it?  Do you have trading rules?  Are you practicing appropriate money management and position sizing?  When you have losses or experience other disappointments, are you able to accept the reality and move on, or do you wallow in self-pity, sadness, and anger?  Are you following the market? Or, do you wish, hope, pray, and otherwise try to make the market go where you want it to go?  Are you journaling?  Are you logging your trades? What you do speaks volumes about who you are.  Alignment also relates to how you are conducting yourself in other parts of your life. Are you expecting more from others than you are willing to give yourself?  Are you keeping your promises?  Are you having difficult conversations with loved ones and other important people in your life?  Are you exhibiting courage? Align yourself and your trading for consistent success.  You are an organic machine, and you work best when all of you are working in the same direction and on the same goals.

 

I can’t think of anyone in a normal situation who would not like to have a fun time full of raucous laughter; and that goes for traders.  In fact, having fun is normally an objective for most individuals.  It is a reason why people work so hard; that is, to have some time where they can relax without care and interact with family, friends or even strangers.  Having fun is across every nationality, ethnic, racial and cultural background.  However, no matter how much fun is in the fabric of human identity, it is not a good prescription for trading; now, on the face of it that may not seem to be sound advice.  In other words, why would I suggest that you not have a “fun” time while you are trading; especially since it is so ubiquitous?  Let’s take a closer look.

To begin with having fun is not without pitfalls.  Having fun has the prospect of mindlessness, which on the face of it is not a bad thing but mindlessness is not a quality of effective trading.  In fact, it is a drag on your trading.  One of the most important cogs in the trading machinery is the ability to focus on what matters most.  It is crucial that you are deliberate about your mindset as well.  Having a mindset that is aligned in thoughts, emotions and actions is required for planning, follow-through and keeping commitments.  Conflict is a nemesis of consistent, self-disciplined trading and when your thoughts are not aligned with your desired results then you are poised to veer off the path at the first fork in the road.  The fork in the road is where you must make a choice between going to the left, violating your rules, and going over the cliff to crash and burn; or going to the right, trading your plan and keeping your A-Game at the platform.  You must be self-aware; i.e., you must pay attention to what you are telling yourself so that you can counteract any errant limiting or negative thoughts that can cause negative emotions like fear, anxiety and greed that throw you off track.  Thoughts determine emotions, and emotions drive behaviors, and behaviors beget results…in every instance.  These three variables are precursors to every result that we experience…bar none.  There may be other variables involved, but at the core are these three – always.  So, your mindset is intricately tied to this ability to think clearly and follow-through.  If you are not mindful; or in other words if you are frivolous in your approach it is going to bite you before it’s all over.

The mindlessness of fun can be highly injurious for another reason as well.  Due to the lack of attention paid to emotional stability you are less likely to track your feelings; meaning that you are less likely to document your internal data (thoughts, emotions and behaviors) that occur as you trade.  Your journal is among the critical things that you must do in order to become aware of your trading issues and then of course to address them.  I have often said that you can’t change what you can’t face, and you can’t face what you don’t know.  Change is another inextricable part of the trading process.  If you are not identifying changes that must be made in your trading, then you are not learning and growing.  If you aren’t learning and growing then your trading is not getting better.  Without growth you are going to languish in the dregs of results you don’t want which is where frustration and fragmentation reside.  Mindlessness is the antithesis of deliberate, design oriented trading.  Having fun then becomes the antithesis of methodical smart trading.

Now, am I saying that you should not enjoy your trading?  No, absolutely not!  Enjoyment is a lynchpin of trading well.  Think about an endeavor that you have mastered whether it is work related or not.  For instance, let’s say that you trained to be a physician, or a lawyer or plumber and your skills have been honed by years of practice.  When you engage in this behavior you enter into a zone of effectiveness; in other words you gain great pleasure from doing this well.  You have developed a standard of excellence and it makes your heart sing to perform at the highest levels of your ability.  Similarly, if you have learned how to dance, play a game, or compete in a sport to a high level of proficiency you gain great bliss from your involvement.  As with the professional activities, when you have established a standard of excellence you feel a sense of power and accomplishment that can only come from performing at your best.  This feeling that you are experiencing is joy.  It is a fulfillment of an inner intention that has been made manifest.  Now, you might be asking, “What is the difference between fun and joy, aren’t they the same?”  Actually, no they aren’t.  Fun is like eating cotton candy at an amusement park.  Cotton candy is pure sugar and it’s a lot of fun to eat; just ask any child or remember the last time you ate it.  But, it has no nutritive value.  In fact, if you continue to eat it there will be negative consequences; for instance, cavities in your teeth, upset stomach and if your diet consists of too much cotton candy and not enough of normal food you will starve.  Joy, on the other hand, is eating a delicious well balanced meal that is full of nutrients, vitamins and minerals that not only taste good but will support your strength, well-being and health.  Joy is a precursor to happiness and living a life that is thoughtful, growth oriented and purposeful.

Fun, like eating cotton candy is fine every now and then.  But, when it comes to your trading, you’ll want to infuse it with joy; that is, going as far as you can with all that you’ve got.  So, establish a standard of excellence and aim to maintain it.  You’ll not only support becoming consistently successful you’ll feel better as well. For more tips like this get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”

Joyous Trading

Trading is simple, but not easy.  The difficulty, as trader upon trader has shared over the years, has to do with errant emotions like fear and greed that often stop the well-meaning trader in her tracks and drive rule violations.  Consider the following scenario: The look on Max’s face told the story; and it did not have a happy ending.  His plan had been based on the price within the Bollinger Bands regressing to the mean after hitting a supply zone which was supported by a 20 period EMA at the bottom of that supply zone.  The set-up actually was a high probability trade and all would have been fine if only he had followed through with the plan.  After entering the trade Max was now watching the price action when it began to inch upward toward his stop.  At first he felt some tension in his stomach but told himself that he was OK and that he would continue to follow his plan.  Unfortunately, as the price action ticked skyward, the more tension he felt in addition to a gnawing fear that was mounting as well.  He had violated his rules, many times before, and he promised himself that this time he would remain calm and allow the markets to prove him right or wrong.  Suddenly the price action surged with more speed, and so did his emotional discomfort.  He became so emotionally worked up that he completely forgot what he had just told himself a few moments ago.  His mind raced with an internal dialogue about losing and what that meant; which began to trigger more emotional volatility.  His hands trembled, his breathing accelerated and despite his best efforts the mental fog that descended upon him seemed to render him out-of-control.  He reverted to default behavior as he moved his stop a total of three times before he finally exited the trade with a substantial loss much greater than his original risk calculation.  This pattern of seeing an event in the charts, thinking negative thoughts that create errant emotions, which then drive physiological responses and behaviors, is a negative default pattern.  Negative default patterns that get triggered are like computer viruses in your body.  They take over your system and end up causing results that you don’t want.

Negative default patterns are programs that are connected to beliefs, biases and values and they are often not in your best interests.  Programming is created from your earliest days of being with family, teachers, counselors, coaches, clergy etc.  These programs represent all that you have learned and or experienced from zero years up to and including the present moment.  It is for these reasons that when they are triggered default programs keep rolling until the situation is over or until interrupted.  Of course, all programming is not negative or bad…thank goodness.  It is important to identify and modify negative default patterns that are contrary to getting the results that you want with your trades.  Trading is counter-intuitive which greatly adds to the challenges.  For example, humans are loss averse.  We are much more opposed to giving up something than we are drawn to acquiring it.  Losses tend to be twice as powerful as suggested by research, as gains.  This bias can cause you to move a stop when it is threatened by the price action or to be immobile in the face of pulling the trigger to enter a trade.

It is very difficult to modify a negative default pattern if you are not aware of the thoughts, emotions and behaviors that comprise it… especially if it’s deeply entrenched.  In most cases you’ve got to become aware of them first.  Default patterns are inertial, meaning that whatever your baseline behavior there is a great internal pressure to maintain that baseline behavior.   You can’t change what you can’t face, and you can’t face what you don’t know.  Like an iceberg, a greater part of everything that goes on in your brain and mind is out of your awareness.  This is especially true when core beliefs, biases and values are involved; and this is where the motivation for the conscious thoughts is generated.  Consequently, you must be willing to use introspection and self-reflection by keeping a trade log and thought journal in order to measure, verify and document internal data (thoughts, emotions and behaviors) that greatly impact upon your ability to plan your trade, trade your plan and keep your trading commitments.  You must become self-aware; that is, you want to monitor your thinking, feeling and doing.  Notice that self-awareness is far from being self-absorbed. To be self-absorbed is an ego function, which is driven by defensiveness, insecurity and fear-based behavior.  Self-awareness will increase self-knowledge and understanding by finding out those limiting beliefs, biases and values so that you can work on changing them.

One of the ways to increase self-awareness is to take your emotional temperature from time to time; especially when you are in a trade.  Feelings, either in your body (as butterflies in your stomach) or emotions like fear are often the first indications that something is not going well.  For example, if you are in a trade and notice those butterflies or a mounting fear and a few moments later get the urge to move a stop, the first noticeable signal that something’s amiss would be the feeling/emotion.  Simply put, it means that you are checking in with yourself to see whether you are too hot emotionally (angry, excited, greedy or anxious to name a few), which can lead to impulsive behavior; or too emotionally cold (boredom, fear, worry, doubt, etc.) that can prompt you to freeze in a trading situation or act out of exasperation.

When you notice the uncomfortable feeling/emotion there is an opportunity to “interrupt the emerging negative default pattern” that has been initiated by what got your attention; such as the price action drifting toward your stop.  When this happens take a deep breath and count to 10 while simultaneously changing your physical position.  Then ask yourself this question: What am I telling myself or believing to feel this (fluttering stomach, tension, anxiety, fear, etc.).  Once you identify your internal dialogue, you can begin to deal with it by challenging the negative thought or limiting belief.  Ask yourself: Is that true, is that absolutely true?  Interrupting a negative default pattern as it is being triggered is an enormously effective way to start taking back control.  Self-awareness is one of the first steps to self-management and self-discipline.  Become deliberate in what you do by becoming aware of and deliberate about what you think.  Then you can design your responses rather than operating by default.

Trading is psychological warfare.  The difficulty stems from the myriad ways that the trading process challenges your weaknesses, character flaws and blemishes.  Trading requires self-limits and personal accountability.  Your best trader, your A-Game is the only acceptable position to trade from.  Otherwise you are placing yourself under impractical, unacceptable and unsustainable risk.  Don’t allow yourself to continue to trade under the influence of negative default patterns.  Identify, root-out, neutralize and replace negative default.  Protect your capital. This is what we teach in the Online Trading Academy “Mastering the Mental Game” Online and On-location courses.  Ask your OTA representative for more information.  Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading