Peak performance trading bridges the gap between wishful thinking and getting the trading results you want. The most powerful tool you have is right between your ears, as long as you learn the combination to unlock your inner self and unleash this strength. And, of course, to unlock your inner strength you must be in the moment, for the moment, fully available and in the “now” of the trade. This means that you are aligned physically, mentally and emotionally; in other words your system is geared to work in the same direction and on the same goals. If your system is aligned, you are accessing and activating your internal resources to bear on the task at hand. But, how do you align your system and overcome all the noise of counterproductive thoughts stemming from limiting beliefs, and erratic unsupportive emotions that ultimately drive behavior that … well, let’s face it, that lead to bone-head trades? One thing for sure is that you’ve got to engage your passion; you’ve got to identify what you are most jazzed about and connect that to your trading protocol and keeping your commitments. When you are motivated by a deep seated, inner desire, for instance the desire to be a “great” trader as opposed to a “mediocre” trader; you would become driven by a fire-in-the-belly intensity to do only that which is in line with being consistent in your follow-through. When you are intensely focused on raising the bar of your game, it becomes less about whether or not you made a profit in any particular trade and more about the excellence of your execution.   A magnificent obsession is developed around the details of the play and being meticulous about your strategy. Wouldn’t it be wonderful to have a magnificent obsession about doing everything that it takes to be consistently successful; where success in the trade is defined as how well you executed your strategy and followed your rules? This is the kind of self-discipline that tunes the body, mind and emotions to work in the same direction and on the same goals.

Neurologically, when we are totally engaged in purposeful achievement, the neurotransmitter dopamine is released, which sharpens focus and increases performance while creating a profound sense of well being. If you’ve ever learned to play a game or sport very well, then you have experienced the drive to be “better.” It really is about “how you play the game.” John Wooden, the great UCLA basketball coach with a record 88 wins in a row, which only recently was tied; seldom talked about winning but more about preparing. Roy Campanella, the great Brooklyn Dodger said about baseball, “…you’ve got to love it like a boy and play it like a man.” He spoke about that level of childlike focus that is immersed in wanting to do it well so badly you are willing to be uncomfortable in the service of getting better…and love every minute of it. You’ll practice for hours in the rain, cold and through pain because you want it that badly. Consider a toddler learning about her world. Does she need to be told to listen, to look, to imitate, to try and try again? A child is driven, and if she sees what she wants, she’s got to have it, or if she sees behavior, she must imitate. She struggles, falls and rises, as she is obsessed with learning to walk. She makes sounds and tries to talk with a dogged determination. That baby is keyed into a passion that drives her to see, to listen, to imitate, and to learn. The passion that drove you as a baby is still inside you; it is a part of your humanness. Unfortunately, we are also taught to remove ourselves from the passion as we become socialized into “good citizens.” Socialization can stifle curiosity, creativity and that playful spirit that sees life as a series of games and puzzles to figure out. When this happens, or when we become “grown up,” that inner spark to explore the reasons why, and to be wide-eyed at the wonders of life, is often lost to the detriment of a rich and growth-oriented life. But, when rekindled, this passion galvanizes our energy, curiosity and trial-and-error courage.

Making mistakes in the service of learning becomes a way of life when your passion is engaged. This passionate attunement to doing what effectively magnetizes your desires to you also makes you feel like a hungry lion, driven by the deep desire to do that which gets you the results you want. Consider the prey the lion must stalk and kill in order to survive and thrive; if she does not learn to do that effectively and in the proper sequence, she will not eat and surely will perish. She must learn the process of hunting first in order to be successful in the hunt. Using this metaphor, the protocol of steps involved in successful trading is identifying the high probability target, stalking, patiently waiting, and then entering the pursuit. You first want to ensure that you have that reality firmly locked in your mind. You must develop the intense desire to learn the hunt, or to do whatever it takes to ensure success, and success is defined as faultless execution and follow-through.

The type of motivation is also part and parcel to this conversation. We are not speaking of external motivation, the kind you get from listening to a rousing speech or a riveting trading lecture. This is anoutside source. This is a good starting place, but it doesn’t last. It has artificial peaks. The day after the speech, you’re 30 minutes early to your trading desk, doing homework and vowing that you’re going to “do it right.” This may last just long enough for the trade to go against you—then, with one failure to include a stop loss, you’re back in the same boat, and the rules might as well be thrown overboard. This kind of motivation leaves you with a false sense of well-being. You get a shot in the arm, but it wears off.

Then there is the most obvious “fool’s gold” motivation—money. It too is short lived, because money is transient and of itself has no substance; it is only good as a medium of exchange. You can’t eat it, drink it, live in it, drive it or wear it – at least not for very long. Many believe that they want money, but to be specific, what they really want is what money can buy. I would contend that if you had everything that you have ever desired, money would lose all of its appeal. The literature is replete with studies that support the notion that money is a poor motivator. One of the articles written about this subject was a Forbes.com missive by Charles S. Jacobs, March 6, 2009 entitled, Why Money Isn’t A Motivator.   An out-of-proportion fixation on money in any particular trade can be a prescription for greed. Greed distorts reality into a phantom of itself, resulting in decisions based on conjured notions of what we “think” will happen, not what is taking place in the charts. Thus, money as a motivator is a poor prospect.

Then, there is fear: “if I don’t make a profit in this trade then I am screwed!” Fear, like greed, fragments, blurs and moves you to grasp for fading phantoms that leave you as bait in waters teeming with sharks eager to feed on your capital. I’m sure you’ve heard the adage: “Scared money does not win.” The only motivation that moves you to identify what is required for consistent long-term results is that which is forged in the heart space of your inner self where those results are tied to reasons like family security, a richness of life, personal pride in doing a good job, and/or peer recognition. This is where your passion resides.

So, rev up your internal engine around something that you’re jazzed about and connect it to your trading to love it like a child and trade it like an adult; where the child is magnificently obsessed with the joy of doing it masterfully and the adult is focused on what matters most – faultless execution.

Has this ever happened to you?  You look over your trades at the end of your session and notice a landscape that caused you to wonder who stole your mouse.  In fact, it seemed as though you were in a fog or a trance; a dream-like state that left you tripping over bad habits and old patterns that acted like a deep rut from whence you couldn’t escape.   In other words you were barreling ahead oblivious to plans, rules or trading commitments where your behavior was driven by fear and/or greed.  You felt dejected, defeated and depressed; and most of all out-of-control because you had done this over and over after having promised yourself that you would change.  This is default trading, meaning that you defaulted to negative patterns of thinking, emotions and doing that proved to be far away from what was in your best interest.  

Another way of describing the above is you were caught in a “negative trader trance” a pattern of behavior that had become so deeply entrenched that you had been on auto-pilot as if in a plane whose controls were broken.  This negative trader trance plagues thousands of traders every day.  You find yourself – despite your best effort to stop– driven by bad habits that have been motivated by errant emotions, which are prompted by unconscious conversations.  Unfortunately, most of this process is out of your awareness until it is too late, and even if you become aware of the issue, it is as though you are trying to walk forward in a 200 mile per hour headwind; it feels impossible.  

One thing that you must come to grips with is that the change you seek is nearly impossible, until and unless you become aware of your issues.  Yes, you are certainly aware of the fact that you are getting results that you don’t want, but that is not enough.  You must become aware of your underlying self-sabotaging thoughts, emotions and limiting beliefs that drive what you do.  If you don’t become aware of this “internal data” you will continue to do the same thing and you’ll get the same result.  You must increase your ability to be “self-aware.”  To be self-aware means that you are cognizant of where you are, what you are doing, how you are doing it and what is going on inside of your body and head.  You’ve got to be sensitive to changes in your feelings, not just your emotions.  Emotions like anxiety, fear, greed and anger are not always known to you.  They can be triggered by an unconscious thought, such as; “…if I lose in this trade that means that I am stupid.”  This unconscious thought might give rise to a surge of anxiety initially, and after the loss, self-loathing; but the emotions may not be identified by your conscious mind (your awareness) because you are not in touch with them.  Rather, what you feel, for instance, is a tension in your gut, a pressure in your head, or a pain in your back.  These feelings are directly related to the unconscious emotion, but you are not aware of the connection.  So, you barrel ahead feeling something in your body, and for the most part oblivious to the pattern of behavior that has been initiated, like turning on a switch to chainsaw that has no handler – it can cause a lot of damage. 

So, when we talk about increasing the awareness of your issues and problems, it is more than that.  You must develop sensitivity to the signals that your body and mind are sending to you that something is wrong and requires your attention.  For example, when you are about to enter a trade and you feel a knot in the pit of your stomach, it may not just be that undigested pork sausage sandwich that you ate for dinner last night.  In fact, it probably isn’t most of the time.  Your subconscious attempts to communicate with you early and often as it relates to engaging in important efforts (like trading) where you place a very high value on phantom concepts like always being right, being perfect, never losing and many other “limiting beliefs” that will throw a monkey wrench into your trading machinery.  When this happens you are out of alignment and working against your best interest.  Actually, when you feel any discomfort, it is usually connected to a part of your inner self that is attempting to express itself.  Your personality is made up of a number of distinct parts, which is why you are often in conflict.  This conflict is a reflection of differing notions, belief systems and values that are vying for expression.  How often have you “decided” upon a plan of action in your trading only to “second guess” and renege on the plan…then to find that the second guessing caused you to lose.  Or, how about making a decision to lose weight, get up early, or put together a Macro Trading Business Plan and part of what you tell yourself is that “you either don’t really need that” or “that you’ll do it as soon as you get “a round tuit” (I’ve got some of those for sale by the way – they are in high demand).  

Becoming more sensitive to the signals (internal thoughts, emotions, feelings, etc.) means that you must stop and “listen” to your body.  It means that you must be willing to invest the time and energy to get to know you.  It means that you must be willing to get outside of your comfort zone and be uncomfortable in the service of your highest and best goals and your A-Game.  I remember one of my students decided not to involve themselves in an exercise in one of my classes.  When I asked him why he had not done the exercise he said that he didn’t want to “remember” the trade and go there.  I told him; “…but, that is exactly the point!”  You must be willing to confront the unpleasant thoughts, emotions and memories to find out what is at the core of your conflicts, bad patterns and limiting beliefs.  What you resist…persists.  Using mindful practices like self-reflection, introspection, meditation, and just asking the question “why” after each answer to the question “what is going on with me right now?” will help you immensely in your quest to connect with your highest and best trader.  

Mastering your mental game will help you reach and sustain your A-Game.  Your best game is crucial if you want to get consistent positive results.  In the process of mastering your mental game you will learn tools to help you become more sensitive and self-aware so that you can change the bad behavior and begin to keep your rules and your commitments. 

Have you ever noticed as you looked at a chart after, say an FMOC meeting, or some other economic report or news event, that when the market invariably whipsaws all over the place as it surges upward and plummets into the hinterlands that your emotional volatility is oftentimes calibrated to the volatility of the price action? Yeah, I know, it’s kinda weird the way that just moments before you were feeling fine; all relaxed and focused.  Then in an instance the price action fireworks start and you either become recklessly excited and possibly chase or hopelessly dejected while your distorted illusions of the market put you on the precipice of violating your rules.  Every day across the trading planet, millions of buyers & sellers make bone-headed moves due to the out-of-control nature of their emotional states brought on by what they “think” they see in the price action. Consider the following:

“It happens every time”, Raymond seethed to himself.  “Why do I freeze up just when the set-up is ready” he said.  The price action on the ES E-Mini had just pierced the supply zone and a shooting star candle formation had presented itself at the top of an intra-day rally on the 60 minute chart.  Rather than place a market order at the close of the next candle on the 5 minute chart, he found himself unable to pull the trigger.  He was driven by fear of loss and fear of being wrong.  And, it seemed that lately he had become much more prone to anxiety and fear when getting ready to.   Now the price action was dropping and was putting considerable distance between the stop that he “would have” placed had he entered the trade and the current price, which would have considerably increased his risk in this trade.  His feeling took yet another turn as he made internal pictures of what someone looks like when they are losing…slumped shoulders, sad face, and dejection in their eyes, which he began to uncannily look like that internal representation or picture .  Additionally, since the train had left the station if had he entered now he would be effectively chasing the trade.  He noticed that he was feeling angry, irritated, and stressed with a distinct indication that he had swallowed an anvil which was just sitting on his stomach.  Raymond was experiencing “emotional pivots” at play in his body and mind.  

Using pivot points as a trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for floor traders to have some idea of where the market was heading during the course of the day with only a few simple calculations. The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous day’s high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level, support and resistance levels calculated from that are collectively known as pivot levels.  

An emotional pivot is a distinct turning point in your internal emotional experience.  The strongest points are those that have moved the person from a somewhat emotionally balanced state to going up in feeling intensity.  These emotions could include for example anger, excitement, greed, fear, anxiety, impatience or on the other hand sadness, guilt, boredom, humiliation, dejection and/or rejection.  As in Raymond’s case, his emotional pivots became activated firstly by an event (he saw the signal on his charts that the ES E-Mini had just pierced the supply zone).  This got his attention and he immediately asked himself three questions that he and you always ask in the presence of an event (although for the most part these questions and the subsequent answers are out of his and your awareness).  Those questions are 1. What is it?  In this case it was a signal that required him to enter a trade.  2. What does it mean to me?  Here it meant that he would by necessity be putting himself at risk – thereby initiating the emotional turning point bringing in anxiety and fear.  3. What am I going to do about it?  In this instance he was so anxious and fearful about putting his account at risk and possibly being wrong that he did nothing, which resulted in a missed trade.  

The second event was internal (he made internal pictures of what someone looks like when they are losing – which was due to his missing the trade).  He again unconsciously asked himself three questions (these same questions are asked every time someone experiences an event.  1.  What is it?  The “it” here refers to the picture that Raymond conjured in his mind of a loser since he has again missed a trade due to a lack of follow through.  2. What does it mean to me?  Here Raymond’s interpretation of seeing a picture of what it looks like to be loser means to him that he is that loser?  3. What am I going to do about it?  In this case he assumes the posture of the internal picture effectively making it a reality that he (in his mind) is a loser, a failure, and can’t follow his plan.

The third event was also internal (he noticed that he was feeling angry, irritated, and stressed).  As indicated in the above, whenever an event happens you ask those same three “mostly unconscious” questions.  1. What is it?  Here Raymond recognizes that he is feeling worse, no doubt brought on by what he is internally telling himself (an unconscious conversation); for instance, “…This happens every time.”  2. What does it mean to me?  In this instance Raymond’s meaning is confirmation that he is a failure; why else would he feel such negative emotions.  (Of course, this meaning is only in Raymond’s mind, it is another example of what he is telling himself).   3. What am I going to do about it?  Well, we don’t know what Raymond did, the vignette ended there.  But, in these types of scenarios, if you were Raymond, you might find yourself continuing to sulk and missing other high probability set-ups or taking an impulsive revenge trade and adding to poor results.  Either example does not bode well for your trading results.  

You’ll want to find out as much about your emotional pivots as you can.  They are usually your first signal that you are in hot water (with a trade or otherwise).  This signal is often a feeling; like a tension headache, butterflies in your stomach, anxiety, fear and so on.  When you get that event or internal signal that something is not right; then ask yourself this additional question.  “What must I be telling myself or believing to feel this way?”  This is a very important question that helps you to begin to identify the impetus for the bad feelings; that is, the unconscious conversation.  You can then do something about it.  Once you identify the faulty internal data you can start to change it.  Remember that thoughts prompt emotions, emotions drive behavior and behavior delivers results.  

You must ensure that you are prepared to do battle in the trader trenches by employing and maintaining your fierce focus on what-matters-most in the trade.  Your emotional state is critically important to honing that focus and getting the results that you want.  Just like on a chart with price action pivot points, you can begin to track your emotional pivot points as you identify which set-ups or strategies have associated with them negative emotions.  Document your trades with both a trade log (for mechanical data) and a thought journal (for internal data).  You can actually indicate on the chart with both text and a mark at which point your emotional pivot became activated.  This will help you to be proactive in dealing with the difficult entries and preemptive in using an emotional tool to reduce the intensity of the emotion associated with that particular entry.  Your A-Game is absolutely critical to executing in the right place and at the right time.  You’ve got to master your mental game before you can hone that A-Game. 

Have you ever noticed the price action rising like a rocket in an extended rally or plummeting in an extended sell-off?  If you’ve been trading for any length of time the answer of course would be yes.  Ahh, but the more important question is, how did you respond?  If you are a novice, you probably took one look at it and thought to yourself, “wow, look at that, I’ve got to jump in on this because it will give me a win.”  And, did you feel an emotional surge of say, excitement or greed?  Then, what did you do?  Did you hit the buy button on the rally…or the sell button on the sell-off?  What happened next, in most situations, is that the price action hit a significant supply zone/resistance level or demand zone/support level and immediately retraced…more-than-likely, significantly.  Then you lost!  Either you were stopped out or you didn’t have a stop in place and you lost so much capital that you liquidated the position.   After that you probably felt frustrated, frazzled and angry; not to mention calling yourself a few choice names.  The order flow and being able to identify when it shifts and when it is about to shift is all important to your successful execution.  Let’s take a closer look.

Firstly, the market exists because of conflict.  For every transaction, there must be a buyer and a seller; hence, it is necessarily adversarial, and in each individual transaction there can only be one winner; the other must lose.  It is impossible for both sides to be right and the order flow goes in only 2 directions, up or down. So, the importance of knowing the order flow is paramount.  What should be noted here as well is that many of the order flow movements are case settlements, which occur when a short is covered or a long is sold.  Actually, a large percentage of price action is characterized by stops being hit or in other words the loser is liquidating.  Only the loser must get out, the winner can wait.  When the loser and winner leave the market; the market is vulnerable to a reversal – only winners are left.  All price action is determined by an imbalance of orders overtime.  How and when those orders are filled creates price action.  So, what you must attend to is whether or not your order is ahead of the next wave of orders in the direction of the price action.  Your analysis, if you want to be consistently successful must be designed to find where the eventual loser will be placing his orders. 

The order flow quite simply is the number of buyers and sellers that are lining up at any given price point and it is a natural imbalance.  Knowing where the loser is in the order flow is all that you need to concern yourself with when you trade:  “Where is the loser and when will he quit?”  What does this mean?  Well, you start the process of understanding where the loser is and when he will quit by first understanding what prevents you from seeing where the loser is.  This is difficult for many traders because they fail to realize that as a novice they are the loser at this point. In many ways, your thinking is the same as every other loser out there.  Knowing how you think gives you clues to how they think. You can then learn to separate yourself from the herd.  Of course, to know how you think you must first become aware of your biases as it relates to the charts and the news.  Extended rallies or sell-offs hold an inordinate amount of bias as the novice becomes exited by the real estate being covered in the price action.  He becomes seduced by the belief that prices are going to continue and often, impulsively executes in the direction of the rally or sell-off.  Actually, the seasoned successful trader is looking to take the opposite side of that novice trade when markets are extended and there is a distinct imbalance between supply and demand.  You not only need to become aware of your beliefs about the price movement, you also must learn how to look at the charts to identify areas where the imbalance is greatest because that’s where the lure of false buy or sell signals are.  

The fact of the matter is the market is only a neutral representation of the price action; there is no pain in nor created by, the market.  It is only in the head of the trader.  Also, there are traders who think that the market is “against them,” and that it is a fight.  However, if there is a fight it is with yourself.  The fight with yourself is caused by the internal conflicts.  These internal conflicts are in the form of unconscious limiting beliefs that drive thoughts about the price action and about yourself.  These biases and limiting beliefs are about “good” news versus “bad” news, the need to follow the herd and the belief that indicators have real time data.  It’s important to become aware of these biases and limiting beliefs by monitoring your thoughts.  In other words, what are you “telling” yourself just before that impulsive entry or chasing that trade?  So, examine your thoughts as you look at charts and become familiar with the common trader illusions about jumping on the bandwagon, or following indicators as though the information they contained were as reliable as the reality of the price action.

Careful tracking of the order flow offers the ability to wait for the right moment as the order flow is indicating that a reversal is setting up.  Your mental game must be in order to become aware of mechanical data (the mechanics of the trade); that is, the data of the market, technical analysis and price action and getting the knowledge about supply/demand levels.  Additionally, your mental game means becoming aware of internal data; that is the thoughts and emotions that drive the behaviors which produce your results.   All of your results stem from thoughts, emotions and behaviors; and in order to get different results you must change your thinking, which is driven by beliefs, and which initiate emotions, which drive behavior.   Trading is a precise, performance oriented art.  In order to have consistent success you must “always” bring your A-Game.  With your A- Game firmly entrenched you are then in a much better position to avoid the herd mentality and thus take advantage of supply/demand rule based trading without being seduced by illusions stemming from limiting beliefs.