One of the concepts that matters to all traders is “results.” Your outcomes or the consequences of your efforts are on the top of your what-matters-most list. In order to increase those results in your favor you must manage your mindset and that begins with the three “internal” variables that contribute to results; they are thoughts, emotions and behaviors. Any outcome or result that you get is an outgrowth of those three variables. Thoughts (movies in your head, internal dialogue, beliefs, biases, values and attitudes) create, prompt and determine emotions, that drive what you do…hence you get a result. When managing your mindset, one of the first and most important concepts is to become aware of thoughts, this is important because most (about 95%) of everything that goes on in your brain/mind is out of your awareness. So, if you are going to manage your thoughts you must first become aware of those negative ones that are causing erratic emotions, like fear and greed which disrupt follow-through causing you to break rules and violate commitments. To become aware you’ve got to monitor what you are telling yourself and when you identify these unconscious conversations it is important to “reframe” them. This mental tool is indispensable to your ability to develop and expand capacity for emotional strength and endurance in the trade.

Reframing begins with an idea or thought and that thought is “framed.” Framed means that the idea has a meaning already associated with it in your mind. Meaning is extremely critical to how you respond or react because when you attribute a meaning to something as in, “that moving average crossover means that my entry was a good one” or “the price action is moving toward my stop and that means that I’m going to lose and that means that I’m a poor trader, and that means…” you get the idea, then what follows is a corresponding emotion and if that emotion is for instance fear, the discomfort prompts you to “do something” to reduce the intensity of the emotion, like move your stop. Meaning controls not only what you perceive, but how you perceive it. So, if you change the meaning (frame) by reframing the idea then you change the meaning, and if you change the meaning then you also change your emotional relationship to it; going from feeling unsupported to supported to do what is in your best interests. This is done by changing the content and/or the context of the idea. Consider the notion of loss. The frame that most traders will use is negative as in adjectives like painful, bad, disaster, failure, etc. In the second example above where the price action is moving toward the stop, the emotional relationship is strained and feels uncomfortable – fear, anxiety, worry, etc. The reframe might look something like: “Every small loss gets me closer to a big win.  Or, failure is only feedback and lessons. Or, losses are the cost of doing business.   Or, everyone experiences loss, what is important is how I manage my losses and keep them small. “ See how the meaning and therefore the emotional relationship or “feeling” of these statements is positive or at least neutral, going from the unsupportive negative energy of the original frame to the supportive positive energy of the reframe.

Your mindset begins with your thoughts and many of those thoughts are in your unconscious so monitor what’s going on in your head because you can’t change what you can’t face and you can’t face what you don’t know. You must first aim to increase your awareness of unconscious conversations by training yourself to be in the moment. It’s not easy which is why I use the word train; just like training for physical competition – only in your mind.   Additionally, I often talk about the importance of being in the NOW of the trade. If you are in the Now; that is, fully present and fully available which means that you are firing on all cylinders and optimizing your internal and external resources you are more likely to be aligned in body, mind and emotions in order to go in the same direction and for the same goals. Being in the now means that you are focused on the task at hand; your attention is more prone to be at least close to if not 100% invested in that task and there is less likelihood for you to be conflicted which is a major issue for traders.   Training yourself to monitor thoughts, emotions and behaviors will also assist you in being able to anticipate what might go wrong and to be proactive in your preparation to deal with it and preemptive in reducing those issues, like biases, that can get in your way.

So, once you identify that the statement that you’re telling yourself is unsupportive, for instance, frame – “I know I don’t have a set-up, but I’ve got to get in on this price action and make some money” reframe – “What I’ve got to do is keep my focus on what-matters-most and wait for my set-up” or frame – “ I’m so stupid for chasing that trade; I’ll never get this right” reframe – “I’ve made a mistake, I’ll journal it and use my tools to cease doing it again; the more data I have the better trader I become” Make sure that your emotional relationship to your mindset as it is created by what and how you are talking to yourself is positive, uplifting and helping you to focus fiercely on the task at hand.

In any important effort where you are up against other individuals that are as motivated, as intelligent, as competent and as prepared if not better than you, then it is crucial that you identify an edge in your game in order to come out ahead of the pack and get the win.  Trading is a good example of this due to the solitary nature of the game.  You are in there alone in most cases and ultimately the only person that you can rely upon is you when the ride gets bumpy.  By having and using an edge you are employing an approach, a strategy, a belief, a mindset, or a tool that will support you in bringing your absolute best to the platform and keeping it there.  Surely you have experienced times where you found yourself at a crossroads in a trade; a fork-in-the-road where you had to make a choice to either go to the left and violate your rules, break your promises to yourself and go over the cliff to crash and burn; or, you chose to go to the right, kept your highest and best trader engaged while trading in your highest and best interests.  When you do-the-right-thing in such an instance, you not only support your ability to follow-through more consistently; but, as well, you have cataloged a peak experience that has the effect of catapulting you forward, bolstering your confidence and strengthening your self-esteem.  One such edge is a tool that aids you in remaining focused intently on what-matters-most in the trade by interrupting disruptive patters of thinking, feeling and doing that can and do cause you to take the left turn at the fork in the road resulting in catastrophic results.  This tool is called Stop, Challenge and Choose.

One of the most common rule violations that novices and some experienced traders make is inappropriately moving a hard stop when the price-action is inching toward it.  The first signal that you normally become aware of is an emotion that is other than positive or neutral; such as in this instance fear or anxiety as you watch the price-action.  That emotional signal is not the first thing that happens however.  The first response in you is an internal dialogue that for the most part is out of your awareness, which is why you must attend to the emotional signal as the first stimulus that comes to your attention.  When the fear/anxiety is felt immediately “stop” what you are doing in order to interrupt the emerging pattern, which would culminate in moving the hard-stop, increasing your risk and in most cases end in a greater loss than you would have experienced had you maintained the hard-stop.  By stopping you take a deep breath which will initiate a relaxation response in you; then change your physical posture and assume a position of power, for example, standing up straight and unclenching fists or teeth.  By doing this you are not only interrupting the emerging bad pattern, you are also exchanging a forthright intention for what a moment ago was frustration, frazzlement and fragmentation.  Then you “challenge” yourself by asking 3 important questions: 1) What must I be thinking or believing to feel this fear or anxiety?  The answer in this instance might be, “…That price-action is going to hit my hard-stop and that means I’ll lose, and that means I’m a poor trader, and that means I’m stupid…” You get the picture.  2) What is the objective reality?  In this example the reality is that the price-action may or may not hit your hard-stop; and in actuality it doesn’t matter because your initial plan calculated the best hard-stop placement according to the risk assessment.  3) Is there an alternative interpretation?  For our example, the alternative interpretation would be that the hard-stop is there to protect your capital and therefore if it is activated by the price-action then it has done its job and you are more not less intelligent for allowing the plan to go forth without interference or second guessing from you.  After asking the three questions then it’s time to “choose” a response that is in keeping with your highest and best goals for the trade and that would be in this instance to be patient and allow the process to play itself out.  You’ll not only maintain your A-Game at the platform, you will have gathered more mechanical and internal data; and trading is all about the data.  

Stop, Challenge and Choose is simple and highly effective “edge” for interrupting emerging bad patterns and placing yourself in a position to not only follow rules and keep commitments, but to maintain a position of increasing your skill levels.  Additionally, it works quite well with your journal to memorialize the process in order to track the instances of emotional turmoil so that you can identify the bad patterns of thinking, feeling a doing as they take place.  In this way you are poised to anticipate the occurrence and become proactive and pre-emptive in the process thereby greatly enhancing your ability to sustain your highest and best trader at the platform. 

Linda had visualized the trade over and over.  She saw herself sitting at her trading platform, cool as a cucumber,  back straight, brow smooth, heart beating evenly with dry palms and saying to herself, “…patience, …patience…patience.”  And, what’s more important she allowed her trade to progress according to plan, with stops in place and remaining in place while letting the market prove her plan wrong or right.  She had done this same exercise many times and then had went through it again in her demo account to create the neural (brain) pathway and as well the neural network (everything that she sees, hears, feels, smells and tastes associated with this trading event) in her brain by mentally rehearsing this behavior.  Just like a professional baseball player who practices through mental rehearsal in his mind first then does everything just has he had visualized it in order to “train” his mind and his muscles to do the right thing habitually so that he gets the right results habitually; Linda was training her mind and muscles to follow through as well.  When she finished, she celebrated her success with the realization that success was defined as executing her trade in exactly the way it was planned and following all of her rules…overtly.   She also had learned and was now demonstrating that neurons which fire together wire together (when you think, feel or do; brain cells fire/release neurotransmitters, neurochemicals and other messenger molecules that create pathways in your brain and when it happens habitually those pathways become hard wired and fire together automatically when in the same situation).   She was not only mentally rehearsing and practicing peak performance; she was creating an “effective routine.”

Mental rehearsal is a powerful tool that is used by all manner of peak performers and high achievers across the board; from elite surgeons, to high powered trial attorneys, to world class athletes because they have come to understand the power of imagination.  They also understand that it is not enough to simply sit and visualize, you must demonstrate the ability in real time by “practicing” the art and using your muscles in the process.  Demonstration is the crucial final step from mental rehearsal to personal evolution.  As you practice the desired behavioral strategy (a high level multi-step plan for getting a result) the more that you “go through the exact motions” associated with the desired result you are slowly changing “explicit memory” (memory of how to do things that you can think about and declare like stating your name or your address or gender) to “implicit memory” (memory that is unconscious or behavior that you don’t have to think about as in typing, brushing your teeth, tying your shoes, riding a bike, and playing a musical instrument).  Another way to think of it is to look at how you learned to drive a stick shift.  You learned each behavior that was necessary individually and then grasped through instruction or watching a model, the whole “behavioral strategy” associated with the desired result of effortless driving.  You then practiced … you Tested (tried the particular behavior like pushing in the clutch) then through feedback from the car you knew if it was done correctly – usually a surge forward followed by an immediate stall meant that you needed to do it again – you Operated (looked at the model or reviewed the correct way to push in the clutch), then Tested again (engaged that particular behavior again, in this instance practicing on the clutch); and you tested – operated – tested until at some point you got it and “exited” this process.  All the while you had to think about each and every behavioral point in the strategy and you were using “explicit memory.”  You did this until you could flawlessly execute the entire stick shift driving strategy.  Of course, fifteen years after you “learned” this strategy you may have found yourself driving 65 miles an hour down the freeway while negotiating a cup of coffee, with a burger in one hand, a cell phone in the other still “feeling” capable of manipulating the clutch and stick if necessary.  This behavior had then dropped into “implicit memory”, in other words you became unconsciously competent with regard to driving a stick shift car.  

Effective routines that are designed around a protocol (a sequentially ordered series of steps toward an aim or goal) or strategy, which then are “tested” using a feedback system that documents and/or verifies that the protocol/strategy is credible that are then done over and over and over again to form a habit are the makings of “skill building.”  If you do this process enough the explicitly based memories associated with having to consciously think about everything that you are doing will drop into your unconscious and become implicitly based memories of “how” to get the same successful results; that is planning your trade and trading your plan while following “all” of your rules to a T.  When you do this you have “programmed” your system to act and respond in a deliberate fashion, you are then designing the way that you interact with the markets and your general environment.  

Your state of mind (a neural network of all that you saw, heard, felt, smelled and tasted associated with a pleasurable or painful experience – that is most often connected to several/many other similar networks throughout your brain)  has everything to do with your outcomes in trading and life.  States of depression, anxiety, fear, self-doubt, anger and greed, to name a few, all have the power to influence your thoughts in very negative ways leading almost invariably to self-sabotage.   On the other hand for example, states of confidence, curiosity, awe, satisfaction, happiness, and optimism can activate your internal resources and align your system to move in the same direction and for the same goals.  You can design your states by identifying the behavioral protocols/strategies that will get you the consistent results that you want, visualizing yourself doing those behaviors successfully, and then practicing this process in real time using a demo account in order to test – operate – test – exit the process.   At this point  you have established an effective routine that is connected to the protocol/strategy and by doing that over and over and over you go from thinking to doing to “being” the trader that you know is inside of you.  The establishment of an A-Game is not an accident.  Just like world class peak performers in other disciplines, trading requires preparation, training, mental programming, practice, persistence and perseverance (pardon the overuse of alliteration) in order to trade successfully in the trenches.  Trading is world class also; you are competing against millions of other traders out there; many of whom are ready for you…are you ready for them?  We help you to develop your A-Game in order to compete in world class markets.  Also, get my book “From Pain to Profit: Secrets of the Peak Performance Trader.”

Merriam-Webster’s Dictionary defines greed as simply, “… a selfish and excessive desire for more of something (as money) than is needed.”  Greed is often referenced as one of the main contributors to trading loss.  Greed mangles the mind by distracting the trader from what matters most in the trade, which is quite frankly to protect your capital by prudent planning and following rules.  It also distorts your judgment regarding high probability strategies and effective follow-through.  Additionally, it is the other side of the fear coin; that is, greed can arguably be thought of as a fear of not having “enough.”  Of course, having enough is a purely subjective notion, but for the reasonable person, someone who wants more, more, more as in getting every cent in a move, or wanting more than one’s share, is considered “greedy.”  Whether we’re talking about the fear of loss or the fear of not having enough, either way it is a very difficult emotional challenge to getting the trading results that you want.  Now, the question is what do you do about those bouts with fear/greed that takes your trading effectiveness south?  The important thing of course, is to manage your fear/greed one trade and one incident at a time.  

Managing errant emotions is one of the most important trading skills that you can develop.  Emotions are an inextricable part of being human and cannot be totally taken out of the trading equation.   However, you wouldn’t “want” to take emotions out of your trading even if you could.  Yes, negative emotions throw a monkey wrench into your process; for instance, anxiety, fear, greed, guilt, self-doubt, impatience, apathy, to name a few are what mangle your thinking.  But what is also true is that positive emotions to support effective decision making and follow-through.  Emotions like inspiration, determination, patience, confidence, curiosity, and the satisfaction of viewing your trade run its course successfully are highly supportive to effective follow-through.  So, if you became actually emotionless, you would be divesting yourself of the power of positive emotions.  This, of course, begs another question and that is, “how can I maintain more of my positive emotions?  Well, the first thing that you want to do is to monitor your thinking.  What and how you think is where emotions begin.  Look at it this way.  If, during a trade, you tell yourself things like “I don’t trade very well” or “This type of trade really turns against me” or “I’ll probably make a mistake on this trade.”  Then, emotions of anxiety, trepidation, fear, and self-doubt, among others, is what follows.  Emotions are connected to thoughts.  If you think positive thoughts, then you will respond with an increase in positive emotions.  On the other hand, if you think negative, power sucking thoughts,  you will begin to feel in ways that are consistent with those negative thoughts.  So, you must not only monitor your thoughts, you must change them when you become aware that they are negative.  Changing negative thoughts can be challenging and difficult when you first begin the process; but if you remain diligent, you will begin to consistently reverse negative thinking.  

Another thing that helps you to manage your emotions is to visualize or imagine an experience from your past where you felt uplifted, confident and inspired.  These types of memories bring on positive emotional states.  An emotional state is broader than a single emotion.  For example, if you feel the emotion of anxiety, it involves just that feeling; however, if you are entangled in the “state” of anxiety, you will activate images that are anxiety producing, memories of times when you were anxious and various experiences involving anxiety.  So, when you want to change your emotional states from negative to positive you’ll want to not only track what you are thinking; you’ll want to change the pictures in your mind.  Now, you might be saying to yourself that this is difficult.  One thing you want to remember is that you are already doing this kind of thinking and visualizing.  Humans think in words “and” pictures most of the time, they just aren’t aware of it.  In fact, when you get consistent negative results one of the things at play is “doom and gloom” visualizing, which is picturing all the ways that the trade will not go through. 

So, the next time that you are feeling “greedy” or fearful it is very important to take an active role in finding out what you are thinking in order to change negative, unsupportive thoughts to positive powerful thoughts.  Then access and activate vivid memories of events in your life where you felt determined, inspired, confident, happy and uplifted.  These are just a couple of ways to help yourself plan your trade, trade your plan and follow your rules so that you create consistent results in your trading process.  Remember, the definition of effective trading is not solely connected to profit and loss, but to consistent execution.  Profit that is not associated with a plan and follow-through of all of your rules is profit that is not helping you become a better trader. 

One of the things that I do to reduce and manage stress is to exercise about 5 to 6 times per week.  It not only lowers stress and promotes the release of endorphins that help me to feel good, it also supports clear thinking and optimal health, both of which indirectly support trading.  Well, the other day, I was listening to a trainer work with his clients and he told them something that made enormous sense.  He said that even though you have a number of repetitions for each exercise which is essentially a goal; what is even more supportive is to “make your goal intentional and think about stretching that goal a little each and every exercise.”  So, rather than just knocking off your set as you usually do, be deliberate and focus on the achievement of that “stretch” goal.  I tried it and it made a big difference in my workouts…a little more challenging but also more rewarding.  So often goals are set and then just as quickly forgotten.  We lose site of the fact that a goal is not just a destination it is a tool.

Most traders are familiar with the importance and power of goals.  But, then again, are they?  Goals have been written about in more books than can be counted.  With all these missives on goals, why is it that they are so over-talked about and under used?  Let’s begin with some definitions of the word goal:  a goal is an aim, a target, an objective; the end to which a design tends, or which a person aims to reach or attain (Webster’s Dictionary).   So, essentially, a goal is where you want to end up in any particular endeavor.  It is the result that you seek and the outcome that you desire.  In this regard, some think that goals are only to be identified when you want something “important” or “large” like trading.  However, setting and reaching goals is a skill, and like anything else that requires skill you’ve got to practice them.  Not to mention, consistent targeting and hitting of small goals is like taking consistent small steps … if you keep going you’ll reach any destination – even around the world.  Herein lies the argument for having goals for everything; i.e. anything about which you’d like to have a positive experience.  This would necessarily mean goals for eating, exercising, sleeping, selling, working, playing and of course trading. 

Now, many readers may have a somewhat negative reaction to this plethora of goals; but if you take a look at people who are most productive and happy, they will tell you that they live their life by design…not by default.  What does that mean?  It means that you are self-aware of your thoughts, emotions and actions.  This does not mean that you are self-absorbed, which is an ego function that is about self-puffery and conceit.  Self-aware and living by design means that you are intentional about the results and the outcomes in your trading and your life.  Living and therefore trading by design also means that you remain focused on what matters most in what you are doing and why you are doing it – and that includes the seeming mundane.  Living and trading by default means that you are governed by the old programmed patterns (most of which are not only negative but out of your awareness; and you are “reacting” in knee jerk behaviors rather than “responding” with thoughtful action.  As Stephen Covey writes in “7 Habits of Highly Effective People” begin with the end in mind.  That refers to whatever you’re doing.  In other words, if it’s important enough to do, it’s important enough to do it in intentional awareness.  

How you construct goals is also of critical importance.  Here are some guidelines:  

1. You’ll want to write them down as a place to start.  In this way you will articulate them in a focused fashion.  Writing involves the physical/kinesthetic use of pen and paper along with seeing it and reading it; your brain has a more powerful and supportive relationship to the sight of it written out.  In addition, you are giving your subconscious instructions every time you read them. 
2. It’s important to identify goals that you “want” not goals that you “don’t want.”  For example, “I’m so grateful now that I joyfully choose to trade only 5 trades per day; is more powerful than…I don’t want to over-trade.”  In this way you are moving toward what you want rather than away from what you don’t want.
3. You’ll want to be positive in how you construct your goals.  It’s important to use only affirmative words; avoid using words like not, never, don’t, etc. 
4. Be grateful in the expectation of achieving your goals as in the example above.  
5. Use emotionally charged adverbs to express your goals.  (see number 2 above) This will emotionally intensify the goal like plugging it into a wall socket for energy.
6. Be specific as possible, your mind likes details and it is especially powerful to your planning process to have your goal particulars acknowledged.   
7. The goal works best when it is tied to a purpose or a compelling reason for why you want it.  The purpose adds its own energy to the process and can catapult you into achieving it.
8. You’ll want it to be measurable so that you will know when you have achieved it; and for aiming purposes; the feedback of hitting the mark is empowering. (see number 2 above)
9. The goal must be achievable.  It doesn’t help you to have a monetary goal of $1,000,000 in 2 weeks when your account is only $25,000.
10. It’s important that the goal is results oriented as well.  For instance, “I am go grateful now that I have joyously chosen to go from simulation trading into live trading when I have reached 3 consecutive months of 50% hit rates of my strategies.”
11. Having time bound goals is also a power point.  (see number 10 above)  Putting a realistic time frame really helps the subconscious accept that this is a matter-of-fact endeavor. 

 Then there are those who believe in setting goals, they just don’t follow-through.    This is fraught with pitfalls because although it’s a good thing that you have taken the time to articulate an identified aim or target; unfortunately you are reinforcing the lack of follow-through, which makes it all too easy to continue with this lack of taking action.  However, if you tether your goals to what you truly desire and follow the guidelines above you will be astonished at how powerful goal setting can be.  

Mastering your mental game is an everyday exercise, not just for trading.  The interesting thing is that your mind/brain is like a muscle and if you continually train it you will not only create consistency for follow-through and focus, but you will develop greater capacity for strength and endurance when you are met with trading or life challenges.  Keep the A-Game in your sights all the time and in that way when you really need it, it will be available…in spades.