Rande Howell

The biggest value I see to emotions is that without them, you are dead. Emotions are woven into the very biological substrate of your brain/mind. Rational is an emotional state that creates a certain kind of thinking useful in probability thinking. To push fear aside and pretend that it is not part of the mix is the set up for emotional ambush by unseen forces. If you experience tenseness in body or holding breath or rapid, shallow breath as you trade, you are experiencing an emotion. Not noticing the emotion and not managing it is the danger. Rande Howell

Hi Johnw I find that there is a shift in trader's perception around the 5 year of trading (sometimes longer). When they have experienced the ups and downs of trading this long, they come to realize that maintaining a Marlboro Man attitude towards the supremacy of Rationalism is simply killing them slowly by maintaining it. I believe this is your perpetual mediocrity. And trading will expose this tragic flaw in their thinking if only they would look at their trading account as the barometer of the effectiveness of their beliefs that they are projecting onto the markets. But they insist on not listening to the facticity of their trading account -- and will continue to believe in their self deception until the money runs dry. I get traders write all the time who have burned through their capital and time (staunchly maintaining their Marlboro Man position) and only then wake up to the folly of their logic. And, of course, they want me to help them out in the spirit of charity to a newly awakened soul who has seen the light. My work has been blessed by earnest traders recognizing that the belief system that they assess trading through is the missing piece to becoming a masterful trader. Meanwhile there is silence. Have a prosperous year Rande Howell

The "Group-Think" of Traders that Blinds Them to What Really Matters Have you ever listened to groups of traders talking about trading? If you have, you’d think (particularly to yourself) that everybody was hitting homeruns and driving in runs. But that’s not the reality. The reality is that they all are covertly participating in a form of group-think called looking good to others. Have you ever noticed that no one talks about the real task of producing sustainable, consistent income from their trading? Instead, they talk shop in a vacuum refusing to address what they are ultimately seeking. The one thing that is most important to the financial health and long term survival of a trader, they do not talk about. Their eye is not on the ball – their eye is being distracted by talking about the minutia of trading, saving face, and the self-deception of looking-good. Meanwhile, another year goes by – and it’s January of another year already. Time is ticking by (do you hear it in your internal clock), chipping away at your capital (sometimes chomping) and your timeline (just how much time can you fritter away before you feel the financial noose tightening?). And, right there, hidden in plain sight, is the answer they you avoid acknowledging. This is the place where the vast majority of traders stay stuck – being blind to their blindness. And the cost of this blindness is their trading success. Their trading performance keep giving the struggling traders feedback about their performances in the form of drawdowns from their trading accounts, underscoring the real problem they are avoiding in their trading -- them. Yet, despite all the evidence, the "wannabe" traders refuse to look within themselves for the source of their performance problems. Instead, they focus on solutions outside of the psychology of performance. That’s not nearly as uncomfortable as acknowledging there is a chink in their armor that allows them to maintain their looking-good even while their trading capital erodes or stays stagnant. And the clock keeps ticking as the trader maintains their self-deception. Meanwhile, they stay where it is safe – they talk around trading as if they (the one who is actually doing the trading) were not a constituent part of their trading. They talk the details of trading and, listening to them, a by-stander might be led to believe that everybody is making money. But what you’ve got is a bunch of really good Monday-morning armchair quarterbacks talking about the game from a spectator’s vantage point rather than from actual performance. Waking Up to the Problem and to the Solution The real question for the life-blood of an evolving trader, “Are you making consistent money?”, is not asked. And, if you are not making consistent money, another question begs to be asked, “How do you diagnose the problem and fix it?”. Once a trader has learned technically how to do his/her business, these are questions that take you to the core of the issue. There is really no risk in the moment of performance to a spectator’s game face – only his looking-good in the fantasy league of fellow retail traders. What you will notice is that traders talk the game of trading, but not their performance in the game of trading. It is so much more self-effacing to talk about the game of trading (as if they were fans of the game, rather than participants), rather than to evaluate their performance as a function of their competence as a trader. This discomfort of evaluating personal performance is so ingrained into traders' thinking that they will avoid dealing with it as long as the capital they bring to trading will allow it - or until they have felt enough prolonged pain and discomfort that they come to the conclusion that they are the problem in their trading. (And they are also the solution to their trading performances.) For most traders to wake up to this pivotal moment, a tremendous amount of time and money may have been squandered needlessly. So much short-term energy was focused on saving face by looking -good that the long-term development of the mind that can embrace and manage ambiguity without a sense of dread of being wrong was never embraced. And this is what is required to become a consistently successful trader. Once this is recognized at a core level, it seems simple, until you realize that your biology and your psychological underpinning conspire against the development of this kind of mind. Your biology and the psychology that arises out of your brain’s survival adaptation to its environment is biased toward the self-preservation of the status quo, rather than developing a higher functioning human being. What Got You Stuck in Performance Limbo in the First Place The power of this primordial drive for self-preservation needs to be understood in a different context from a civilized conception of man’s recent history. The brain builds a self that is adapted to survive in a particular environment. It doesn't care if that self thrives in that environment or not. It cares that the self (the bio-cognitive system that you have been organized into) survives. To the ancient brain that self needs to survive until sexual maturity, prevailing in your environment, and perpetuating the species through your survival success. All successful strategies for dealing with the challenges of survival are hardwired into neural-circuitry as they are learned. Once wired they become an automatic response in the organism’s bio-cognitive repertoire. This means that successful adaptations to survival situations become a reactive dance between the environment and the self. This is called the stress response. And this adaptive response mechanism was essential to our ancestors where danger lurked constantly in their environment. That danger was biological and life threatening. And the stress response, being reactive in nature, allowed our ancestors to have a better chance at surviving in an environment loaded with saber-toothed tigers and other predators. The problem is that this biological system of stress responses was built for another time and another environment than the world that the trader now lives in. Unfortunately for the trader, the ancient brain (the emotional brain where all this stuff is wired), cannot distinguish between a biological threat and the psychological discomfort of uncertainty found in trading. And here is the kicker: When under stress, the brain is going to revert back to old familiar patterns learned long ago for the avoidance of pain. Remember, the emotional brain cannot tell the difference between biological threat (pain) and the psychological discomfort found in the management of uncertainty. The moment that the emotional brain perceives uncertainty (stress or the challenges of living life), it falls back to old familiar reactive patterns that have produced survival success in the brain's formative period. This is what the trader perceives as falling apart in the moment of emotional uncertainty. And an emotional hijacking is triggered instinctively long before the thinking mind can begin to manage the uncertainty of a critical moment, unless the trader re-trains the body and mind to respond differently. The Psychology of the Trader is Railroaded by Primitive Emotional Belief This is where the bio-cognitive system that “you” are (responding instinctively to stress) and the deeply held beliefs about your capacity to manage uncertainty (that give rise to your trading psychology) conspire against you. The Emotional Brain makes a decision and the Thinking Brain produces an explanation to support that decision, no matter how irrational. Your Emotional Brain on stress (managing the uncertainty in a moment of ambiguity in trading) reverts back to primitive stress responses learned long ago. And then, your Thinking Brain (rooted in beliefs learned in your family of origin, culture, and circumstance) demonstrates those beliefs under the stress of the moment. If you are a human being that trades who tries to save face by “looking good” to the outside world, you are operating from a belief system rooted in a sense of inadequacy, not mattering, unworthiness, and/or powerlessness. And as long as you avoid engaging those beliefs head on, your Emotional Brain will continue to hijack your performance mind in the clutch. It will instinctually avoid the danger of not being able to survive in the environment in which it lives. Short term, this strategy works because it avoids the threat - and that is all the Emotional Brain is interested in. Long term, this biologically induced strategy keeps you, the trader, locked in the limbo world of perpetual mediocrity. Toward a New Construction of the Self When a trader learns that self-honesty is the most powerful tool he/she can possess, then the game of performance can change. There is no shame in being a fallible human being. It is our nature. It is also our nature to learn from mistakes. It is this openness to making and learning from mistakes that must be cultivated. Attempting to avoid mistakes simply keeps us stuck in old self-limiting patterns. These patterns were successful solutions when certainty of survival was the driving force. But now, in the brave new world of trading, the trader has to step out of the old comfort zone that has become his prison. And now it is time to embrace self-honesty as a tool and reconstruct the mind that trades. It is your choice – stay stuck in old self-limiting patterns or intentionally and consciously grow new ones, adapted for the world of uncertainty found in trading.

But they are constructed by the minds and habituated patterns of flawed human beings. And they bring all that baggage into their artificial intelligence. Rande

You're welcome. I have found that trading really does force most people to redefine and transform their attachments to the brain's focus on short term gain as the organizer of familiar pattern. My understanding is that it applies to all human endeavor, but is inescapable in trading in particular because of the short distance between belief, action, and result. Right now I'm in the UK teaching this perspective to professional investors. Their concerns with stress, worry, belief, and action is not as immediate as a traders, but they are all being judged by a benchmark that works in monthly to every third month assessments of the management of uncertainty. That is where the professional investor class and the trader class come together. Rande Howell

Or the mindset that you bring to the management of performance of the trade is hijacked and replaced by you keen observation. Rande Howell

What I am really talking about is the capacity to manage the mind that engages the uncertainty of trading. There will always be loses in trading -- it is unavoidable. What is manageable is the size of loss based on the mind that is managing the mind that trades. Revenge trading is a condition that occurs when urgency to get back your loses hijacks the mind that manages probability. Rande Howell

Actually I took this vignette from a current client of mine who was very successful in business before he began trading. His problem centers around his notions of success and how to achieve it. In business he made success happen by an urgent sense of seizing opportunity, what can also be called drive. That urgency, that had been the cornerstone of his success in business, was his undoing in trading. In business he could make things happen and thereby control outcome. In trading, his lesson was to learn patience and wait for the trades to come to him -- one at a time. At the core of the psychology was a need to prove himself to others. This is at the bottom of many a successful alpha male in business. His sense of power come from being able to control circumstance around him, which is what has to be given up in trading. In trading you don't not control outcome. You control the mind you bring to the management of uncertainty. Rande Howell

How many of these success-mind strategies do you employ in your approach to the self-development as a trader: •Seize the day • Feel and see the success • Get excited about your image of success and stay motivated • Get up after a loss and push through it • Be persistent in the face of adversity • Be a winner – you can do it, just keep trying • Learn from your mistakes and never give in • Imagine success and be that success • Know that you will conquer trading as you have other challenges. These are the mantras of traders I meet every day who feel they are right on the cusp of turning the corner. Unfortunately for them (but fortunately for traders on the other side of their trades), they usually have been at that place for a good while. They know how to trade. And they hold the belief that if they only push hard enough, they will get past the barrier to their success by sheer hard work and determination. Years later, they are still treading water financially and are perplexed about why they have not broken through to the financial success that they know is right around the corner. What is the roadblock that keeps success at arm’s length and out of your grasp? Is it your methodology? You’ve probably tested that backwards and forwards and discovered it works just fine if you were able to manage the pressures of risking capital in the heat of the moment. Is it that if you only had just one more indicator, one more device, that would be the “magic bullet” needed for success? No doubt you have collected plenty of trading “stuff" over time and the promise of the Holy Grail has faded. Seeing the Destination, But Not the Changes Needed for the Journey Read that first paragraph again. Notice that, in all of them, “you” are acting on the external environment to create the conditions of success. Even when you make a mistake and correct it, it is about an external mistake OUTSIDE OF THE SELF that you are attempting to change. No one notices the “you” who is projecting beliefs about your success onto the uncontrollable trading environment. “You” see what you want (the destination), but the “you” that you bring to trading is not equipped for the journey to get to the destination. The evidence is there if you are willing to be honest with yourself. Look no further than the health of your trading account. It is the black and white truth meter that cuts to the core of the problem – if you accept one assumption about “you” and your trading. The Assumption: You are projecting your beliefs about your capacity to manage uncertainty onto the markets and you are seeing the effectiveness of those beliefs as a by-product in the health of your trading account. I am not asking you to believe this assumption – I am inviting you to test it in the laboratory of your trading. With this assumption, you are turning your notions of success on their head. The answers to your trading woes (if you already know how to trade and trade well when risk is not a palpable trading variable), then the lack of success in trading is not found externally in more “stuff”. It is internal, where you recognize that the beliefs you bring to trading are the very limitations that you are mistakenly trying to change externally. It is these very beliefs that drive the use of your methodology. The goal (successful trading) is the destination. The journey is to become the change internally that makes the goal of the destination a strong possibility. Unfortunately, most traders really do not want to look at themselves internally and explore how their psychology is, in effect, shooting them in the foot every time they force their success notions upon the markets. They fear what they may find. They begin to fear fear itself. And out of the avoidance of that fear, they never look at the beliefs they hold about their capacity to perform in the clutch when the outcome is uncertain. Bravado replaces real internal courage. But the will-power of bravado becomes the vanity that caves in when exposed to the fear of being found out. Meanwhile, internal courage assumes that you are a mess at the level of psychology of belief. And it is this very mess that needs to be re-organized to become a clutch trader. The fear of the deep dark secrets you are hiding from is simply an expression of the self-deception within everybody. It has to be confronted so that the belief system (that trades) can be re-organized into higher functioning (consistency and patience). It is here where the re-construction of the mind that trades takes place. In the same way, all people discover that (for traders, sooner rather than later) the interior landscape of the mind, initially, is a mess. This is simply human nature. It is the willingness to re-construct this interior landscape that makes all the difference in the performance of trading and the development of consistent profitability. You discover that, yes, “you” are the problem in your trading – not all the external stuff you have distracted yourself with. And that a re-organized “you” is the solution to the problems in your trading (again assuming that you know how to trade, but have performance issues while trading under pressure). This is the journey into the performance mind needed for consistently profitable trading. Finding the Self-Beliefs behind Performance in the Clutch Traders who are really committed to developing their capacity to perform well under pressure analyze what happens psychologically while in the heat of a trade in order to get at the underlying belief structure behind performance. It is not about what you would like to believe about yourself, or what others believe about you, that matters. It is the beliefs that are exposed in these critical moments that matter. It is these moments that you are forced to acknowledge your powerlessness to control outcome. It is also these beliefs that drive the performance of execution in your trading. And, consequently, the health of your trading account. Most people do not want to change, not matter how compelling the evidence for the need to change is. They want the external world to change. They prefer staying in their comfort zone and forcing the world to change in compliance with their beliefs about their need to control outcome. This attitude has often worked in life before trading. They were able to control outcome externally usually by sheer will. So, why should they change? They should be able to maintain the status quo in trading just as before trading. Wrong! The problem is that any belief that is rooted in control of outcome is going to fail in trading. The trader has to accept that he cannot control outcome. Instead of certainty of prediction, trading requires the management of probabilities where outcome is never certain. Willpower and prediction based on positive attitude simply are non-starters in the world of consistently successful trading. By looking at your trading account, you can ascertain whether you are working from a probability-based mind where uncertainty is accepted and managed or from a mind rooted in self-limiting beliefs attempting to control outcome. These self-limiting beliefs are recognizable in the performances that lead to failure and loss. When you lose, what do you really say to yourself? Do you beat yourself up? Do you get mad at the trading gods and seek revenge? The self-limiting beliefs lurking behind impoverished performance fall within four categories. This is not rocket science, but it does take courage to acknowledge that they are operating and resulting in your poor performance in critical moments. But without the courage to see the self-limiting beliefs, and thereby remaining blind to it, these traders stay stuck in the comfort zone of current performance. The Self-Limiting Beliefs behind Diminished Performance in Trading 1. A sense of inadequacy. Not being good enough. Never enough information to act in the heat of the moment. 2.A sense of not mattering. Having to prove by deed that you matter by making a lot of money. 3.A sense of unworthiness. I have to work hard for my money. Easy money is not right. Net worth becomes a reflection of self- worth. 4.A sense of powerlessness. I talk a great game, but I get overwhelmed when the heat is on. These beliefs are unavoidable and are simply part of the human condition. Much of the success that many traders experienced before trading were actually adaptations based on these four self-limiting beliefs. A perfectionist who feels inadequate if he makes a mistake can make a great accountant or airline pilot, but not a trader. Many a successful business man is driven to prove that he matters and confuses his sense of mattering with his performances, particularly if he makes a lot of money. Many a great salesman who has learned how to please his clients is, at the bottom, trying to prove his worthiness – worth assessed through the opinions of others. And who has not known a control freak who has produced success as a way of demonstrating his power ("I can conquer anything") - until he started trading. Unfortunately, for many, the underlying belief structure becomes so common that it is accepted as the truth in the building of success. At least, until they become aspiring traders. Then the small world of their former career collides with the incomprehensible world of the markets. And the very traits that allowed them to become successful in circumstances they could control become the binders to success in the world of trading where outcome cannot be controlled. From Theory into Your Reality as a Trader How do you use this information to evaluate your trading performances? First, look at your trading account. Is it healthy and growing? Or is it stagnant or subject to unhealthy drawdowns? This is your baseline. Then look at your ratio of winners to losers – this will reveal the effectiveness of your beliefs about your capacity to manage uncertainty. Winning percentage alone is not a good indicator. You can have a great winning percentage, but not manage trades well and still lose money. One big drawdown can negate many small wins. Then you look at what happens when you choke under pressure. What thoughts flood to your mind? This is what you should be looking for, rather than attempting to avoid them. You have already seen what happens when you practice avoidance. Now you need to look to define them. It is not rocket science. It is about self-honesty. Cut to the chase. Is the mental attack you experience in your mind after a loss about adequacy, mattering, worth, or powerlessness? This is what I call your Orphan Nature. It is simply part of our humanness we bring into trading that is seeking healing or transformation. That is all. It is not about you as a human being. It reflects how your brain organized you to survive in the world in whichyou were born. This is only the historical organization of the self, not “you”. It is only one potential you. And one that was organized before you had a mature brain with which to work. This is the first step, evaluating the current mind that you are bringing to trading. It will show you where to re-organize the mind that you need to bring to trading. It is a big step. It is the one that most traders avoid until they have depleted their resources. And hopefully, you are ahead of the game and on your way to taking advantage of the other traders who refuse to look at themselves in the mirror and tame the beast that holds them prisoner. Rande Howell www.tradersstateofmind.com

Work harder. Be dogged after a failure – be persistent and push harder next time until success comes. Never give up. Never show a weakness. Everyone has heard these tried and true axioms of success. And these axioms have proved to be true in other endeavors outside of trading to the point that they have simply become the bedrock of "success" thinking. They seem so self-evident that few question whether they are also effective in the performance of trading. Why? It is natural to assume that attacking a problem by brute force and finally forcing your will upon outcome will work in trading as it has in other endeavors. This approach has great appeal for males with their testosterone-driven perception. Yet after the smoke clears for the umpteenth time, this kind of thinking produces persistent draw-downs in a trader’s account. What’s the disconnect? Stress – Facing the Challenges of Life. First, let’s define stress. For our purposes here, stress can be defined as your response to the challenges of life. Anytime you experience uncertainty, the body/mind is triggered to a stress response and the body and mind are placed on alert for the duration of the stress or challenge. In the not-so-distant past, stressors or challenges were fairly short in duration (but intense) and the body adapted to this. Finally, these short-term adaptations to challenges were so successful that they were burned into our DNA. So they became automatic, reactive biases built into our very nature. While the high alert status of the stress response allowed your ancestors to deal with a particular challenge (being threatened or approaching predators), eventually the body calmed down because the uncertainty - the threat of real predators - was gone. Life was good again. The body and mind then naturally fell back into homeostasis (calm state of mind) until the next challenge appeared in the environment. The take-away for the trader here is that the act of trading produces the very circumstance that triggers the stress response. And the brain/mind built for survival in a world of danger cannot distinguish the difference between the challenge to an uncertain future while being confronted by a saber-tooth tiger and the challenge of an uncertain future that confronts a trader every day. And until the trader can separate the two (biological threat and psychological discomfort), the body is always going to overwhelm the mind when it senses danger. Trading requires the smart management of stress (emotional intelligence) because it is unavoidable. What matters is the skills that the trader brings to the management of uncertainty and the challenges that are inherent in trading. Stress is Your Friend or Enemy – Depending on How You Use It. The relationship between stress and performance has been studied since the early 1900’s. Reduced to a graph, it looks like a bell-shaped curve. And essentially what was discovered is that stress is good up to a point. It keeps you focused, alert, on-task, and concerned about your current situation. It also produces a highly flexible state where the organism (the trader while trading) can respond thoughtfully to changes in the environment. This “good” stress is called eustress and it is the cornerstone of a peak performance mind. Then, after this period of eustress responding to the stressors of life, performance drops off dramatically. However, when stress is prolonged without effective coping skills for its management, the good stress of eustress becomes the bad stress of distress. Concentration levels go down and mistakes go up. The mind becomes confused and reactive. The distress will build (unless effective intervention is made) until burnout occurs and you are no longer capable of performing to the best of your abilities. As you have probably noticed, this scenario is common among traders. Particularly when they are trying to push themselves through the management of uncertainty with brute strength. So up until a point, working harder, being persistent in the face of failure, and never giving up did help. But without the addition of new, more effective, coping skills, this approach leads to distress. And distress leads to compromised thinking that shows up in your trading account as drawdowns. Fundamentally what is required is a new approach to understanding stress and its management. Failure as a Path to Improvement I'm not saying that you should stop being persistent. Instead I’m asking you to come to a new understanding of what persistency is. Persistency is not doing something over and over again until you force your will upon the markets. I know many traders who have tried this approach and have truly traumatized themselves as they keep running into the same brick wall over and over again expecting a different outcome. It doesn’t happen that way. Once you learn how to regulate emotional intensity by breath and relaxation training, you will get to the door of the mind. And it is the mind where you find the beliefs that you are projecting upon the markets. It is these projected beliefs that you produce the results that you see in your trading account. So failure can help you to isolate the belief about your capacity to manage uncertainty that has been holding back your success in trading – if you have the openness to learn from your mistakes. The trait of persistency helps you to find the self-limiting beliefs behind your lack of performance. These are not the beliefs that you talk about. These are the operational beliefs behind your performance in the face of uncertainty. These are two very different things. You can fool yourself and other people, but you cannot fool your trading account for long. After luck runs its course, you discover that the markets don’t care. If you insist on bringing ineffective beliefs to the management of uncertainty, the markets will allow you to burn capital. The more you project ineffective beliefs upon the markets about the management of uncertainty, the more you experience the stress of trading as distress, rather than eustress. It’s not about working harder, working more, trading more, or pushing yourself – it is about the beliefs you bring to the management of uncertainty. Once you realize and truly accept that you have to give up control of the outcome in trading (certainty), trading becomes the microscope to aid you in discovering the operational beliefs behind your performance in the challenges of trading. Mistakes show you the way. You are no longer using persistency as a bull-headed denial of reality. Instead you are using feedback from your failures to point out the beliefs behind performance. Personal performance is the one thing that you can control in the management of uncertainty found in trading. It is here that you find the real beliefs about your capacity to manage uncertainty. This is what you have been avoiding having to face. Yet no matter where you go, there they are. They are waiting for you to discover them and change them so that you can re-organize the mind that you can bring to the challenges of trading. It is here that the worry-based mind of distress in trading is transformed into the concern-based mind of eustress. It is your choice. The markets are not capable of caring. If you insist on bringing ineffective beliefs to the performance of trading and refuse to learn, then so be it. And the new reality is that the mind that you bring to the management of uncertainty is the only thing that you can control. When you begin seeing trading as your teacher, then you have opened the door to learning how to manage stress in trading. Rande Howell

Ken had come a long way. Emotional hijackings no longer ambushed him. He could catch them long before they would blow him up in the heat of the moment. At first, he thought he had finally discovered the secret that would take him to the next level in his trading. But there was something missing. He still experienced dread of a grandiosity that would creep into his trading and, like a slow fuse, blow-up his trading mind.[/indent ] Working with emotions effectively is not an option for successful trading. When developing your Emotional Intelligence for peak performance trading, Emotional Regulation is an inevitable by-product. But it, by itself, is never enough to change self-sabotaging behaviors into an empowered mindset for trading, just as our friend Ken is discovering. In the first 2 articles of this 3 part series, we explored how Ken developed the emotional intelligence to understand emotional arousal and learned to regulate it before the emotion consumed his trading mind. To do this, he learned what to look for BEFORE the emotion overwhelmed him. Then he learned how to disrupt the negative emotion before it did damage to his trading account. I encourage you to go back and read these prior articles so that you can transition to this article about the ultimate difference-maker in Ken’s trading. Peeling Back the Layers There are 3 levels of awareness that we are bringing to this study of Ken’s trading. The first layer is simply the physiology of the emotion as it ramped up for action. Ken became aware that an entire biological process was involved – it did not happen out of thin air. As he developed his capacity to be mindful of his body and its precursors of emotional arousal and feeling, he became much more attuned to the ebb and flow of emotion during his trading day. Out of this new found awareness, new skills arose that allowed him to interrupt and then regulate the intensity of the emotion – the second layer of his emerging emotional intelligence that became operational in the heat of his trading cycle. He developed observational skills which advanced him to a new level of management of his emotions. Note that the management of emotion does not mean the willful control of emotion. You must work with emotions like an electrician works with electricity – with an enormous level of respect. The electrician does not make the electricity do anything, but he does manage how the electricity is applied in a given circumstance. This Emotional Regulation process, and the skill with which he applies it, has given Ken considerable influence over the arousal, feeling, and motivation components of the emotional triggering. By managing these elements of the emotion, Ken is able to keep his composure. However there is another layer to the emotion that Emotional Regulation does not touch – meaning. Meaning, Belief, and the Eye of the Beholder During the formative growth of your brain, a process of imprinting lays down neural circuits that constitute the basic beliefs you have about life. These basic beliefs structure the meaning that you bring to the circumstance of life. The most basic ones are about mattering, worth, adequacy, and your sense of power in the world. Most of these beliefs come from the culture, community, family, and circumstance of your life. Your notions of adequacy and power become rooted into the enormously complex way you learned to respond to the challenges of life. The way you respond to the challenges of life are grounded into your emotional nature as the meaning component of an emotion. Most of us, through cultural, social, and family learning, come to hold certain beliefs about our capacity to manage the uncertain challenges of life (i.e. whether or not we will be able to prevail ). It is these beliefs that show up in trading when you are attempting to manage the uncertainty, the ambiguity, and confusion found in trading. Unfortunately for the trader in you, the brain was wired for seeking certainty and avoiding uncertainty (fear-based thinking) because our biology is biased toward that end. And our socialization adapts us to avoid risk because we might make a mistake and fail in a particular attempt. And in trading, this is certainly going to happen. Because trading is a probability-based venture where large numbers have to be put up to see a true trend and your brain/mind is biased to not lose even a single time, your beliefs (both from biological bias and adaptive social pressures) are usually not suited for trading. In your family, in your culture, in your schools, and in your careers – you are told to “not make mistakes”. And if you come out of (in particular) an engineering, medical, accounting, or airline employment background, the pressure to not make a mistake is compounded. The hidden beliefs that you are looking for are the ones that you hold about your capacity to manage uncertainty and what making mistakes means to you (really). It is these beliefs that bedevil traders as they attempt to become successful traders. Let’s take a look at Ken as an example. The Dilemma: You Cannot Learn if You Do Not Make Mistakes, But Are Shamed if You Do. Ken grew up in a military family where making a mistakes meant that you were about to be yelled at, shamed, and emotionally isolated. Ken’s developing brain, in adapting to this environment, did everything possible to avoid making mistakes. And even when he was an adult, making mistakes produced a visceral sense of dread and shame. And Ken learned to “not make mistakes” in everything that he did. This strategy worked well in his career until started trading. And then the mind that he brought to trading that was scared of making mistakes began showing up in his trading performances – where losing is simply part of the game. This belief that he must never make a mistake, so forcefully embedded into his habitual nature, became his undoing. An avoidant/adaptive response to circumstance became a belief about his adequacy, his worth, and his power and this was compounded by his biologically inherited bias to avoid the risk of making a mistake. A perfect storm was the result. His belief about his capacity to manage uncertainty became woven into the emotion of fear. Uncertainty and fear were fused together. So now, when Ken encountered uncertainty (at entry points and managing the trade), fear (with its arousal, feeling, and motivation) exploded because the belief he held from his formative period was that he could not make a mistake – or he would be shown to be inadequate. The feelings associated with inadequacy were to be avoided at all costs. So, no matter how much Ken knew, he still did not believe that he could master uncertainty because he made mistakes. Until this problem was solved, Ken (like many other traders) would never become a successful trader. Beyond Attachment Disruptions: Imprinting a Self-Limiting History Ken, like many traders, experienced significant attachment disruptions that his brain organized him to avoid during his formative period. The sting of making mistakes (inadequacy) and the sense of being overwhelmed by an overly critical parent colored the lens of perception that Ken brought to trading. And in trading, he could no longer avoid dealing with this once-successful strategy that no longer served him. For Ken, learning to forgive and let go of the past was the major piece of work that stood between his current performance and the later performance he achieved. He had to come to recognize that his father did love him, though he did not know HOW TO LOVE Ken effectively. The sins of Ken’s and his father’s forefathers came to bear fruit in Ken’s trading mind. As a result of his trader psychology training, his hyper-vigilance about making mistakes was transformed into an acceptance of learning through mistakes. This is a common psychological reorganization that many traders need to master as they evolve as traders. But how about other traders who do not have such strained attachment relationships like Ken? How is it that they also have problems in their trading? One of the biggest problems found in trading is scarcity thinking. And it particularly shows up as a trader takes profits too early or engages in self-sabotage. In these cases the brain has developed in a family or community history of powerlessness. Each individual’s history is unique, but an example will point out the power of a history upon the efficacy that a trader brings to the table. Roger grew up on a farm in Western Australia. At best the land was marginal for farming. The family persists for generations, barely eking out a subsistence living. Everything has to be nearly perfect for them to make a profit. But the weather often does not cooperate. They experience droughts regularly and their crops fail. There is barely enough money to pay their loans and they are often at the edge of foreclosure. And there is never enough for them to buy anything for themselves. They live in circumstances where they come to believe that bad things are going to happen right around the corner. They have seen it happen so many times that they “know” it is inevitable. No matter how good things may look right now, they “know” that it is only a matter of time before it is taken away from them. This is a loving family. And it is also a breeding ground for scarcity thinking. When you are raised in circumstance and histories like these, it is only natural that you will fall into the perceptual map of seeing the dark side of probability. Often this mindset is brought into your trading and, as long as this acquired historical mindset is not recalibrated into a more empowered understanding of probability, bad things are going to continue to happen. Changing the Beliefs Embedded in Emotions In both the scenarios described above (both from my clients), what I hope you have seen is that the process of reorganizing the Self into a higher functioning trader begins with applied Emotional Intelligence. Understanding how emotions operate is crucial. As the trader begins to regulate them, they begin to drill down deeper into their beliefs about their capacity to manage uncertainty. It is this that has to be transformed for the trader to move from struggling to competence in his/her execution of trading. Beliefs are the lens through which the trader sees the markets. And the hardest part about change is your resistance to change. The skills outlined here show you how to stay the course as you approach the self-limiting beliefs that require change. Then the powerful question arises: Who do I need to become so that the trader I envision can become real? The traders who become successful recognize that they have to stop fighting change. Instead they become the change.

I'm with Steve on this. I work a number of traders who are successful traders (post their results), have written books (rarely a profit center for them), and train traders -- because they like working with people and making a difference in their lives and see this work as another profit center for their trading business. I'm hoping that this part of their business is successful because it takes a lot of effort and without compensation, they are not going to do it for long. Right off the top of my head, Larry Gaines, Scott Barkley, Jeff Killian, and Thomas Barman come to mind.. Scott even gives 10% of his earnings (tithes) to an orphanage in Easter Europe. Jeff and I have just finished a manuscript for a book together. The reason that they all have developed relationships with me is that they realize that KNOW HOW is only one part of success in trading. Eventually, the trader learns that the mind has to be developed to use the KNOW HOW. That's the Right and Left Brain integration. The difference with Steve that I see is that he is more discriminating about the traders he will begin working with. Eventually a trader is going to have to reorganize the beliefs his holds about his capacity to manage uncertainty. The more he resists, the more cynical he becomes to support his world view. I also run into traders who, when they get their heads together, do not produce successful results because they discover there are serious flaws in their trading systems. It cuts both ways. The first order of business is to become a discerning consumer of trader education. Rande Howell

SIUYA I've found that the "halo effect" can also have a set of horns as well, depending on the person's history. We all project our "stuff" onto others, particularly in the beginning when there is no history to disrupt our automatic assessments. This is particular true of the delusional state called romantic love. We tend to see ourselves and others through the eyes of our ideal initially rather than waiting for the other to show up. Then we wake up from the ethers a disillusioned person -- until the next time. Same as it is in trading. People really bring a highly biased view of themselves and what constitutes success into trading. It's a real halo effect -- I call it blindness. And no matter how much feedback to the contrary, they will maintain their notions of success until their capital is really dented. Then the wiser ones realize that the trick is in re-organizing the beliefs they are projecting upon market. The Buddha called this "Waking Up". Carl Jung said it another way -- Seeking enlightenment by turning toward the light ignores that you fear your shadow. Until you face and make peace with your shadow, enlightenment is illusionary. Trading simply forces the issue like few other occupations I've ever worked around. As an aside, I've decided that older white American men who watch Fox News as their source of information about the world will never gain the humbled wisdom to stop projecting ineffective beliefs into the market and insist their perception is right despite negative feedback to the contrary. However, it sells an enormous amount of advertising and makes people rich pandering to these beliefs. My history with builders is the same as yours. It goes with anything that you have to estimate time and materials. When I ran an advertising agency, we would multiply our best guess of the cost of a project by a factor of 3 to get at a better projection of final costs. We only saw the good news, maybe, hoped for news would be a better description Rande

Mind is a term I use to describe the historical organization of Self produced as adaptation to circumstance and environment during the formative period of brain development. Mind emerges from that brain. A good example is the attitudes of success that proved successful in the past that many traders bring into trading from former careers and businesses. The urgency to act, to make things happen, is a killer in the trading environment. To be more technical, it would be the organization of the community of emotional programs of the brain that give rise to the mind that people bring to trading. Rande Howell

This is why I state that the mind that you bring to trading is not the mind that is going to bring success in trading. For most people, this reorganization of brain/mind can be taught, but, as you probably see on a daily basis, not everyone is willing to put in the heavy emotional training required to rebuild the circuitry of the brain. I see it happen all the time. I also see people back away from the challenge and look for another solution. Left brain and right brain really do have to fire together to produce success in trading. When they are trained together, that's the shortest distance for the learning curve. Rande Howell

Yes. I consider the rewiring of brain after painful event (losing, particular big, or continued losing) to be traumatic memory. The brain interprets as threat to biological system and not the discomfort of losing a trade. And you can bet the brain is going to become hyper-vigilent and produce avoidant responses to further possibility of loss. Winning, as a reward mechanism, is also counterproductive to the brain/mind of a trader -- and it's a hard one. If you are ever looking at charts for a place to get in because you need to be in to be trading and making money, you have experience the dopamine rush of urgency to act. A serious problem for traders who have not developed patience as the most important emotional skill to master in the beginning. Rande Howell

A trader's notion of work has to change from a sense of the urgency of doing to a notion where work is the effective coordination of action -- mostly by observing. Until you get beyond believing you have to be doing something to trade, the work of trading remains elusive to the trader. Also, I don't see any way of detaching from emotions. Our very bodies are the embodiment of emotion. The key is something zdo once stated -- It is not freedom FROM emotion that the trader seeks. It is freedom OF emotion that is sought. The dispassion that most traders covet is, in fact, an emotional state. It's not the absence of emotion. Rande Howell

I remember those! My memory was they were about if you were in the mood for party and thought, "Is anybody that stupid?" Seriously though, I am interested in learning more about affordable and sensible applications of bio-feedback that can be applied to trading. Much of the stuff I'm aware of is either too clumsy or too expensive to be a real option. I also believe that if applied within the context of a more complete emotional management program, then it can become an indicator of emotional arousal before the emotion becomes an freight train. Rande

SIUYA What do you know about the pressures that fund managers, analysts, and hedge fund managers face in their work? I've been asked to speak at the CLSA Forum in Hong Kong and train a number of these people for a client throughout Asia and I'm tailoring my work with active traders to their. I know how to work with the micro management of psychology of active traders, but I understand these guys seem to have a constant dull pressure from numerous sides for performance -- and that they MUST be right. Any insight. Rande

The "crutch" way of viewing bio-feedback technology is clearly a limitation of my thinking on this subject. It does give real time info into the triggering and arousal timeframes of an emotion, so it's useful. I use video recording of clients to help them gain awareness of their emotional states -- and this is similar. The first part of my training is focused on this aspect, so as a student of the mind that trades, I need to get over my comfortable biases. Is anyone here familiar with apps or reasonably priced bio-feedback devices? Rande Howell

Hi SIUYA I am being forced step by grudging step to work toward this. In the world that I teach, I want folks to be self aware and not depend on technology to do their awareness for them. But from a teacher's perspective, I need to get over MY desire for people to develop awareness in the beginning and be able to use a crutch like you speak of as an intermediate step on the way to a greater whole. I'd be interested in learning more about the smart phone apps you were talking about. A Russian software company approached me about this very thing a little while back as a cross development project. The advice given to me was why on earth would you do that? Listening to you, maybe what I need is already there. And, not withstanding to those who read this, is that the biology of emotion is only one part of my training. It's important though. You don't get to mind until you can manage emotion enough to calm the furies. Much of my writing is focused on this. It's harder to talk about the organization of mind before there is a ground from which to build. Thanks Rande

I thought I had posted the first part on this website last month, but I didn't see when I looked. Here is the link. Both also have video accompanying the article. Managing the Fear of Trading (article) Sorry about that. The first article looks at what is happening physically, this one drills down another layer, and the next drills down to the meaning attached to the reactiveness. I also need to learn how to correlate the articles and the video so they work together. Any help with that would be appreciated. Rande Howell

It's true an untrained brain/mind is going to avoid situations that have caused pain in the past, particularly significant pain. That biological bias has to be deconstructed and rebuilt into higher functioning to move from struggling to profit. I also brain traders to be aware of their attention at moments in the trading process. I actually define 8 different moments that the mindset has to be reset during the trading cycle. Once they see that emotional hijacking are associated with these moments, traders become more willing to micro manage the mindset they bring into any given moment in trading. But not only is it a natural reaction to avoid pain, it is also the meaning of that act that gets encoded into the pattern avoidance that is the most important to address for long term improvement. A trader's sense of adequacy, mattering, worth, and power get integrated into the emotional pattern generation also. This is their inner game or the inner struggle that has to be mastered whether its trading, golf, chess, or tennis to move from adequate performance to peak performance. Rande Howell

Fight or flight are two of the 3 emotional motivations that are wired to trigger when an emotion erupts. The other is Approach. It is the Approach Motivation that is the desired one for effective traders mind. We still have to learn and retrain engrained biases that trigger to habituated emotional responses. Some people are born with a proclivity for traders mind. I worked with a few, but I find they are rare, other wise traders would learn the Left Brain rules of trading and step into success. Rande Howell

thank you zdo Spell check has been a blessing. Would love to hear about your observations about this topic. Rande Howell