Rande Howell

The whole point of trader psychology or trader self development is develop a mind that, when exposed to the ambiguity of the markets, can effectively use the system they are trading with. The problem is that most are not emotionally equipped to do so. Rande Howell

At some point in time most traders come to recognize the problem with their trading is them, not the platform or the methodology (particularly if you can sim trade profitably). Trading requires a very different kind of "success mind" than the "success mind" that drives success in professional careers and businiesses. But until you recognize the problem is not "out there" but "in there", you'll chase the Holy Grail and keep putting a dent into your capital. Developing the trading mind is moving from an urgent discipline (gotta be trading to make money) to a patient disipline that can wait for the trade to come to you rather than chase the trade. MM also makes a very good point. Less is more. Over trading creates enormous costs to over come.

The Confessions of a Hard Working Trader NOTIFICATION TO ALL READERS: THERE ARE SEVERAL LINKS PLACED IN MY TEXT THAT APPEAR AS SPAM TO ME. THEY WERE NOT INTENDED TO BE INCLUDED IN THE ARTICLE AND I'M HOPING THAT TL IS NOT RESPONSIBLE FOR THEM OR IT WILL BE THE LAST ARTICLE I PLACE ON TL. I’m about to pull out what little hair I have left. I keep running into the same brick wall over and again. I’ve been trading 5 years and I win consistently when "play money" is on the table. But the moment I move from paper money to real money and really risk my capital, things just go haywire. And I don’t know why. I’m well trained. I know how to trade my plan, but I don’t do it. I know that I should be patient, but still, five years later, I jump into trades I know I shouldn’t get in. I know risk management so I try to keep my losses small, because that is how you manage risk in trading, but instead I add to my losses – and hope things will turn around – but they don’t. And I even catch myself as I make stupid decisions (in the moment) – but I do it anyway. I’m like one of those characters in your book. It’s like you wrote about me. I've "been there and done that" with trader psychology. I’ve spent good money on programs that promised that I’d become a disciplined trader – but I haven’t. I’ve been promised that I would learn techniques that would keep my emotions from railroading my perfectly good rational mind into becoming a runaway freight train. But here I am 5 years later still sabotaging my trading. It’s almost like I don’t really want to win, deep down. I can go from one to three weeks without losing and then get mad and give it all back plus a lot more. This is the sabotaging pattern that I keep repeating. How do you figure that out and can you overcome it? I love trading, but I need to come to overcome these destructive patterns. I don’t have an unlimited source of capital. So if I can’t get past this hump, I need to face the music and move on. John Doe Waking Up in Free Fall Have you ever felt this way? I get numerous emails all the time, just like this one. So if you have ever felt at the end of your rope in trading, don’t feel alone. (Not that this is a consolation to your situation.) This guy is trying hard. (And, I imagine, so are you.) He is smart and working hard. He knows HOW to trade. No doubt he has experienced a pretty reasonable degree of success in his career or business before he came to trading. But, like many drawn to trading, he was not satisfied with running a business or dealing with the corporate world anymore and wanted more personal and financial freedom. Then he discovered trading as a means to his dreams of independent living. After being shown the blue-sky side of trading and being sucked into its enchantment, he is convinced he could learn how to trade successfully and make those dreams come true. No one tells him about the psychological side of trading - or that he is going to come face to face with sides of himself of which he was blissfully unaware. (And if he had been warned, he would not have listened anyway.) Now he has chosen trading as a career, while thinking that trading is simply a way to make money so he can enjoy life. He invests money in methodology training and learns how to trade in simulation. As proof of his increasing skills, he is able to take his sim account to impressive paper profits. And now he is ready for live trading. He is confident in his methodology and knows that he is capable of making money in the markets. His past skills that brought him success are ready to be employed in his new career. He is ready and begins trading. For the vast majority of traders this moment (moving from simulated trading to live trading) is like falling off a cliff. It is a long way down and the landing is brutal. Suddenly undiscovered emotions become involved in his decision-making that whipsaw his "mind that knows HOW to trade" into a mind that cannot seem to make a rational decision in the newly pressurized environment of risking his own capital. Often, traders who have experienced confidence and discipline in past careers find themselves suddenly over-trading and impulse-trading. Once confident people, who were accustomed to making things happen by being “large and in-charge”, they are now paralyzed with fear – both at entry points and at exit points. And the more they try to “man up” to the problem and push through it, the bigger the problem gets. How can a guy with proven confident and disciplined personality traits (that brought success in a past profession), use those very same traits in trading - with such poor results? Career Development and the Notion of Work: Urgency to Act vs. Patient Observation A set of attitudes has to be developed for a successful career in trading that is different from a career in a profession or business. No one comes to a career in trading with the traits necessary for instant success in trading, although they are certainly led to believe this by their trading trainers. These attitudes and assumptions have to be developed right alongside the knowledge of how to trade. But this is not taught. The left brain of the trader, where logic is king, is taught. But the right brain, where emotion is king, is ignored. The flawed assumption that many people bring to trading is that the traits that brought them success in their careers and business will also generalize into developing a successful performance in trading. And they assume that the very confidence and discipline that drove them to prior successes will work in trading also. But they will not. In fact, far from it. These past traits, so essential to their prior success, will become the primary obstacle to the very success that they seek. The kind of confident discipline necessary for trading success is very different from the confident discipline found in business. In business success there is an urgent discipline that is ready to take action and conquer goals by sheer will power. When this attitude is brought into trading and applied to the mind that actually trades, disaster is not far behind – or at least slow descent into pain. There is a bias toward urgency to act, to get into trades, because this is the work of trading. (You’ve got to be in trades to make money, right?) The moment that urgency enters the trading mind, the trader is no longer in the state of mind necessary for successful trading. Read that last sentence again. This is very counter-intuitive to the experience of a trader's past successes, so he will continue with even more urgency because he now must make trading "happen" as a career (and make up for prior losses). The formula of a focused work ethic bringing career success worked in the past, so the trader simply tries harder to make success happen in trading. And the pattern continues until the trader stops to re-evaluate what mental and emotional traits are really needed for success in trading. When traders are successful, they practice a patient discipline where they calmly lie in wait (ambush really) until the market comes to them – and then they strike. How different this is from our vignette at the beginning of this article! His trading is based on urgency while successful trading is based on patience. The notion of work is different between the two. Rather than work with urgency to action to achieve a goal, work takes on new meaning to the evolving trader. The new paradigm becomes patient observation, allowing the conditions to come to you. The trader is no longer chasing the trade (an urgency mentality), but is waiting for the trade to come to him so he can strike. This is the successful mind built for trading. Less becomes more. Now, the career development of the trader has taken a quantum leap. Freed from a historical notion of action that brought success in another time and place, the trader now has the newer organization of mind that allows him to manage his emotions, his mind, and his methodology for a successful career in trading. Neither one is better or worse than the other – only different. It simply means that success in business and success in trading require different forms of discipline for success. Without the development of patient discipline, a trader will continue to crash and burn. And it all has to do with the way the trader perceives work. Work as the Coordination of Effective Action I invite you to examine the assumptions of work habits you bring to trading. Really start noticing whether you drift mindlessly into an “urgency to trade” mentality – because that mindset produced success in another time before trading. Does working mean doing and pushing forward to you? Or is there room for a deconstruction of the beliefs you have about work? If you can accept that work is really about the coordination of effective action, then you can examine the effectiveness of your beliefs by examining your trading account. The effectiveness of your beliefs about work being projected onto the markets is demonstrated in black and white right there, in your trading account. It is the final judge about the effectiveness of the mind you bring to the performance of your trading. Then, as you become more mindful of whether your notions of work are effective for trading, start to recognize patient observation as the key to effective work in trading. And realize that success in one domain does not generalize mindlessly into another domain, such as trading. If this is your career, you are going to need to develop the mind that trades right alongside the knowledge base of knowing how to trade. It takes both. Developing the mind you bring to the performance of trading is not an option to a successful career in trading – it is a necessity. And it is going to have to be re-invented for you to be effective in trading.

I think you need to deepen your research and particularly your interpretation. Testosternone levels coorelate to euphoric emotional states that generate a belief in the certainty that the good times are going to roll and where risk is minimized. While cortisol leads to mind sets springing forth from fear where perception becomes biased into believing with certainty that bad things are going to happen. The article I read in The Economic magazine went on to say the researchers discovered that thinking was impaired both ways by the level of cortisol or testosterone. And that the traders did not even recognize that they were impaired. This, by the way, led to substantial losses. In my experience euphoria leads to over trading and impulse trading where good risk management is thrown out the window in the hijacking of the mind. And it is particularly prevalent when the trader has actually become successful but does not stay vigilent in maintaining state of mind while trading. They get a high off winning and come to believe that it is them winning, rather than maintaining a particular state of mind in the performance of a series of trades. That euphoria leads to sabotage. There needs to be a balanced chemistry, including testosterone, to build and maintain the mind that trades effectively. Rande Howell www.tradersstateofmind.com

What I've come to notice is that a trader works hard to develop his mind so he can trade effectively, starts making good money, and then begins a slow descent into the grandiosity rooted in unmitigated testoserone. He believes he has "arrived", which, from my perspective, is a dangerous belief to project upon the markets. In the resulting euphoria, he loses the perspective that allowed to to trade from a disciplined and impartial mindset. And he does become a gambler because he blinded himself to the destructive tendencies sneaking back into the committee of the mind. This is what I suspect happened at Morgan Stanley and the Whale. I try to instill a sense of vigilance in traders as they make the transition from break even to profitable traders. What they have to recognize is that euphoria is just another emotional state that creates a certain kind of thinking. Unfortuately euphoria produces a mind that believes with certainty that the good times are going to roll and begins to minimize the potential cost of risk. But it feels sooo good. Rande Howell www.tradersstateofmind.com

Hi SIUYA Good to speak with you. For my purposes I separate the impulse to get in a trade caused by a fear of missing out from the fear of missing out on profits that takes place while a trader is attempting to manage a trade. To me it is the difference between the roles that an offensive coordinator and a defensive coordinator. Different mindsets that they are acting from. There is alot of complication here and a case could be argued that they are similar. My obsevation is that there is a different emotinal belief lurking in the background that compromises performance. I find developing the skills to manage a trade to be the hurdle most retail traders have the most difficulty with. Even if he can get past the entry problem, he still has the management problem. I find this to be the problem, also, with professional traders. The vast majority of the traders I work with have well thought out plans that have been developed in conjunction with a methodology coach. I work with very few self taught traders. This is because if they don't have a plan that is successful in sim, I encourage them to work with a trading mentor and not waste their money on me, yet. Their plans work in sim and in back testing. It's that risk thing that gets in the way of execution. The problem I find is that most retail traders don't seem to understand that they are going have to develop the mind that they bring to trading. It's just a different animal from what produces success in other endeavors. Professions get that. I have a question for you. I am speaking at the CLSA Forum in Tokyo later this month and my audience is fund managers, risk managers, CFO's, and CEO's of large companies and trading groups. What I have observed in the professional traders I have worked with is that either euphoria based trading or taking profits too early are the major concerns they bring to work on. What is your experience on this? Rande Howell www.tradersstateofmind.com

Déjà vu All Over Again “This happens to me all the time. I’m a profitable trader, but I leave way too much money on the table. Each day I wake up resolved to stick to my trading plan. And I’m fine until I get into the trade. Then something goes haywire, particularly if I’ve already lost one. I get rattled as I watch the trade bounce around. The more I hold on to the trade, the more I feel the pressure build to get out of the trade. Then I don’t know what happens. When I finally see the trade becoming profitable, I've come unglued. I just want to get out with the profit I have before I lose it. I get a jolt of relief when I get out of the roller coaster ride I’ve been on. I’ve got some profit. Then I watch the trade do exactly what it was supposed to do. I see it trend and I realize how much money I left on the table, again. In hindsight, I know in my right mind that I should have stuck to my trading rules, but my right mind just gets blindsided and my fearful mind takes over. I never see this coming. This is the biggest problem I have in trading. If I could get this one licked, I would be a very profitable trader.” A Strong Will Never Wins Over an Excited Emotional Brain One of the largest obstacles in a trader’s journey to reach consistent profitability and income is actually learning how to manage his emotional nature once he is in the trade. This is when risk becomes real and palpable. And this is where a trader’s lack of understanding about emotions and thinking becomes the barrier to his growth. To the trader who has not trained his mind to work in this highly charged emotional environment, there is a powerful tendency for him to get ambushed into a fear that paralyzes clear thinking and urges him to take the profit he’s got RIGHT NOW rather than risk the gains that could evaporate if he waits for the trade to further develop. This is despite what (while in a logical state of mind) the rules of his trading plan dictate for his exiting a trade and taking profit. In this special case of the Fear of Missing Out, the trader has fought through trade entry. And, unprepared for the requirements and skills for psychological management of the mind that he brings to the performance of managing the trade, his will power to force an emotionless mindset in the face of uncertainty is swept away, along with his profit. The problem for the trader is that he does not “see” the fear before it has already undone his capacity to manage a trade from a disciplined and impartial state of mind. He has just experienced an emotional hijacking of his rational mind (and his will power) by his emotional brain. Trying to steel his emotions in the face of the challenge of risking capital seemed to work – for a while. Then the use of will power in the face of continual exposure to the risk of uncertainty and the negative attribution bias built into the primitive neuro-circuitry of his brain was overwhelmed by millions of years of biological programming that he bumped up against while trying to manage his trade. What actually happened to his state of mind? Did this hijacking just come out of nowhere? That is the way this trader, and most traders, explain it. They "did not see it coming". And they do not understand how to change a deeply wired reactive pattern that the emotional brain has already established to avoid uncertainty. In fact, this trader (and most traders) head right into a head-to-head collision between their will power and the force of a powerful emotion that can derail a trader’s thinking in nano-seconds. The Emotional Brain Makes a Decision: the Thinking Brain Produces an Explanation to Support It First, let’s start with examining some of our assumptions about the nature of emotions and thinking. Rene Descartes was wrong. The guy who brought us the Rationalistic Tradition by declaring “I think, therefore I am” made a fatal flaw in his understanding of how body, brain, emotion, and mind inter-relate to one another. It was like he attempted to separate the mind from the body (emotion). This error moved through the centuries and became an unexamined assumption at the base of many human endeavors, including western medical and scientific thinking. This thinking held that you could ignore the mind and the beliefs contained there and simply treat the body. Mind and body were separate in this assumption. Now, of course, with the advent of neuro-biology, a very different paradigm of understanding has emerged. Today the understanding is that the mind (thinking) emerges from emotion. The well-evidenced theory today is that all thinking is emotional-state-dependent. So much for leaving emotions at the door while trading! Without the presence of emotion, you have no thinking. The only question here is what kind of thinking is available to you based on the emotional intelligence of the trader. The key is managing the emotion that you are bringing to the management of a trade, rather than having the reactive emotion managing the mind that trades. If you go back and read the oh-so-real vignette at the beginning of this article, you can observe that the trader ignored his emotional nature at his own peril, and that by not heeding the presence of emotion, his thinking (when he needed it most) was compromised by fear. The emotion he wanted to be in was impartiality. That emotion produces the clear thinking so treasured by traders managing trades under the stress of uncertainty. Being ignorant of the way emotions and thinking are linked together, he kept falling into the same trap, again and again. What he saw as “coming out of nowhere” was in fact very observable (and manageable) if he had known what to look for. But first, he had to develop an understanding that allowed him to see emotion in a very different way. By doing this, he would be able to see his reactive pattern in a new light. Emotions Are Biological – They Take Over Psychology By the time the trader in the beginning vignette noticed the psychology he was trading from, he had already compromised his capacity to manage the uncertainty and ambiguity of the trade in process. He was not prepared because he did not know what to look for. What he missed were the tell-tale signs of the emotion arising and turning into a force that took over the mind that was supposed to be trading from a disciplined and impartial state of mind. Because emotions are biological, there are physiological changes that start occurring as the triggering of an emotion ramps the body and brain up for action. (That action, in this case, is getting out of the trade early.) This “ramping up” of the emotion is called arousal and is much like a dragster gunning his engine in preparation for accelerating down the drag strip. Emotional arousal has a biological signature associated with it that can be observed. In this trader’s case of the Fear of Missing Out of Profits, his breathing would have either stopped, or become rapid and shallow. His muscles in specific areas of his body would also begin tensing. In addition, his heart rate would have accelerated anticipating a call to action so that a threat could be avoided. Unfortunately, the trader had not developed the Mindfulness needed in order to be aware of the building up of the emotion before the chemistry of that emotion began flooding into his body and brain. This is analogous to the dragster not gunning his car in preparation for the run, but just racing down the drag strip. In the case of the emotional build up with our trader friend, the emotion has hit a threshold that flips a switch and the emotion is propelling the trader into reactive avoidant action. Yet, with training and practice, he can develop the Mindfulness to be vigilant about the avoidant pattern (avoidance of loss) that is wired into his adaptive response to the management of uncertainty. By intentionally altering his breathing and relaxing his muscles, he could have managed the intensity of the emotion so that it would not have taken over his mind (hijacked his mind) as he attempted to manage the trade. Notice here that the trader becomes an emotionally intelligent Observer of his body as part of an emotion. This is critical because the emotion dictates the kind of thinking that the trader brings to the management of the trade. It also allows him to face what he has been avoiding. Beliefs Become Embedded Into Emotion Ultimately, by managing emotion so that it does not hijack thinking, the trader is able to approach his beliefs about his capacity to manage uncertainty. It is these beliefs that generate the results in his trading account. It is also these beliefs that the trader has been avoiding because they cause such discomfort when brought into awareness. This is called "facing your dragons". Ignoring the dragon gives it enormous power over your life. Pretending that you can use positive thinking or affirmations to make the dragon simply go away is very simplistic. Ultimately, the dragon must be faced. The "belief dragon" does seem real. But it is only an assumption that has been embedded into the neuro-circuitry of your brain’s programs and has taken on the force of belief. It feels real because it has become habituated and has become the fulcrum around which your sense of self has been forged. What is being exposed in this trader’s performance is his belief about his inadequacy to manage uncertainty. And until this "belief dragon" is challenged, deconstructed and re-organized, the dragon will have emotional power over the trader’s performance under the stress of managing his trade. Notice that this begins by managing the emotion so that it no longer has the power to overwhelm. It is at this point that the trader can step back from both the emotion and the belief and recognize that beliefs and the emotions in which they are embedded can be re-organized into higher functioning states of mind. Instead of avoiding the discomfort of the emotion, the emotionally intelligent trader recognizes that the structure of the emotion is his teacher. The fear teaches you to seek out the self-limiting belief that keeps you stuck from achieving your greater potential. Getting equipped for this kind of work opens the door for using your fears and impulses as guideposts in your journey into becoming a professional trader. Rande Howell www.tradersstateofmind.com

Dynamic Patterns: The Self-Organization of Brain and Behavior - J. A. Scott Kelso - Google Books Automatic activation and strategic avoidanc... [J Abnorm Psychol. 1998] - PubMed - NCBI

For better or worse, the act of trading provokes breakdowns in the process we use to engage uncertainty. On the better side, these mistakes can point the way for the trader to re-engineer the mind he brings to trading performance, both from a method perspective and from belief perspective. The resistance to embrace the learning potential in the trader's mistakes and losses lies at the heart of the "trading not to lose" mindset that so many trader act from. My hope is that this kind of learning becomes possible for you. Rande Howell

You might want to read the article, Making Better Mistakes to Develop Your Inner Game, I posted in the article section of Trader Psychology on the TL site. It addresses some of the problems, and their root, that you bring into this conversation. Adding to Steve's review suggestion is the notion of recording either auditory or video of yourself as you are evaluating what is appearing on your screens as you trade. Talk your thoughts out as you do this process (talk aloud to yourself). This really helps slow the reactive process down so that you can unpack it and look at it. Most people are blown away by what they hear/see coming out of their mouths when they do this process. Then do the process in slow motion as a visualization where you start catching the triggering of the self limiting pattern activating and taking over the trader's mind. This is a process I use with my clients. This isn't a magic wand solution to your problem, but it will give you a tool to see the problem from a new perspective that can allow you to interrupt and redesign the thought process you bring to the trading moment. There is always some embedded emotional "stuff" that is linked to the pattern that has be re-engineered. I appreciate your candor here. Good luck Rande Howell

The Attitude You Bring to a Trading Loss Is the Key to Transforming Your Trading How you handle mistakes (and losses) in trading, both emotionally and psychologically, reveals your capacity to grow as a trader. Do you seek to learn from the mistake or do you want to avoid making another mistake (which, by the way, is impossible)? When you make a mistake in your trading that leads to losses or loss of profit potential, how do you react? How do you typically engage the mistake? Do you explore the mistake as a way of learning or do you beat yourself up for making a mistake? What quality of conversation do you have with yourself about the mistake – what does the mistake represent to you as a trader and your performance in the act of trading? When most traders answer the above questions, they discover they work with the mistake in a way that ensures continued problems in their trading performance. Are you emotionally swept away by the loss and do you berate yourself for making the mistake (the typical way a trader acts), or do you curiously and thoughtfully examine the breakdown in the emotional and mental process of your performance that led to the mistake, and then re-construct the process from a sense of suspended time for a higher level of performance (the path of peak performance mind training)? Failing Your Way to Success Most traders are so blinded by a mental attitude of “trading not to lose” or “not making a mistake” that they cannot learn from what the mistake can teach them about the very mind that they, as a trader, bring to the performance of trading. However, if you want to develop the mind that trades, then you need to make better mistakes. The attitude you bring to the mistake opens and closes the possibility that the mistake represents. This is what “making better mistakes” means. The mistake that leads to loss is simply a breakdown in the flow of coordinated action in the domain of trading. It is not a reflection of who you are as a human being (no matter what your self-talk may tell you), but, rather, an indication of the current organization of the self (your psychology) that you have brought to the performance of trading. Bringing a “trading not to lose” mindset to the breakdown creates a "no-learn" opportunity. But bringing a “curious and thoughtful examination” mindset to the breakdown creates the opportunity of learning – changing the effectiveness of the way the brain and mind engage possibility. From this vantage point, mistakes help you to see where you need to re-engineer the mind that you bring to trading. Mistakes, in this interpretation, become an opportunity for learning. Mistakes, failures in performance, are going to happen because trading is about managing probabilities rather than predicting the future. There is no certainty to be found in trading, yet, most traders bring a highly biased mind that seeks certainty into the management of their trading (this is the very mindset that has to be re-engineered for increased successful performance in trading). And every time the bias of certainty is challenged, the integrity of a once successful belief (now hardwired into a neuro-pattern) is called into question. Here, you will find resistance to change. The catch-22 here is that if you avoid dealing effectively with the internal conflict generated by the mistake, you stay stuck in the very self-limiting belief and pattern that you want to change. Clearly, a new attitude towards mistakes has to be consciously developed to re-engineer the mind that trades. Your mistakes (losses) point this out and your trading account verifies the need. It is at this point that the trader either re-engineers the neuro-circuitry of his beliefs about the management of uncertainty or he resists change to his already-formed comfort zone (cognitive dissonance). But until the trader develops the emotional intelligence to seize the opportunity presented by the loss or mistake, the historically wired pattern compels the trader to be sucked habitually into a vortex of reactive pattern. And the more you try to muscle your way through the fear-based pattern by sheer force of will, the more entrenched the self-limiting pattern embedded in the neuro-circuit becomes. Essentially the trader has strengthened the very neuro-circuit that he wants to change. (This is why you keep doing the same stupid thing over and over again.) Learning to Learn From an Emotional Intelligence Perspective The very thing that traders have to embrace is that they cannot be separated from their methodology and platform. The mind that you, as a trader, bring to the other elements of trading (methodology and platform) has to be re-trained in order for you to be able to use the tools of trading effectively, in much the same way that a race car driver and his car cannot be separated from one another. (The driver of a Toyota Camry is in no way prepared to drive a Formula One racing machine at 200 miles per hour, as the mental and emotional skills for Formula One racing have to be developed.) It is the same with trading. The mind you bring to trading is not going to be the mind that produces success in trading. You have a brain genetically engineered by evolution to avoid uncertainty. Uncertainty and ambiguity generate confusion in our brain. And confusion has been melded with fear in an untrained trading brain/mind. This is what has to be re-engineered. Until that happens, every time you are faced with uncertainty in risking capital, your emotional brain “sees” a saber-tooth tiger attacking and reacts to this perceived biological threat. And your mistakes made in trading are going to point out exactly where the new skills need to be developed. You are going to fail on your way to success because that is the way the brain learns. It learns from failure – it does not learn from success. However, if you are going to re-organize the attitudes and beliefs that your brain is currently organized around, you first are going to have to learn how to manage the biological system that creates the mind. Cooling the Excitatory System of the Brain/Mind Down Fortunately emotional intelligence is fundamentally different from cognitive intelligence. It can be developed. Before the trader can begin the journey into re-engineering his mind, he must first learn how to emotionally regulate his emotions so they no longer overwhelm him. This is done by learning to observe (be mindful) of the body and to become more adept at catching and regulating emotions before they develop a head of steam and hijack objective thinking. Emotions are biological – they are not psychological. They take over psychology when aroused. The really dangerous emotions in trading are fear (in its many forms) and euphoria. Both, once aroused, contaminate your thinking so that an effective mindset for trading is corrupted. Each has a biological signature defined by breathing style, tension signature, and heart rate that are associated with that emotion. Disrupting the arousal of the emotion, before it contaminates your state of mind, is possible by volitionally managing the way you breathe, relaxing the tension in the body, and calming down your trader’s heart rate. This does not solve the problem, but it does get you to the door of the mind. Practicing Performance in Slow, Deliberate Motion Building the skills to be able to slow the process that your mind was engaged in when the mistake happened is the next step to re-engineering the mind that trades. Most traders do not see what happened to them when psychological trading mistakes occur. The speed of the emotional triggering is too fast and they don’t know what to look for. Fortunately, whenever there is an emotional hijacking, there are precursors that appear before the trap springs and you are swept away. You just have to know what you are looking for. In a process called performance mapping, you can learn how to slow down the process that the mistake is embedded in so you can see all the elements of the performance. This is done by taking really good notes during the process of your trading and/or making either an audio or video recording of yourself while interacting with your charts as you trade. This process is very revealing. By doing this, you can slow down the memory of the process that led to the mistake (much like a movie in slow motion) and correct it. This is done in deliberate and slow motion. It is also done with a state of mind that is focused on excellence in the mindset you are bringing to the trade and not on a mindset focused on winning or losing the trade as you are in it. You then practice the new performance (first in visualization, then in your trading environment) so that you are altering the sequencing of the new learned skills into the old pattern. Developing the Mind that Trades A sophisticated process is described here. And much has been left out from the complete process so that it can be presented in article form. One of the major keys to the process is managing which elements of your mind (all those thoughts running around in your head) are doing the observing and which elements of the mind are doing the practice. It is the mind that you bring to uncertainty that determines the probability of long term success or failure. Building the mind that approaches mistakes and failure from a curious, inquisitive, self-confident, and open perspective is the fundamental skill needed to learn how to learn. At that moment, uncertainty and fear have been untangled from the knot that evolution created and you have become a designer of the self – one that can think and act in probabilities. This is the state of mind that the trader strives to develop. And it is only by learning from psychological mistakes that the trader is able to re-develop his psychology of peak performance trading. Rande Howell www.tradersstateofmind.com

BTW. I work with plenty of successful professional traders that use stops as part of their risk management. It may depend more on whose money they are risking. The guys I work with are risking others money and also their own. Rande Howell

I tend to view it as that we are fallible human beings. I don't see being fallible as being flawed. It is just our humanness we are facing. It is when we come face to face with our imperfection, there is an option to face the mistake and learn from it or to maintain a denial of it. Trading will offer a way through the denial. Mistakes become the avenue that we learn to grow from, not what we hide from. Developing emotional intelligence and mindfulness equips us with the tools we need to face our historical organization of self that keeps us from pushing into our potential. It allows us the grace and the tools to move beyond our comfort zone. Rande Howell

The place I like to start with a trader is where he develops an awareness (mindfulness) of the connection between emotion and body (awareness of the subtleness of thought is often a real stretch in the beginning). By becoming aware of the biological signature of emotion, they can catch the rise of an emotion before it takes over mind. The elements they become mindful of are: breathing style, tension in body, heart rate, and degree of fixation to the trading screen. Simple volutional management of breath and tension relaxation can go a long ways in emotional management of the mind that trades. There are a number of good books and guided meditations regarding becoming mindful of thoughts. I use and teach a process that is derivative of Zen, where the witness to the thought becomes aware that they and their thoughts are not the same. In the way I teach it, the trader learns to understand the mind as a committee where various competitive elements of the self compete for dominance. And that you, as the Chairman of this trading committee, need to wake up (mindfulness) and reorganize the mind that trades. Rande Howell

Amen. Internal courage, necessary to push through the door of fear, is far more valuable than external courage.

Hidden Beliefs Taking Over the Performance of Trading (Vignette adapted from a recent consult with a trader) “This happens all too often to me – it’s a repeating pattern that I can’t see happening until it’s already too late. I don’t even see how I fall into this trap. And it is the missing puzzle piece that keeps me from becoming the trader I know I can be. It just seems to happen to me automatically and it occurs most often after I’ve had a few good trades and am feeling good about myself. At the start of the day, I’m prepared and have a positive attitude. I’m ready to trade; I’m ready to get it on. I know what I’m looking for – it’s well defined. I’m looking at my screens and waiting to jump on the kind of set-ups that are called for in my trading plan. I’m ready to trade. I’ve got to be trading to make money, so I need to be trading – not sitting around. Time ticks by as I wait for acceptable set-ups, but I stay ready – poised to act. Often after initial success, it takes what seems like an eternity for another set-up to appear. I want to trade but nothing appears that’s workable. Time passes. I’m waiting, waiting, waiting for a set-up to appear so I can trade. Time keeps crawling by as I anticipate a set-up showing up – I’m ready to trade, I’m just waiting for it to happen so I can trade. Finally I see a set-up – I’m ready. I pull the trigger. It’s only then that I realize that I’ve jumped into yet another trade that, in hindsight, was not a good set-up for me. I don’t understand why I keep on doing it. I know what my rules are and, if things are going well, I’m on it. But I’ve been doing this for years and it is what keeps me from getting to the next level in my trading. I don’t have a clue why it keeps happening.” The Glitch: The Brain of the Trader is Wired to Pursue, Not to Wait for the Trade There is both a biological underpinning to this common problem in trading and an untrained mind blinded by mindlessness that keeps getting sabotaged by an unseen self-limiting pattern. First, let’s take a look at the biological bias that sets the trader up for having his trading mind ambushed. A common trait that is burned into human DNA is to pursue prey. This adaptation was powerfully successful over eons of time with our ancestors so that it was folded into our genetic predisposition. This hardwired trait shows up in trading as “chasing the trade”. First, the hunter is poised for action and ready to act just like our trader in the vignette above. Once the hunter spots the potential prey, he (and the untrained trader’s mind) reactively becomes fixated on the prey and begins pursuing the potential prize. Everything becomes focused on the readiness to chase down the object of fixation. Because his focus is so absorbed by the object of the hunt, the rest of the world around the hunter/trader disappears. The arousal caused by testosterone and the thrill of the hunt overwhelm the disciplined impartiality needed to assess market criterion effectively. In the world of trading, this is a set-up for sabotage. Ancient advantage, burned into DNA because of its success, has been turned into a liability in the new world of trading. This is simply a biological bias that has to be anticipated and managed to maintain control of the mind that trades. By developing emotional regulation skills and awareness of the precursors in the hardwired pattern that leads to the fixation to chase the trade, the trader can learn to spot the arousal of this instinct. It does take work to change old deeply-habituated patterns burned into DNA that were once useful, but are not effective in the environment of trading. But this biological bias is usually not alone in creating problems in trading. The mind that the trader brings to trading also acts as a co-conspirator. Our Notion of Work Sets the Trader Up for Sabotage Going back to the vignette, notice that the trader wants to be trading, not standing around waiting. If he is not trading, he’s not making money, right? And there is an urgency to get into a trade (so you can be working) rather than to manage the mind that observes and assesses the quality of probability. What is being exposed here is a faulty assumption (turned unquestioned belief operating out of conscious awareness) that "working is doing" – taking care of business. If the trader is not busy doing the business of trading, then he is not working. This is the typical unexamined assumption that drives many traders' inability to trade effectively. Work is not about how much you get done. Work is about your capacity for the coordination of effective action. It is not about being busy, accomplishing a bunch of stuff, or taking action when it is not warranted. The work of trading is about coordinating and effectively assessing the elements necessary to produce high probability trades. It is not, by itself, about the act of taking a trade. This understanding of work has as much to do with waiting purposefully and patiently for conditions to set up as it does with pulling the trigger so you can get into a trade and manage it. This is the work of trading. This is called waiting for the markets to show you what it will give you – rather than attempting to take from the markets. In this notion of work, often not trading is actually doing the work of trading. This requires a seismic shift in the way many traders understand work. The old notion of “I must work hard for my money or to be successful” simply does not bring success in trading. In successful trading, bringing an effective mindset to the performance of trading includes a patient, observing mind. There is no urgency to act before conditions are met. Notice how the biological bias burned into the trader’s very DNA to chase the trade combines with a faulty cultural (turned personal) belief that to be good in trading, you must work hard – rather than effectively. It is this “perfect storm”, where an ineffective belief about what constitutes work becomes fused in the trader’s neuro-circuitry with a biological predisposition to chase prey that sabotages the mind that the trader brings to the act of trading. How Do You Solve This Problem? First you notice the pattern. The brain creates programs that, once built, run automatically and out of working awareness. That is the job of a brain that we inherited from our ancestors. These programs are rooted in pattern-recognition and reactive response to the fear of missing out (in this case jumping into unwarranted trades). You have to be able to observe the problem pattern before you can begin to change it. If you are just beginning to investigate Mindfulness in your trading (learning to observe the pattern), start by observing your body (i.e. your breathing, your body tension, and your heart rate). That will eventually lead you to the trading mind where self-limiting beliefs are given voice. You will clearly hear these “voices” when you berate yourself after a loss. All these programs and self- limiting patterns created by the brain are emotional in nature. And because emotions are biological in nature, they show up in the body and can be observed as physical phenomena. Fear of missing out will show up in the body as accelerating pulse, faster shallow breathing or holding the breath, and the build-up of tension in the body. This is the arousal of the emotion, and this is when the emotion can be interrupted and regulated before it hijacks the trading mind. When the emotion is calmed down, you can begin to approach the mind (your beliefs about your capacity to manage the uncertainty that you bring to trading). It is in observing the mind that you discover what beliefs actually are driving your trading. If they are effective beliefs for the performance of trading (the management of uncertainty), you will see your trading account grow. If they are ineffective beliefs, then you will see your trading account stagnate or shrink. It is here that the trader will find it necessary to commit to self-development of the mind that trades. You discover that no one comes to trading with a mind ready-built for success in trading. This is a myth. Instead it has to be developed with the same rigor that you use to develop a sound methodology. What you do discover, though, is that in the same way that the brain has built programs for avoiding the fear of uncertainty found in trading, it also has programs burned into DNA (and accessible) that provide the discipline, courage, patience, and impartiality needed to build, block by block, a mind capable of managing uncertainty, risk, and probability. The programs are there. Your contribution to your trading system is to develop the mind that runs your methodology and your platform. It starts with simple awareness of problem patterns in your trading, learning emotional regulation as a skill, and then developing applied Mindfulness so that you gain access to the empowered programs that lead to a mind re-engineered for the rigors of trading. And what you discover is that trading forces the issue. In many endeavors in life where a trading account does not measure the effectiveness of the beliefs you bring to the management of uncertainty, you can get away with fooling yourself for long periods of time. In trading, your trading account is in your face, bringing into stark relief what separates you from success. And your job, as a designer of mind, is to re-organize the existing programs that your brain either inherited or created into a mind built for the management of uncertainty and probability. Who would have guessed that trading was the ultimate avenue to personal development?

zdo Actually the vignette is taken just about word for word from the description a client spoke as he was describing what it was like to fall into impulsive trading. He was not tired. It happened early in the day. But it did happen that he had had a string of winning days before this happened. From there, we knew he had a saboteur as a resident program (or voice) in the community of his mind that he had not observed before. So this was not a case of fatigue. But fatigue is a serious problem that traders need to deal with or it will lead to some serious problems in their trading performance. Traders really have to decide that they are going to shape the indwelling programs that the brain has built over the eons and through adaptation. I find that need a call to action or they stay stuck in the old limiting patterns. Rande

MM Reason is highly over rated. Reason emotes out of an emotional state I call impartiality. The problem is that, once comtaminated by fear (or psychological discomfort), impartiality and reason cannot be maintained. Like the JP Morgan traders, who actually believed that they were not having emotions (therefore in reason), impartiality was hijacked by emphoria and they never knew it - until too late. The mind produces an explanation for a decision that the emotional brain has already decided. Believing that it is reason is folly. Learning to manage and observe emotion opens up a whole new world where the observer can learn to re-engineer meaning and emotion. And actually arrive at a reason that is not too comtaminated by the trader's ignorance. Rande Howell

Why Your Mind Goes AWOL at the Very Time You Need It Most “You and your thoughts, you and your beliefs, are not the same.” Rande Howell The Bull in the China Shop “I don’t know why this keeps happening to me. Each morning I start my day with a plan. I know what to look for, I know what to do, and I am confident that I can manage trades effectively. And I have a positive state of mind. But somewhere along the line, I seem to get sucked down a vortex and I start doing things that I know I shouldn’t be doing. I often see this as I am making the mistake – but I do it anyway. Or sometimes I don’t even see the loss of rational thinking until it’s all over. That vortex feels like a black hole that is inescapable and there's nothing I can do about it. It’s crazy – I should be able to handle this. I mean, I know how to trade. I don’t understand it. But it keeps getting the best of me.” Can you identify with this trader’s recollection of a trading day gone bad? This is a story I hear countless times from countless traders. They don’t understand why this meltdown keeps happening, considering how much effort they put into building a strong knowledge base in their trading. With each blow up, they dissect the problem and learn more so that next time it will be different. Then it happens again. And again. It’s like they keep getting ambushed by an invisible enemy that appears, on the surface, to come out of nowhere. Perhaps though, they are blind to the circumstance behind their pattern of self-sabotage. And by looking outside of the self for answers, they remain ignorant of their participation in their own trading failures. They truly are like a bull in a china shop. They keep trying to bull their way through the delicate nature of the relationship between brain, emotion, adaptation, and mind. The problem is the very mind that traders bring to the trading arena – and particularly their lack of understanding of body, brain, emotion, and mind. They are inseparable; and for as long as the trader deceives him- or her-self into believing that the mind exists separately from the brain and emotion (i.e. that your thoughts and beliefs are not rooted into biology and emotion), then they remain a bull in the china shop of trading performance. Living and Perceiving as a Captive to Belief, Rather than Having Beliefs that Represent “You” There is an unexamined assumption that you "have beliefs". If you’ve been trading awhile, you probably have written down your “beliefs” that guide your trading. You read a book and with excitement you exclaim, “Oh! These are the right beliefs to bring to the trading arena! I’ll practice them by affirmation and/or visualization (even in front of a mirror) until they become automatic.” You even work up some emotional energy in order to internalize them. Then, as you trade, you DECLARE your beliefs by writing them down and referring back to them. Next, the same old performance pattern crops up again…and again. This ever happen to you? Back to the bull in the china shop. According to neuro-biology, beliefs are rooted into our adaptive biology. They are constructed by the brain and embedded into the neuro-circuitry as a perceptual map. These are primitive circuits that are woven into your brain/mind’s circuitry for survival value at various stages in the brain’s maturation. Literally, your brain (the “You” you believe yourself to be) is born into historical circumstances where a soup of beliefs (your family system and culture) already exists long before you arrive. And your brain adapts “You” into an organization of self that can survive the environment into which it has been born. It is the circumstance of adaptation that forms the early and primitive belief system into which the brain molds the future you. You do not have beliefs; they have you. This is where your fundamental beliefs about your capacity to manage uncertainty are forged. Your beliefs are rooted into your brain and are biological in nature – they take over your mind. Since your brain is organized around the avoidance of threat (fear of uncertainty), it is no small wonder that you push these pesky beliefs out of the forefront of your awareness and into the shadows of your mind. (What you don’t see can’t hurt you.) Then you organize your life to avoid dealing with uncertainty and cover it up with a mind obsessed with controlling the outcome. And it works….until you start trading. Suddenly a mind constructed to avoid uncertainty and control outcome is thrust into an endeavor (trading) that demands the management of uncertainty and the acknowledgment that there is no certainty - just what your constructed mind has been avoiding since early development and what shaped its direction. And your beliefs about managing uncertainty, pushed into the shadows of your mind by a brain mandated to avoid the fear of uncertainty, is confronted with a reality for which it is not designed. Rebuilding Your Mind for Trading Because the brain evolved to link fear of biological threat with uncertainty (it’s a great survival trait burned into our DNA), a trader has to learn to de-tangle fear from uncertainty if they are to learn to trade effectively. Genetic evolution and adaptation to circumstance conspire against this endeavor. But it can be done, but it takes a powerful motivation to de-construct old patterns of reactivity to uncertainty and take responsibility for training the brain with new effective beliefs about your capacity to manage uncertainty. The place to start is the realization that your reactivity to fear and uncertainty in trading is, in fact, revealing beliefs that are limiting you as a trader. Rather than hiding from these beliefs under the assumption that these beliefs represent you, you recognize that these beliefs are ones that you were born into and represent your history, not “You”. In fact, they represent only one possible organization of the self. And you have the power within you to free yourself from being prisoner to your adaptive historical beliefs and to then design beliefs that lead to good management of uncertainty. It will take some work, but it is certainly possible. You’re simply going to have to commit to self development of yourself as a trader. Fortunately, your brain (in the process of building hardwired programs from which your mind arises) also hardwired into your DNA particular traits needed for the management of uncertainty (I call these hardwired programs Archetypes). These programs are just as real as the self-limiting programs from which your mind has been operating. The problem is that in your mindlessness (the bull in the china shop), you have not developed these parts of the mind. But they are there, waiting to be brought into awareness and to contribute to the committee of the mind. In this scenario, the mind becomes a trading committee where various forces or programs are in competition with one another. Your job, as you awaken to mindfulness, is to become manager of which neural programs contribute to the thoughts and beliefs from which you act. To do this, you have to become mindful and intentional about your thought life. Where Do You Start? In the courses I teach, you start with emotional regulation of the arousal component of an emotion. If your emotions get out of control, you will never get to the door of the mind where beliefs reside. Learning diaphragmatic breathing and tension relaxation in the context of risking capital in trading are fundamental skills for emotional state management. This will not solve the problem, but you will never get to the core of the problem if you can’t manage the intensity of emotional reactivity. This process stops the “getting sucked into the vortex” problem discussed at the beginning of this article. Next, you have to learn how to step back from the chaos of emotional contagion (getting sucked into a vortex) and be able to observe the mind as a place where thoughts and beliefs are given voice. This is the skill of mindfulness and it is the essential tool used to transform the organization of the mind. It is from mindfulness that you come to realize that you and your thoughts are not the same and that you can have a major say-so in what kinds of thoughts occupy the awareness of the mind. It is the difference between looking in the rear view mirror and seeing what has already happened and living in the now with awareness of what forces in the mind are at play in the moment – essential for peak performance trading. Also in mindfulness, you develop the capacity of stepping back from the vortex attempting to suck you into mindless trading and to intentionally decide which programs, or forces, in the mind are going to be active in your thought life as you trade. This is the difference maker. This is emotional intelligence at work. Fortunately emotional intelligence can be developed (unlike IQ). As you learn to manage your emotional reactiveness, you no longer fear learning about yourself. You realize that you are like the hands drawing themselves in M.C. Escher’s drawing. You are bringing yourself to life. Mistakes are neither bad nor good. They are simply disruptions to the continuity of flow and show you where you need to improve...and your trading account will give you the information you need to know so that you can improve. At the very bottom is the recognition that you and your resistance to change, in fact, are what stand in the way of your trading success. It is here that the battle lines are drawn. Are you willing to change to become the trader you could be? Much like Strider transforming into Aragon in "The Return of the King" (from the Lord of the Rings), it is time to act from courage in the face of your fears.

If you understand stress as the body's (and brain's) keying up to meet challenges in the environment, you can go a long ways in understanding how to work with it. Stress is also broken down into two basic kinds, distress and eustress. Distress is the bad stuff if the challenge in the environment is not biologically threatening and only psychologically uncomfortable. Eustress the build up of chemistry in the body for performance. The difference is the beliefs the observer has about managing the challenge. To the trader, it is the difference between trading from fear vs. trading from mindful concern. Learning to observe and manage the levels of stress is the key. Bringing the belief system to a point where uncertainty is accepted as the norm, and not something to be avoided, is the driver of the stress. Rande Howell

johnw The ideal would be that the trader's mind is the same for sim trading and live trading. To get to that place is a journey that requires a good bit of training and self awareness. I opt for training traders on a stress inoculation schedule that allows the trader to acclimate to higher levels of risk and uncertainty as they are ready for it. This way they train themselves to work in a particular environment before they step up to the next level. In baseball, the player first plays in the minors before getting to the big show. They learn how to work at each level. After the mind is trained, it wouldn't make a difference. Rande

Discipline is what keeps your mind ordered and focused when under stress. Under these conditions other attributes of internal team of the mind can be organized and directed. Patience, courage, impartiality, and intuition can, when well directed from a disciplined mind, gel into an emotional cocktail that creates the kind of mind that trades well. Passion for trading and a vision of what you could be as a trader are also important. Rande Howell

To steve46 I often find myself scratching my head when I read comments from you. In your comments you make reference to certain groups of attachment theroy types and the environment from which they spring -- so we'll start there. "For those" and "those" that you refer to in your comments are incredibly small subsets of the world of humans -- of which you may be a privileged minority. In John Bowlby's and Mary Ainsworth's notion of "good enough" parenting style, less than 10% grow up and adapted to such an environment. In Mary Ainsworth's "Strange Situation" mountain top experience, it was discovered that the vast majority of people would have no cue what secure attachment style is. Reactiveness was the norm rather than "good enough". Having practiced as an attachment focused therapist working with really difficult populations (even today in trading), I can certainly appreciate the truth of their findings. These are the same proportioned numbers who come to trading also. Reactiveness to fear, either by avoidance or pushing away, show up in people's trading every day. A number of very successful traders also have a disconnect in their capacity to be aware of and process emotion -- it is called high functioning autism. It's actually a great trait to embody for a profession in trading. I don't know if I would try to relate to the rest of the folks who are trying to learn how to manage emotions if I were a trader some where on the spectrum though. I certainly encourage people to explore other providers of psychological development in the arena of trading. I currently have 2 clients working with me who have been presenters of one such guy who also teaches how to trade. Go figure. I don't think you understand Emotional Intelligence or its connection to Jungian archetypes. Archetypes are neural programs, first adaptive in nature, that have proven successful over evolutionary history and have been burned into the DNA of our humanness. Each archetype will have a feeling component of the archetypal emotional grounding. It is this feeling element of the emotion that creates the kind of thinking that is associated with the archetype. It is biologically rooted and is burned into DNA. It becomes your choice to develop these aspects of your brain/mind's repetoire or not. This is what I call "taking control of the community of rivals in the mind". You are going to have programs wired into your neural circuitry that compete for control of the thinking mind. I prefer to have a language that allows me to understand what is actually going on in mind and be able to manage it. Most traders, in their journey to consistent profitability, seek this understanding. Good luck with your trading and better luck still with trying to teach your students how to develop the mind that trades. I have no doubt you can teach a person to trade, and I have a lot of doubt that your methods teach "the rest of us" how to build a mind for trading. And I hope I'm wrong. As I've traveled this journey, I have found very few teachers who can get their heads around the trading mind -- and fewer still who acknowledge this self development aspect of trading has to be taught alongside methodology. It is much easier to stick to methodology and ignore the need to develop the mind that trades. Rande Howell www.tradersstateofmind.com

In our culture not much emphasis is placed on the intuitiveness of the right brain and much is placed on the analytical left brain. While we never learned to manage the gifts that the right brain can bring, they can become a liability in most trader's performance. It is the right side that can read emotion while the left side can analyse the structure of that emotion. This is what you see in really good traders. Jill Bolte Taylor and her book, Stroke of Insight, really turned me around on this. As a celebrated neuro-scientist, she had a stroke that wiped out her left brain and left only her right brain for perception. They are now reintegrated, but they are partners now, making a much more nuanced human being. In trading a client of mine, Christopher Castro-Viaho (sometimes I get that spelling wrong) has the same sort of right brain, left brain synthesis. Not only does he analyse, but he also intuitively "smells the blood". His major job was to learn to trust this part (his right brain) and make it a member of his trading mind. The results have been impressive. I believe you can be profitable without the right brain's contribution to the trading mind, but, add skilled intuition, and the competency of the trader really goes to a new level. Rande Howell www.tradersstateofmind.com

“There is someone in my head, but it’s not me.” Pink Floyd Have you ever noticed all that idle chatter going on in your mind while you trade? Have you ever taken the time to listen to it? I mean really listen to it. Have you ever connected the dots between it and the success or failure of your performance in trading? This running commentary in your mind is so ubiquitous, so commonly familiar, so ordinary – that most do not give it a second thought. In their blindness they think, “It’s just me and my thoughts.” Yet, when it comes to crunch time (like the mental and emotional readiness you need to pull the trigger, or maintaining emotional sobriety while in a trade), the seeming harmless self- talk that you simply pushed away or ignored moments ago roars like a lion in hot pursuit of its prey – you. Meanwhile, you keep believing that if only you could push those pesky thoughts out of your mind, you would be able to break through the barrier that separates you from consistent profitability. But at exactly the most critical moments in your trading, this background noise in your mind keeps suddenly erupting into a tirade of self-doubt or temptation, judgment, blame, or fear. How can something that is supposed to be so familiar and harmless rise up and become a tidal wave that sweeps your trading mind away? Well, just because it so common that it attracts no attention does not mean that it is harmless. What is important to realize here is that you, as a trader, do not understand the power of the internal dialog or what comprises this narrative in the mind. That lack of understanding shows up in your trading account in the form of losses or the loss of potential profits every day until you come to a very new understanding about what is actually going on underneath the hood of your mind. Thoughts Set the Stage of the Internal Struggle First let’s make sure you recognize an internal dialog that is, in fact, going on in the mind as you are attempting to follow your trading plan in the midst of a trading performance. When a trader commits to a trade and the order is filled, often a wild ride ensues – almost like a roller coaster ride with no safety equipment to keep you in your seat. Initially in the uncertainty of the trading environment, the trade is bouncing around in a flux that rattles you. You begin losing your composure. Thoughts of the trade going against you (and you losing, again) begin to overwhelm your untrained mind. By the time it begins to trend, you are so exacerbated that you jump out of the trade because now your fear of missing out of even a little profit has so consumed you that you cannot think straight. You’re just happy to have grabbed a little profit, rather than another loss. Then, after you get out of the trade with only a skinny profit, you watch the trade trend and take off – just like your trade plan had indicated. All that planning, all that charting, all that knowledge of trading - down the drain again. If you have experienced this scenario, you have been on the losing end of the internal struggle that goes on in the mind when it is challenged by uncertainty. The dominant thought pattern that has taken over the mind is usually, “What if I lose?” or “I’m going to lose” or “I always mess up in the clutch” or “Who said that I could trade successfully?” Trying to force yourself to not hear these thoughts, or voices, in the mind by acting as if you are a tough, seasoned trader does not work. You can’t "fake it 'till you make it" in trading. You truly have to develop a mind that is built to embrace uncertainty – not fear it. Linking Brain, Emotion, and Thought Let’s take a look at what is really happening in the brain and mind as this cacophony takes over the thinking of the trader’s mind. The brain’s job is to adapt us to survive in whatever environment it finds itself. It does this by creating programs that keep the organism (that’s you) alive. Once the program produces success in dealing with the environment, it becomes embedded into the neural circuitry and begins to run automatically totally out of the awareness of the conscious mind. It then operates out of pattern recognition and simply reactively “pops up” when circumstances trigger it (trading offers countless opportunities for this to occur). This is how the brain links emotion and thought. An emotion (defined as "any disruption to a standard sensory pattern that the brain has already created") erupts to control the kind of thinking needed to solve the problem in the context of the environment in which the program was created. Usually this emotional program is created during the formative period of the brain/mind – a period when mature problem solving skills have not yet come on line. It becomes locked in and is triggered reactively. This does not bode well for traders. Initially these programs are simply wired into your perceptual repertoire. These guide your responses to environmental cues (think avoidance of danger and uncertainty). This is called adaptation. However, if the programs become successful over countless generations, they are burned into the DNA. This is called instinct. And how do you experience these programs? As voices, or narratives, in the mind. These programs show up as the seemingly idle chatter going on in the mind. Most of the time, they appear harmless enough. Uncertainty and the Brain of the Trader However, adaptation and instinct collide in trading because the emotional brain (the one that controls the kind of thinking you do) does not distinguish between uncertainty and fear. All neural programs are wired to create patterns of avoidant response when stimulated by perceived threats in the environment. And the trading environment, due to its rooting in the management of uncertainty, is going to trigger to fear-based programs. Hence, both instinct and adaptation in the untrained mind create a perfect storm for losing your emotional sobriety while attempting to manage a trade. And how do these neural programs show up in your mind? They appear as the internal dialog or voices in the mind. Thought becomes the voice of your programmed beliefs about your capacity to manage uncertainty. And remember, the brain does not distinguish between uncertainty and fear. This is something that has become instinctual, burned into our DNA, as a successful solution for a greater probability of survival of both the individual and the species. So…this idle chatter that you may not even be aware of most of the time or that can become pesky at other times, is, in fact, the tip of an iceberg that lays out the blueprint of how you react to environmental stressors (like managing a trade). And the programs were created in a time when your brain was not developmentally mature and could not make the kind of decisions it is capable of now. This is what is running your trading mind as you trade. How Does This Apply to Trading? In his book “Incognito” David Eagleman, the neuro-scientist, describes these programs established by the brain as a rivalry of equals. In the generation of thought from neural behavior that describes the relationship between brain and mind, these programs show up as thoughts, voices, or narratives in the mind. Most are developed through adaptation as a successful response towards survival and become residents of the unobserved mind. And these programs, working in the background of an untrained mind under the stress of trading, take over the rival of rational thought. Your brain, whether you like it or not, creates a community of rivals. Your job as a student of trading will be to re-organize this community into an effective team for managing the uncertainty found in trading. Another way of describing this situation from a psychological perspective is that the current organization of the rivals of the mind is the baggage that you bring to trading. Fortunately, the adaptation to the avoidance of the fusion of uncertainty/fear can be re-developed through the application of emotional regulation, mindfulness, and the examined development of other internal resources that have been burned into our DNA. Until you learn to regulate the triggering of these emotionally-based programs that give rise to thought, you do not get to the door of the mind. You stay hijacked by programs the brain has already established when you perceive threat. Once emotional regulation is a working skill, mindfulness can be developed so that you become aware of all the rival programs showing up as thoughts or voices in the mind. And you discover that you and your thoughts are not the same. They are simply programs running you. In applied mindfulness, you develop the talent of choosing which rivals run the thinking of the mind. This is the personal development that all traders need to embrace. This is the internal discipline needed to organize the rivals in the mind into a state of mind that embraces uncertainty and probability. This is the journey that trading demands to become successful.