Rande Howell

Sabotaged by Unexamined Beliefs When he puts money on the line, the trader quickly finds out about the strengths and weaknesses of the mind that he or she brings to trading. Whether you want to know about your weaknesses or not does not matter. Suddenly, risk is real and the trader’s deepest emotionally- laden beliefs surface without warning and hijack the thinking mind. Trading has a way of forcing the trader to acknowledge his emotional and mental weaknesses. In fact, most traders, until they begin trading live, have done a great job of avoiding awareness of their self- limiting beliefs. But in that forced moment of embracing ambiguity called "live trading", your real beliefs about your capacity to manage uncertainty become the submarine that torpedoes a perfectly fine trading plan. The trader’s shortcomings in performance show up as hesitation, self-doubt, nervousness, over-trading, or impulse trading. These are symptoms of the problem that the trader attempts to mask without getting to the core of the problem. This is where most traders stay stuck until they learn how to examine the self-limiting beliefs to which their performances are rooted. Up until that moment of reckoning, most aspiring traders really do not know themselves very well. As one trader taking my group course put it, “I didn’t know what I didn’t know when I started this course. Now I know what I know.” The Mind that You Bring to Trading Let’s learn from this trader’s journey into understanding the self by following him as he begins to wake up and realize that he has to build the mind with which he trades. What he discovers is that he really needs to develop the mind that he brought to trading into a mind that can produce success in trading. It was not that he had a “bad” mind – it was just that a commitment to self-development is required to move past self-imposed roadblocks and into consistent profitability. Like many people training to become traders, he had been successful in a career before trading. He explains, “I spent 25 years in the Air Force as a flight engineer for a large cargo jet. It is a huge plane with many complicated systems that you have to stay on top of – or you will have trouble. I was part of an incredibly well-trained team that flew that plane. We, as a team, were prepared for anything. As a team we were highly disciplined and confident in our capacity to keep our plane flying. If one person was having a bad performance or day, there was always someone else on the crew to support them and get them back into the mindset needed to fly that plane. “ “Naturally, I thought the discipline and confidence that served me so well as a crew member flying the plane would also serve me in trading. It didn’t. My discipline and confidence, developed as part of an effective team, eroded as I traded. The problem is that I held a belief that I couldn’t be wrong and I could “right” any situation – this is not the way it works in trading. Also what I discovered is that, as a flight engineer, I was part of an external team. Everybody developed certain roles that gelled into a high performance team. The problem, as I examined the situation through this course, is that there is no external team in trading. The team that has to be developed is internal. This is an entirely different animal than an external team. When I came to trading, I was not prepared for that and my trading account proved it.” Developing the Inner Team “What I have discovered, though, is that within each of us are the attributes required to build a high performance team. But you have to develop it. You’re not going to simply get lucky and fall into it. In the Air Force teams are built with great intentionality. Each person contributes his skills for the overall success of the team. In trading, you have to develop these parts of the self – there is no one there to do it for you. As I have developed these parts of myself, my trading has taken off. I now know what to look for and how to bring these internal resources into my working awareness. I call this my trading crew. It makes all the difference in the world.” Fortunately, within all of us (as this trader describes) are powerful inherent, indwelling resources that can be developed into a high performance state of mind. But how do you go about developing the mind that trades? A New Understanding of the Mind First, the emotionally intelligent trader discovers that his mind is more nuanced and complicated than he initially thought. What he discovers is that the mind is not just a place where “his thoughts” occur. Rather it is better understood as a committee, or a board room, that is populated by various competing forces. Each of these board members of the committee comes to the meeting with an agenda and direction where they want to take the "corporate self". In the undeveloped mind of a trader struggling to become consistently profitable, the dominant “board members” are destructive in nature, while other less-dominant "board members" are fearful that change will result in losing what they have. If you have ever experienced self-doubt while trying to pull the trigger or have gotten out early from a trade fearing that you were going to lose money, you have experienced these members of the self as they control the committee of the self – better known as an undisciplined mind. By developing emotional regulation skills to calm the body and mind, mindfulness can then be used to open the door of the mind and examine both your thought life and the beliefs that drive your trading. And what you discover is that you do not have thoughts and beliefs – they have you. And in your blindness to their influence, they have been running your trading mind, and your trading account, into the ground. By learning to discern these different elements of the self through mindfulness, a great opportunity for the re-invention of the self becomes possible. Taking Charge of the Mind In the same way that there are destructive elements of the self – there are constructive, empowering parts of the self. This is simply the nature of our humanness. But they have to be awakened, fed, nurtured, and developed for them to become an active (and vocal) part of the committee of the mind. As you develop mindfulness and apply it to trading, what you discover is that you, as chairman of the board of the trading committee of the mind, have been asleep – not tending to the business of developing the mind as a trader. And because you, as an observer to the mind, have been asleep (not knowing to be awake), the trading committee of the mind has drifted without leadership and is not on course. In waking up the Observer of the Mind through Mindfulness, the trader discovers powerful constructive elements of the self. He discovers inherent indwelling resources that have been waiting for him to wake up and develop. These are what Carl Jung called the empowered side of the archetypes. These archetypes give form to the various emotional forces at work in the mind’s trading committee. In the same way that a trader experiences the fear of the Orphan or the judgment of the Inner Critic at moments of uncertainty, an awake trader also (by being human) has potential access to the discipline of the Ruler, the courage of the Warrior, the self-soothing of the Caregiver, and the impartiality of the Sage. Notice that each archetype (i.e. inherent, indwelling resource) has an emotional signature. This is important. This is where the modern science of Emotional Intelligence intersects with the theory of life as a journey into human potential of the Archetypes. Each Archetype (member of the trading committee of the mind) has an emotional signature that can be used to create the emotional cocktail that leads to the peak-performance thinking required in successful trading. The Mind is Developed, Not Found If left to its own devices, the mind will drift in the historical adaptation to which it was born. This is where most traders stay stuck. They never come to grips with the notion of developing the potential that exists within each of us. In their blindness, they keep looking “out there” for answers to their trading woes. They look for an external team to plug into, rather than developing the internal team of the self. But by bringing a different Observer to the trading committee of the mind, you find a very different potential for what the trading mind can look like. We all exist as potential that is limited only by the Observer that we are. Learning to develop the Observer of the coming and going of thought in the mind, recognizing that we are not our thoughts, allows you to de-construct the old committee of the mind showing up in your trading as self-limiting beliefs - and to rebuild it into a mind for consistent profitability in trading. This is the challenge that has to be overcome. It is your mind that trades. Its potential can be developed. And trading makes re-development unavoidable if you are to become consistently profitable. It is your life and you, and you alone, are responsible for the mind you bring to the invention of your life. Embrace it.

Journaling, in and of itself, is kinda like keeping a diary. Depending on the observer of the journal, the journal becomes useful or it just becomes another item on a check list that doesn't help you to learn. I ask my clients to journal with specific questions to help develop the capacity to observe self while trading. What is the thought saying? What emotion is attached to the thought? What part of the self (beliefs) does that emotionally laden thought come from? What is the evidence (or not) that supports the automatic assessment? Is it true? At the core, the trader needs to be examining his resident beliefs about his capacity to manage uncertainty. Applied to specific phases in trading, journaling like this, gets to the beliefs and emotions behind performance. Most traders remain mindless and don't recognize that there is always an internal struggle possible in the mind. Getting to the substance of that conflict allows the trader to begin to the develop the mind that he or she bring to the performance of trading. Rande Howell

Most of the traders I work with are not seeking to be a master trader. Instead they are seeking to be competent enough to earn a living -- what I call a professional trader. I find a huge gap in methodology teachers ability to train aspiring traders. They can teach the TA and mechanics of trading, but they don't know how to touch the underlysing self limiting beliefs that the trader brings to trading. Unless those are deconstructed and reconstructed into higher functioning beliefs, then you are right, they either have it or not. My hope is that a new frontier in trader training will emerge where solid methodology teachers recognize that it is part of their training to get at this psychology part. In the same way I found very few therapists know how to produce long term change, I find that too with "trader psychologists". Steve, I hope one day you and I talk. Everything I've read of yours tells me you are a good teacher and a credit to an aspiring traders learning how to trade. In much the same way that Gail Mercer of Traders Help Desk and I have begun working together to work with the whole trader -- my hope is that we can explore that also. Rande Howell

You brought this vocation notion up a while back in response to a guy I was working with that had a strong ability to build businesses. And you were dead on. The guy did become a profitable trader and he has now bought a business that he can grow. Trading is sideline now. What he discovered was that he loved being in the nitty, gritty of building businesses and was not nearly as well suited for trading. He could make himself do it, but it was a waste of perfectly good talent. His miscalucation was that trading was a business that was capital intensive. He expected to be able to apply his acumen to trading as a business and build it. He did not realize that he would have to redevelop his mind to become a trader. What he learned in working with me has served him well, but it is being applied to business rather than trading now. From what I've seen, the person has to have genuine passion for trading to make the endeavor worthwhile. Because you are going to have to go through some serious development to build the skills, both technical and mental, to become successful. I believe most anyone can accomplish that if they are so motivated. But to sustain that motivation, I find the necessary ingrediant to make it worthwhile is passion for what they are doing. The major problem I see is a fear based mentality that is brought into trading with the hopes that they can escape the limitations they have been experiencing in other areas of their lives. After being sucked into trading by some serous misguided promises, they get into trading and find that facing their dragons are no longer avoidable. Sooner or later, we have to face up to our fears -- whether its in trading or in other areas where we experience limitations based on our beliefs. I really appreciate the insight you have brought to the discussion of trader psychology and want to acknowledge you were dead on the money about suitable vocations. Rande Howell

Koyasan What an interesting post. It is our nature to look outside the self for solutions to problems. Until a trader comes to understand that they are both the problem and the answer, they do not take self development seriously. Trading is about the intersection of platform, methodology, and mind. Mind does not sit outside of the trading -- it is part of the trading. Each element is essential, but the development of mind is neglected. Until this need is addressed, there is a weakness in the system. If a trader were to recognize this need early and address it, then a much shorter path to consistent profitability becomes a real possibility. But they have to come to have place value on and need of self development first. Most people I work with have traded for a number of years and can produce paper profits easily and they really understand the mechanics of successful trading. When they come to the conclusion that they need to build the mind, it can be done in fairly short order. So there can be a shortened path, but the trader has to see the need and push through their resistance. Meanwhile the markets really don't care what story the trader brings to the arena. How the trader approaches the uncertainty is what matters. Better be prepared both in skills and mind. Rande

The Mindset That You Brought into Trading is NOT the Mindset That Will Bring Success in Trading The Journey Begins – Stumbling Out of the Starting Gates Traders begin the journey into trading with high hopes. They believe, with good training and enough screen time, they will be able to master trading and achieve their dreams through trading. They practice diligently in simulation, back-test their methodology, and/or use a trading organization’s “near money” until they clearly see that they can win at this game with their own money. Confident from their past experience of hard work and ambition having paid off in the past, they assume this ethic will lead them to success in trading also. Methodically, they have trained themselves to achieve their dreams. Then they start trading live. Anyone who has been around trading for a while knows the war stories. The stories of blown-up accounts and the slow bleed of a thousand small cuts litter the landscape of the journey into trading. After the losses, fear takes up residence in the trader’s mind and self-doubt becomes the invisible partner riding herd over the trader’s mind. Even when they have a winning streak, they end up getting over-confident and giving back all their profits – and more. Somewhere the trader’s mind gets hijacked by fear or euphoria and an efficient trading mind is no longer in charge of the methodology that (on paper) gave them the edge to be profitable. The Journey Hits a Critical Moment – Taking Stock of Yourself By this time in a trader’s journey, they have chased the Holy Grail through different methodologies, the latest trading guru, the next “can’t miss” indicator, new platforms, and mechanical trading systems that take the emotion out of trading. But they still can't break through to the next level. By the process of elimination, some begin to realize that they are looking in all the wrong places for the missing ingredient to their success; the Holy Grail is not to be found “out there” in new systems or methodologies. Rather, the Holy Grail is really a set of inherent, in-dwelling resources within the self. The rub is that traders have to find, excavate, and develop these elements of their potential. And that is uncomfortable to do on an emotional level, especially for someone who has avoided the heavy "emotional lifting" required to change beliefs about one’s capacity to manage the uncertainty of probability. Many traders stay stuck at this point in the evolution of themselves as a trader, either because they do not want to hold themselves responsible for their trading results or because they do not know how to change. Unless you were lucky enough to win the genetics lottery for trading pre-disposition, there is really no choice but to re-develop the mind for trading. The first big AHA! moment for the emerging trader is recognizing that the problem with his trading is him (or her) – and that alone. Both emotionally and psychologically, this is a difficult task. Redeveloping the self that trades forces the trader to confront parts of himself that he or she has very successfully avoided for decades. The very psychological dragons that the trader has pushed out of working awareness in other domains of his life now stalk him as he trades. The developing trader has to look into the mirror of the self and take stock. This is where he really needs to decide if his passion for trading has the emotional motivation to see him through confronting his fears and redeveloping his beliefs about his capacity to truly manage uncertainty. Unlike other areas of his life where there is so much "fuzzy grey" area about declaring "success", the condition of success in trading is black and white – it is your trading account. If the beliefs you have about your capacity to manage uncertainty in trading are effective, the results will be reflected positively in your trading account. The reverse is also true. If the beliefs you bring to the management of uncertainty in trading are not effective, they will produce trading performances that show a capital drain on your trading account. The Courage to Build Your Mind for Success in Trading At this point the trader comes to understand that the mindset that he brought into trading is not the mindset that is going to produces success in trading. And if he is going to be successful in trading, his is going to have to commit to self-development. Self-development implies that the trader is going to have to build a mind for trading. There is no reason to feel embarrassed. Just about everyone comes to this moment in their journey into trading. It’s called paying your dues and waking up. Generally, at this point a trader has been developing his technical side for three to five years; and he has read more than a few trader psychology books. At some point he realizes that he, and he alone, is the problem that keeps sabotaging his potential. So he decides to commit himself to self-development in the same way that he developed other skills for trading. He has been "in his own way", but he is finally ready to change. This is a critical moment. Many people leave trading before they arrive at this intersection because they are unwilling to change. However, if the trader truly has a passion for trading, he also has the motivation to change. Change Into What? Many traders have attempted to change with no long-term gain. The battlefield of self-development is littered with programs that promise change. Many programs deliver a sense of energy (called a seminar high). When you leave these programs, people literally feel as though they could conquer the world. They leave the training in a state of high energy, they are goal oriented, and they are razor-focused on success. And after walking over burning coals or another seemly impossible mind-over-matter obstacle, they are certain that nothing can stop them. They feel on top of the world. They have the affirmations, the success visualizations, they have learned some NLP, they have done some hypnotic guided meditations that released their higher self, and they have become the spiritual warrior of success. No matter how great this euphoric state feels, this is a dangerous state of mind to develop for practice in trading. Euphoria (which is what these programs generate) is just as dangerous to success in trading as fear. Euphoria is an emotional state that makes a person believe with certainty that the good times are going to roll on forever. It is the same emotionally-based state of mind that hedge fund managers or proprietary traders fall into that causes them to blow up their accounts (i.e. JP Morgan’s $2.5 billon dollar loss). The mind that needs to be developed for trading is rooted in an emotional compound state called disciplined impartiality. In the same way that fear creates a belief in the certainty of things going wrong and euphoria creates a belief (cognition linked to emotional state) that the good times are going to keep rolling, disciplined impartiality creates a state of mind that believes in the certainty that probability is on your side as you manage the trade well. Notice the difference here in how the emotional states work. Fear and euphoria produce a bias of predicting certainty of the future as if it were real. Disciplined impartiality produces a mind that manages the probability of what future may come. Fear and euphoria are trying to control the outcome of probability as if it were a certainty. Disciplined impartiality is aimed at controlling the state-of-mind to manage the probability of outcome. Setting Course for the Journey of Self-Development First and foremost, as you explore how to develop the self for trading, look for ways of calming down the excitatory process of emotional arousal – not cranking it up. The more emotionally aroused you are, the more difficult you will find it to create the calm, patient states of mind necessary for trading. Next, look at the way the system is teaching you to achieve success. Are you being asked to produce high-energy states where you can “feel” the energy of success that makes success happen as you envision it? Or are you being trained to develop a state of mind that is receptive (or open) to what life (or the markets) are willing to give you and then to seize the possibility? Trading demands calm, patient states of mind that can seize opportunity when it appears. This is the self-development that works well in trading. It is the difference between the way the American cougar hunts compared to the hunting style of the African lion. The cougar waits in patience for the prey to appear in her ambush zone and then she pounces. This is the kind of strategy that works well in trading. On the other hand, the African lion chases the prey in teams. This high-energy “chasing the trade” strategy sucks the trader into trades and positions that take him out of the state of mind that keeps probability on his side. Ultimately, the trader has to develop a mindset that encourages him to wait to see what the markets are willing to give him and to also conserve energy and capital to trade another day. Understanding the mind that needs to be developed can really help you sort out HOW you go about building that mind. What tendencies are you bringing to your trading mind as it observes the markets? What aspects of your psychology do you need to develop in order to get into the zone where effective trading occurs?

Thank you Tim. I have found that the vast majority of people, including traders, do not have an effective understanding of emotions and how they work with brain to create the trader's mind -- so the probabality of change is limited. This article is a basic primer that helps traders view emotions in a new light that allows them to work effectively with emotions. Gail Mercer of Traders Help Desk is beginning to incorporate my self development training into her methodology training with her clients. She knew that the trader's emotional mind had to be developed along side of the rational mind to create an effective trader's mind. That's a common gap in trader training. With both, the aspiring trader wins. The whole trader is developed, both mind and method. One day, I hope that this path of working with the whole trader is the standard practice of developing traders. Rande Howell

The mindset that you bring to the trade is neither about winning or losing. It is about performing the trade so that you execute it in excellence. Winning or losing occur afterwards. It is the mindset that you bring to the performance that determines the capacity to manage probability. Rande Howell

Most traders wake up in an emotion, never having seen the tell-tale signs of how an emotion takes over perception and runs a trader's thinking. Yet, the emotion was hiding in plain site - it is the trader's blindness that led them into a decision-making ambush. Working with emotions is not optional in the life of a trader. A trader’s lack of understanding of emotions and how they work is a major obstacle in trading performance, and it will stay that way until the trader learns to deal with emotions effectively. Most traders do not notice an emotion (fear, greed, or euphoria) until it has already corrupted their mindset and hijacked their capacity to think clearly. By the time the trader notices the "feeling" of an emotion, it is too late. When you (the trader) “feel” the emotion, it is already coursing as chemistry in your body and brain and your thinking is compromised in whatever direction the emotion is taking you. When this happens, there is no way to put the brakes on the emotion and return to clear thinking. The best solution at this moment is let the emotional chemistry “burn” itself out so you can come back to your senses. (You can accomplish this by getting away from trading - i.e. take a walk, go exercise, go for a run – anything that accelerates the burn of the emotional chemistry in the body). But, it does not have to be this way. Let’s take a look at emotions in trading and discover how it is possible to build a path to emotional mastery. What is an Emotion? First, emotions are not feelings, although feeling is an element of an emotion. Emotions are not touchy-feely – they are biological. Emotions take over psychology and thinking. They are built to provoke the body and mind into specific forms of action based on the motivation of the emotion. This is why managing them is so important in trading. Fear, for instance, is built to avoid threat – both biological and psychological. The emotional brain, once provoked to fear, will manhandle the thinking mind to create explanations that support what the emotional brain believes. This is because all thinking is emotional-state-dependent. The key to successful state of mind management, therefore, is emotional state management. Second, an emotion (being biological in its nature) is defined as any disruption to a standard sensorial pattern that the brain has already established. That standard sensorial pattern is often referred to as your "comfort zone". So, as you are trading, if any deviation occurs from a pre-existing homeostasis, an emotion pops up to deal with the disruption. Now what does that look like in trading? The movement from evaluating set-ups to committing to an entry point is just such a disruption to standard sensorial pattern. Suddenly your cozy comfort zone is disrupted and you are committing capital to risk. For many traders, this represents threat. And, if you do not develop your EQ (emotional intelligence), it will not matter how much you KNOW about trading and risk management while in the safety of your comfort zone, your trader’s hand still freezes and you cannot pull the trigger because the emotional brain dictates how the thinking mind will think. Here, the emotional brain perceives the uncertainty of putting capital to risk as a threat and jumps to fear and hesitation. Becoming emotionally intelligent is essential to the development of successful traders. Learning how an emotion operates will give the trader an edge in managing his emotions and mastering the mind that he brings to trading. Elements of an Emotion Emotions are composed of a number of interlocking elements. The important thing to understand about emotions is that they are biological and they take over your psychology. Learning how emotions operate is the first step to mastering them. Here are the elements of an emotion: Arousal. First, there is a change in the status of a trade which triggers an emotion based on the trader’s perception of threat (fear) or opportunity (euphoria or greed). What happens next is that the body begins to ramp up for action. Breathing changes. It stops or begins to become shallow and rapid. Muscles tense, getting ready to spring into action. The heart begins to race or miss a beat. You are now experiencing the arousal of an emotion. It is building, readying the body for action. This is the place you want to catch the emotion – before it builds up a head of steam and becomes an out-of-control locomotive. As the emotion’s engine revs up, it reaches a critical mass. It flips an internal switch and it springs into action. It is no longer building up – the switch is flipped and the emotion activates the feeling component. Feeling. Feeling is the subjective experience of the emotion and is where most traders notice the emotion. However, the feeling element of the emotion is also the chemistry of the emotion coursing through your body. This chemistry is what you “feel”, and this is when the emotion contaminates thinking. In the life of emotional activation, the emotion can easily take 45 minutes to an hour for the chemistry to burn out if it is no longer being stimulated – not good for the trading mind. So you will no longer be in your “right” mind for trading if you are experiencing fear or euphoria. Both fear and euphoria set the trader up for skewed thinking. The feeling element of the emotion produces a belief in the certainty of whatever direction the emotion is provoking you to go. Motivation. Motivation is where the emotion is taking you. Remember, emotions are biological and are about producing action in a particular direction. Those directions are called emotional motivation and are either avoid (run, hide, freeze, submit), attack, or approach. Feeling and motivation conspire to sweep the trader’s mind away. If you have ever been reviewing your trading day and wondered what happened to your right mind in the heat of trading – this is it. Motivation provided the direction of the e-motion and the feeling provided the certainty of the belief that hijacked your thinking mind. Meaning. Meaning is the self-belief concerning the trader’s adequacy, worth, mattering, or power to manage uncertainty that becomes attached to the emotion. You can declare that you believe something, but that is only cheerleading. The proof of what you really believe about your capacity to manage uncertainty will be found in your trading account. Most traders avoid looking into their self-limiting beliefs (no matter how boldly their trading account points to them) because it creates discomfort in their comfort zone or current organization of self. This lack of courage is what keeps the trader locked in his self-limiting beliefs, that negatively impact his trading account. Pre-disposition. Genetic pre-disposition is simply beyond the scope of this article. We are all wired with certain potentialities – it is what we do with our potential that matters, though. Freedom of Emotion, Not Freedom From Emotion Emotion is unavoidable in trading. The EQ skill is learning how to use emotions to produce effective states of mind for peak-performance trading. As a trader develops his EQ, he learns to regulate reactive emotionally-based pattern. The first step is to volitionally alter the arousal element of the problem emotion through breathing and tension release. By doing this, he is able to better manage the intensity of the emotion so that it does not activate the feeling state of a reactive emotion while trading. (If that occurs, the trader’s mind is compromised.) As he gains the emotional competence to regulate the emotion, he is able to get to the door of the trading mind. This is where he can use new-found courage to examine the beliefs that limits his capacity to manage the uncertainty of probability. Here is where meaning can be transformed - first, by discovering his inherent worth as a human being. This is really important. It is at this point that he can focus on his trading as a performance rather than a characterization of his being. At this point in the journey of a trader, he is re-organizing the meaning of self that is embedded into the emotional structure. Here, the trader can begin to use emotion as information or data because he is no longer afraid of what he might find out about himself. He begins to see what is manifesting in his trading with far less avoidance and denial and he uses this information to design the mind that trades. No longer does he try to avoid the discomfort of reactive emotions and the self-limiting beliefs that lurk behind them. Instead, he is able to use the emotion as information that tells him where he needs to look for self-limiting patterns. He knows that emotions will lead him to what he needs to know about himself so he can grow as a trader. Fear has been transformed into reverence, vigilance, and concern. These emotional states that give rise to a peak performance state of mind are rooted in discipline, courage, patience, and impartiality. For those interested. A similar article similar to this one is the cover article for June's issue of SFO magazine. Here is the link to "How to Train the Brain to Manage Fear". http://www.sfomag.com/eSFO/eSFO2012_06.aspx?page=22. And for those coming to the Dallas Traders Expo, please catch my presentation there.

Before techniques comes the need for understanding. A basic understanding of emotion and the way it drives mind is simply necessary from my perspective. Read zdo's comments on the neuro-scientist studying traders -- the traders did not even know that their mind had been seized. This is what I see with new clients. They only know that they are in an emotion once they are able to feel it. This is way too late. Ask trader who has taken losses because of skewed thinking. Once a trader has a grasp of what emotion is, it is earlier to start regulating it and then designing for its use. I'm placing an article here in the next couple of days that addresses emotion and the importance of observing emotion at the beginning of its arousal so that it can be managed. The first tip comes from there -- you begin observing your body for signs of arousal that you can intervene early in the triggering of emotions. Later you learn to be designer of the emotional state you are taking into various moments of the trading cycle. But first you become an observer of emotion in your body. It's takes a little practice, but it's alot better than finding out later that your cortisol and adrenaline levels have ambushed the mind you are trading. Same with euphoria and its cocaine like neuro-chemistry -- just not wanted in the brain of a trader during the performance of trading. Rande Howell

It's not so much about "working on the self", but about knowing the self. Emotional Intelligence is far more important to success that knowledge. Fear and greed are emotions. And emotions are rooted into our biology. They are not psychological -- they take over psychology. An emotion is any disruption to the standard familiar pattern that the brain has already established for interfacing with the environment. Fear is the response of the biological organism that we are to a disruption of standard familiar pattern in our environment that is interpreted as threatening and triggers to avoidance of the stressor. Anxiety is the negative apprehension (thinking) that occurs after fear has hijacked mind and has become standard pattern. Greed is based on the fear of missing out of scarce supplies of food or other essential elements of survival. It is derivative of fear as is anger (attacking the threat). The application to trading is that few people bring the skills needed to regulate the limbic system's organization around fear and its pattern recognition that triggers to fear stressors. It does not distinguish between biological threat and psychological discomfort. Either through experience and/or training, a trader has to learn to sooth the excitory process of the emotional brain so that he can maintain an emotional state of impartiality in his trading. Otherwise primitive processes will prevail. And since most people really avoid digging into themselves and examining their worts, they stay stuck in primitive patterns of perception and action that limit new ways of approaching the enviirnoment in which they live. Trading is a great place to see this resistance to pushing through one's comfort zone. People give lip service to psychology as talk -- they rarely have the insight to confront the basis of their fears organized around managing uncertainty. They read books, have discusssions (all in the head), but then avoid approaching the problem with a mind to change. There is a reason that Gail Mercer of Traders Help Desk requires students of hers to read Mindful Trading: Mastering Your Emotions and the Inner Game. She knows that a trader's psychology is what is using the tools of platform and methodology. She recognizes that her students will never be able to maintain being in the zone, if they can't rewire the brain of old beliefs about being able to manage uncertainty. Building Emotional Intelligence is not an option in trading, it is a necessity. As long as you stay in your head and think, your biology will have an open back door to sabotage perception and trading. Know thyself -- then do something about it. Rande Howell

The factor you are talking about is called genetic predisposition. It is far more flexible than absolute -- more of a generalized direction than a locked in position. Gene expression has proven to turn on and off depending on various factors including environment. A person born with a predisposition toward anxiety may not become a lion trainer, but can go and watch the lion trainer or even learn to train dogs. They can show up at the party, just not be the life of the party. But they can enjoy themselves. Same with trading. I have worked with people with significant OCD that, when properly medicated, could learn emotional regulation skills and trade effectively. I have also seen the same person not sustain his capacity to manage his predispositon with horrible results. It's commom when working with a trader with sub-clinical levels of anxiety (everyday worry applified by the rigors of trading) learn to work with this predisposition gone amok and develop a working mindset that managed the trading environment effectively. The point is that predisposition is not set in concrete. It is the belief, usally learned from family of origin and culture, about their capacity to manage uncertainty successfully that has to be examined and transformed. People often confuse predisposition with self limiting beliefs. If the emotional brain comes to believe something about the self, the thinking brain will produce an explanation that supports that belief. This is pre-logic. I'm with JohnW here. Tiger Woods is a good example. From an early age, he was taught and learned to fuse his sense of indentity with this performance. He certainly got drunk with power and confused sex with a representation and reward of how large and in charge he was. As in trading, this belief (that had once served him so well in the domain of golf) and the euphoria of being a hot man (Gail Mercer calls this male bravado in her trader training) crashed marriage and family. Like many traders who fall victim to the euphoria that can occur in hot trading and end up losing big capital based on self limiting beliefs exposed in their trading, Tiger Woods did nothing different and his performance is now tentative. Being blind to his arrogence brought him down. In Tiger Woods story, it took time for the consequeces to be brought forth. In trading, it usually is alot faster. Self mastery is what I see most traders avoid. They will seek answers outside of the self so they do not have to change the current organization of the self. This is called self preservation. It's a useful bias, but it keeps you locked into a particular way of seeing the world. If that position comes crashing down, it's time to look at the self limiting beliefs behind the performance. Not sit in the comfort of saying that it is all nature. Rande Howell

"John" is a former client of mine who is now trading successfully. This forum is way too small a space to a discourse about how brain adapts biological system to its environment and creates reactive patterns to trigger before thought to similar generalized stimuli in the environment. One of the better ways of understanding of understanding this process would be to look at how brain responds to traumatic events. Patterns get wired and "pop up" reactively based on genealizing from a negative event in the environment. If you have ever had a substantial loss in trading and found it hard to trade after that, you have experienced this process. It is possible to discern between biological threat and psychological discomfort. But you have to train the brain/mind for it. Just like learning to read changes the brain from its evolutionary direction, so can we build a "new and improved" brain/mind for trading. Evolution and biology did not set up shop for long term success. It is wired for short term success. Once success to a break down has been established, it wires it into pattern or habit. Often that short term success is not actually good for long term success. This is what is happening when a trader keeps repeating the same mistake over and over again despite the negative consequences. In the stress (or thrill) of the moment, the amygada's reactive fear patterns get past the hypocampus' evaluation function that moderates fear responses by the elavation of stress hormones that block the hippocampus' moderating influence on the amygdala. The brain only learns from mistakes, but it also tries to prevent the possibility of experiencing a mistake. That's what reactive pattern is all about. It's not seeking to better the self long term -- only short term. Back to "John". He had learned long ago "not to make a mistake" in his training as an engineer. He "knew" that trading was a numbers game where even with an edge, there would be losses intellectually. However when he was in the soup, this intellectual stuff simply got blown out of the water. Having gone to numerous Tony Robbins' seminars, he tried to envision outcome, overcome fear, and control the future with his positive and powerful attitude. Having worked with a number of people like this, it is no surprize that this approach to psychology created a bigger monster when he discovered he could not control outcome. He could only control his response to circumstance. He was taught the same process I teach all my clients. First emotional regulation in the context of the trading environment. Until you get control of emotional reactivity, you don't get to the door of the mind. Second is mindfulness where I am teaching a trader how to take a step back from thoughts and beliefs that hold your perception of the world. Third, I taught "John" how to observe the Internal Dialog -- that's all those thoughts running around in your head -- particularly the kind that come with stress and worry. In particular I taught him to question his historical conversation about being right. From there, I taught him how to access the indwelling discipline, courage, self soothing, and impartiality within himself and develop it so that this emotional base created the mind that traded, rather than the one he showed up with in the beginning to trade. I used a memory model to retool emotional memory to access the varioius emotional states that give rise to mental states (this is the archetypal stuff). Took about 4 months for basic change process to become high functioning in the trading environment. He went from a mindset in his trading rooted in "trading not to loss" to a mindset that stayed disciplined and impartial as he worked with the uncertain world of outcome in this trading day. Can he fall back into the old pattern? Easy. You gotta stay alert to back sliding. One of the methodology teachers I work with is Gail Mercer of Traders Help Desk. She has been teaching for a long time and her clients have ennormous respect for what they have learned with her. Her comments on traders are on target. She says that the problem occurs because traders have a problem pulling the trigger, staying in the trade, and taking losses. She reports -- It is their head, not their methodolgy that is the problem. Much of it false bravado of the male kind, she also reports (She says it more colorfully). She has tried to solve this problem for many years. Same things we're talking about here. Out of working with this situation, she now integrates trader psychology into her trader training. And if you were going to her conference later this month, you would see me teaching teaching various elements of my work that she then integrates into her training the next day. It's a great way of working with traders. I encourage you to read into Emotional Intelligence. Particular pattern formation and reactivity and the rise of mind from brain. It is theory, but with alot of testing of hypothosis that grounds it. What you will discover is a vast amount of the stuff I write about comes out this theory. I also give a number of free educational webinars that show how these elements fit together. EQ is far more important than IQ. Rande Howell

I agree in that there is a range in which a personality needs to suit method. What I hold is that emotion is misunderstood. This misunderstranding has tripped up people since before Descartes when he asserted "I think therefore I am". He later realized his mistake, but the rationalistic tradition had already been born. Emotion and feeling are not the same. Feeling is an element of emotion that allows you to sense the emotion and generates the emotional base of cognition. But emotion is so much more. Emotion is biological that takes over psychology. Until we learn to work with emotion, working on psychology is useless. The glue that holds biology, brain, and mind together is emotion. Yet sinks beneath dualistic perception like a rock thrown in deep water. Rande Howell

Interesting post zdo. Fear and its cousins are an important emotions to become competent in working with. When engaged wisely, it can be part of a trader's ground into humbleness - which I find to be trait necessary for long term success in trading. Reverence, or to revere (have deep respect for something beyond our understanding), is an important mature aspect of fear. This is actually the kind of fear spoken about in the Judeo/Christian Bible. One of the problems with spells of success is that it uproots the participant from the focused concern and discipline required to maintain a receptive state of mind needed to work with uncertainty. Often this is called arrogence. I was listening to a guy who fell from grace in politics in DC. It was interesting what he said. It was that when he first went to Washington, his intentions were noble. But as he became part of the soup of Washington, he became insular. Out of this, he became drunk with power. He began to feel large and in charge. As he drank of the power that Washington offered, he became disengaged from the intentionality that had driven him to get to Washington. He started doing some really stupid things and, in his arrogence and its blindness, didn't cover his tracks. Before you know it, some enterprizing reporters had drawn a bead on him and scandal ensued. When he woke up from the drunk, he could no longer explain how his noble intentions had become so corrupted. I find this happens with traders where money and power can become intertwined. And though I do not live in the world of large hedge fund traders, I figure something similar happens to them. They become drunk on the power Wall St money avails them, they lose their senses, they blow up, and then wake up. And begin the process again. If they are like active traders tasting success, they go boom and bust several times before they conclude they must refine their fear into reverence so that they can maintain the emotional sobriety that allowed them success in the first place. One of the practices I find useful for traders is for them to acknowledge the potential of the voice of their fear. To the emotionally intelligent trader, what this does is keep them riveted on the concern to stay focused and disciplined. Not surcumb to the fear, but manage it to have a healthy respect for what can happen if they don't maintain a mindset grounded in humbleness (anything can happen), discipline, and impartiality. Euphoria (which leads to arrogence and grandiosity) also has no place in the mind of the trader when trading. Rande Howell

If my writing style triggers you to rewrite, I encourage you to save yourself from the angst and not read it. That would solve that problem. And you ask some good questions along the way. See my responses below: The basis I use for determining whether a trader can technically trade or not is the success of his sim trading. If you can trade successfully in sim, there is good evidence that they technically can trade and then we know that his/her ability to manage risk and uncertainty is the major problem. That's psychological organization. What is exposed is the organization of self that manages uncertainty. It's pretty simple and is the basis that methodology teachers will use to refer to me. I see alot of engineers, programmers, and music theory folk that have the trained cognitive tools that would provide a great basis for trading, but they can't get them unpackaged due to fear based reactivity that blows out their capacity to think clearly in the rigors of trading. Very trainable situation. People who know how to trade technically often get in trades and their capacity to trade their plan from a position of impartiality blows up due to hyperasousal of fear of loss of some sort. When they wake up from this emotional hijacking, they again get logical control of their thinking process (their mind) again. Organisms from the simplist to the most complex are inherently wired to avoid uncertainty by establishing familiar patterns that fire into automatic responses to threat to current organization. This is a biological mandate since disorganization of self in a biological sense means death. This drive was not built for the advent of the development of mind. Mind simply follows biological history -- until the owner of the mind wakes up and starts developing awareness. This is a biological mandate that has driven survival for untold generations. Once the pattern is wired, it is highly resistant to change. And then when facts don't support the patterns of recognition, now embedded as belief, the organism (the trader) still acts from history -- rather than changing. This is called cognitive dissonance. In trading, you see this in emotional reactivity thinking where the trading mind is taken over by avoidant or attacking emotions. Both are reacting to perceived threat, but in different directions. Fear of pulling the trigger or revenge trading is what it looks like in trading. Actually I also work with successful traders who simply want to maintain a state of mind that has proven successful in their trading or they seek improvement in their inner game. They seek emotional sobriety so neither fear nor euphoria become the basis from which their trading mind springs. Both are dangerous for successful trading. Others simply never learned how to produce emotional regulation and develop indwelling resources inherent to their humanness until they were forced to by their desire to become a more competent trader. Professional athletes and business folks use coaching to keep their edge up -- it's simply a cost of doing business. I see little difference in trading. If you have been so blessed that the mind you bring to trading needs no tweaking, good for you. Most are blind to what causes them to stay stuck in self defeating pattern. And they need help. Rande Howell

The Allure of Magical Thinking It was the start of another trading day, and John was ready. “This day is going to be different. I am going to trade my plan – no matter what!” John said resolutely into his reflection in the mirror. He practiced visualizing and “feeling” the success that trading was going to bring him. He declared the affirmations that he learned from the success seminar he had just attended. He felt the high-energy state that he now believed would create the "success mindset" he had been missing in his trading. And after all that modeling of a super trader, he knew he was attracting success. If he could walk on live coals, he had no doubt that he could conquer the fear that had been blocking him from success in trading. “I’m a million-dollar trader. I am going to conquer my fear. I am a confident and disciplined trader. I am going to win,” John confidently declared in his mind. And sure enough, self-doubt was nowhere to be seen. All went well as he began his trading day. He felt great. His confidence was high as he watched a particular set-up heat up. This was the one he was looking for. It met his trading plan conditions for entry. With his new-found confidence as his guide, he pulled the trigger. Initially the trade trended as he had predicted. Then, WHAM, the trade went sideways on him and it stayed in flux for what seemed like an eternity. It nearly hit his stop a couple of times as it bounced around and it just would not refresh and trend as he had anticipated. Suddenly, and without warning, he was not so sure. He was so sure just moments before. Now his confidence in the certainty of the trade evaporated like a mirage in a desert. Feeling knots in his stomach, all he could hear was the deafening roar of his thoughts, “You’re going to lose.” The self-doubt that moments before was "nowhere to be seen" was now front and center in his mind. What seemed so certain just moments before was thrown into chaos. And out of that uncertainty came a fear of losing. He thought for certain that he could predict where the market was going. And with that certainty gone, fear of loss sprang from the uncertainty and he was no longer trading his plan. Instead he was trading from his fear of uncertainty. What happened that rearranged his thinking so quickly, so thoroughly? The Trader’s Pursuit of the Myth of Certainty The biggest problem I see that keeps traders stuck in mediocrity is their blindness to the need to change from a mindset rooted in predicting certainty of outcome to a probability mindset where the trader learns to live with uncertainty – literally becoming comfortable with not knowing with certainty what is going to happen. It takes internal courage to shift this fundamental biological and psychological bias in perception. Rarely is the mind that brings a person to trading going to be the mind that produces success in trading. The mindset that produces success in other domains of performance based on forcing a will upon the world or having a positive winning attitude does not translate well into trading success. The evolutionary biological bias of your brain predisposes you to seek certainty and avoid uncertainty. (You can already see that this creates a problem in taking a brain designed for survival in an uncertain world and plopping it down into the world of trading without a significant reworking and override of primal directives of the survival brain.) This is your survival (emotional) brain at work. To your primitive brain, uncertainty, chaos, and the fear of death are linked (this is a serious glitch in the development of a trading mind). Add to this the fact that the untrained brain/mind cannot discern the difference between biological threat to the continuance of life and psychological discomfort. (This is a distinct problem in trading because there is always uncertainty and, therefore, psychological discomfort). At its core the brain is a pattern-recognition machine that organizes the developing “you” into a set of beliefs that govern how you interpret and respond to a circumstance that is ambiguous in nature (like trading). Once your brain finds a random solution to a challenge you face, it habituates the solution into an automatic response that no longer requires additional thinking or problem solving. This produces hardwired neural pathways that automatically trigger when the organism (the trader) is exposed to ambiguity, uncertainty, or risk (threat). This mechanism is out of your working awareness and is reactive in nature. (For the trader, this creates a real barrier that compromises the capacity to work with the uncertainty found in trading.) The particular solution is not necessarily the best solution, but it is a successful short-time response to the environmental uncertainty your brain faced. Then the brain takes another step – it generalizes the perception and response to a perceived threat (uncertainty) from one domain to similar ones. This is called response generalization. Suddenly the mind (and all its learned beliefs and behaviors) that the trader brought with him or her into trading becomes a liability to the development of a successful mind for trading. The mind that emerges from the biology of the brain does not separate uncertainty, ambiguity, confusion, and fear from one another. The emotional brain is biased to see the uncertainty found in trading as threatening. This brain and mind that you inherited was never built for the rigors of trading. It’s a liability that you, as a trader bring into trading as a biological bias – and you must retrain it to become a successful negotiator of uncertainty. The brain, with its bias to create a sense of certainty (safe from threats to self), creates highly reactive patterns to keep the illusion of control of circumstance in place. There is even a name for this preponderance – cognitive dissonance. The brain you bring to trading will not accept facts or positions that do not support the current belief structure about its capacity to manage uncertainty (threat). The more facts to the contrary to which you expose the embedded belief, the more entrenched the belief becomes. This all exists so that the brain/mind can keep up its illusion of control. It is this illusion of control that the trader brings to trading that must be altered for him or her to make the transition from certainty-thinking to probability-thinking. Letting Go of the Illusion of Control Trading effectively demands a probability mindset. There has to be a commitment to personal and professional development so that the trader can use the tools and skills of his trade, incorporating a set of beliefs that can manage probability and uncertainty. Otherwise, the trader stays stuck trying to produce certainty. This takes ontological change which most traders neglect, ignore, or avoid. (It represents change for which the outcome is uncertain.) Out of this resistance to challenge the myth of certainty, traders stay stuck in self-limiting beliefs that perpetuate the illusion of control. This is what has to change for a trader to make the jump from looking for certainty to managing uncertainty and risk. The very first step towards reconstructing the beliefs about the management of certainty (trading not to lose) that the trader naturally brings to trading is to wake up to them. Most traders have been mindlessly attempting to force both trading and the markets into patterns that can be predicted with certainty – more commonly known as "trading not to lose". This is the bias that has been embedded into our perception for countless generations. Most traders talk the talk of working with probability, but when their trading account’s health is used as the basis of assessment, a different story emerges. Fear of loss in the brain (and the confusion generated by uncertainty) is equated with the fear of death. This is what takes over the trading mind that is led by the prediction of certainty. When you look at serious hesitation problems in pulling the trigger or the hijacking of impartial thinking that happens while managing a trade after entry (like our friend in the vignette), this correlation becomes apparent. Probability-thinking and perception does not come naturally. Traders generally go through a long learning curve to move from the mind that they brought to trading (rooted in certainty-thinking) to the mind that trades successfully. The first step is to wake up from the blindness that keeps the trader from seeing the self-limiting beliefs that hold him in a pattern-recognition bias that force the mind to seek certainty rather than the management of uncertainty. It is this AHA! moment that opens the door to the possibility of change. What most traders discover is that the certainty bias is deeply entrenched and takes real work to change. They recognize that the comfort zone of the way they have been stands in the way of the mindset that is needed for success in trading. This is the first step in the new journey into the re-invention of the self. Only from there can the self be re-constructed from the inside out. In the opening vignette, this is the problem that the trader was experiencing. He was trying to change the self externally. By not grasping the power of biological pattern rooted in the need for certainty, he was never able to develop the skills and tools necessary to change the pattern-making machinery of his brain/mind. The pattern of belief was far more primitive and powerful than the puny tricks he used to try to change that pattern. In truth, he resisted changing into the person he needed to become. Instead, he confused short-term “feel good” states with the mechanics of change. He remained "blind to what he was blind to". He missed the first step – recognizing the bias toward certainty. It "had" him and it was so familiar that he could not “see” it. How Do I Use This Knowledge? I make the following assumptions when I evaluate whether a trader is ready for true psychological change. First, that he has been trading long enough to know HOW to technically trade. Second, that he can trade successfully in simulation where the risk of capital does not trigger the fear of uncertainty. So, look at your trading account. It will reflect the beliefs and biases that you bring to trading. If your trading account remains marginal or continues to need injections of capital, then you need to be asking yourself: What I am blind to that keeps me from achieving my potential in trading? Stay in that question. Then listen. What do you observe? Notice your resistance. Notice what happens to your comfort zone. Notice the tendency to pull back into your familiar pattern despite its lack of achieving success for you. What do you notice about your need to maintain a sense of certainty in the face of uncertainty? What beliefs (about the management of uncertainty or certainty) is this rooted in? Rande Howell http://www.tradersstateofmind.com

The Allure of Magical Thinking It was the start of another trading day, and John was ready. “This day is going to be different. I am going to trade my plan – no matter what!” John said resolutely into his reflection in the mirror. He practiced visualizing and “feeling” the success that trading was going to bring him. He declared the affirmations that he learned from the success seminar he had just attended. He felt the high-energy state that he now believed would create the "success mindset" he had been missing in his trading. And after all that modeling of a super trader, he knew he was attracting success. If he could walk on live coals, he had no doubt that he could conquer the fear that had been blocking him from success in trading. “I’m a million-dollar trader. I am going to conquer my fear. I am a confident and disciplined trader. I am going to win,” John confidently declared in his mind. And sure enough, self-doubt was nowhere to be seen. All went well as he began his trading day. He felt great. His confidence was high as he watched a particular set-up heat up. This was the one he was looking for. It met his trading plan conditions for entry. With his new-found confidence as his guide, he pulled the trigger. Initially the trade trended as he had predicted. Then, WHAM, the trade went sideways on him and it stayed in flux for what seemed like an eternity. It nearly hit his stop a couple of times as it bounced around and it just would not refresh and trend as he had anticipated. Suddenly, and without warning, he was not so sure. He was so sure just moments before. Now his confidence in the certainty of the trade evaporated like a mirage in a desert. Feeling knots in his stomach, all he could hear was the deafening roar of his thoughts, “You’re going to lose.” The self-doubt that moments before was "nowhere to be seen" was now front and center in his mind. What seemed so certain just moments before was thrown into chaos. And out of that uncertainty came a fear of losing. He thought for certain that he could predict where the market was going. And with that certainty gone, fear of loss sprang from the uncertainty and he was no longer trading his plan. Instead he was trading from his fear of uncertainty. What happened that rearranged his thinking so quickly, so thoroughly? The Trader’s Pursuit of the Myth of Certainty The biggest problem I see that keeps traders stuck in mediocrity is their blindness to the need to change from a mindset rooted in predicting certainty of outcome to a probability mindset where the trader learns to live with uncertainty – literally becoming comfortable with not knowing with certainty what is going to happen. It takes internal courage to shift this fundamental biological and psychological bias in perception. Rarely is the mind that brings a person to trading going to be the mind that produces success in trading. The mindset that produces success in other domains of performance based on forcing a will upon the world or having a positive winning attitude does not translate well into trading success. The evolutionary biological bias of your brain predisposes you to seek certainty and avoid uncertainty. (You can already see that this creates a problem in taking a brain designed for survival in an uncertain world and plopping it down into the world of trading without a significant reworking and override of primal directives of the survival brain.) This is your survival (emotional) brain at work. To your primitive brain, uncertainty, chaos, and the fear of death are linked (this is a serious glitch in the development of a trading mind). Add to this the fact that the untrained brain/mind cannot discern the difference between biological threat to the continuance of life and psychological discomfort. (This is a distinct problem in trading because there is always uncertainty and, therefore, psychological discomfort). At its core the brain is a pattern-recognition machine that organizes the developing “you” into a set of beliefs that govern how you interpret and respond to a circumstance that is ambiguous in nature (like trading). Once your brain finds a random solution to a challenge you face, it habituates the solution into an automatic response that no longer requires additional thinking or problem solving. This produces hardwired neural pathways that automatically trigger when the organism (the trader) is exposed to ambiguity, uncertainty, or risk (threat). This mechanism is out of your working awareness and is reactive in nature. (For the trader, this creates a real barrier that compromises the capacity to work with the uncertainty found in trading.) The particular solution is not necessarily the best solution, but it is a successful short-time response to the environmental uncertainty your brain faced. Then the brain takes another step – it generalizes the perception and response to a perceived threat (uncertainty) from one domain to similar ones. This is called response generalization. Suddenly the mind (and all its learned beliefs and behaviors) that the trader brought with him or her into trading becomes a liability to the development of a successful mind for trading. The mind that emerges from the biology of the brain does not separate uncertainty, ambiguity, confusion, and fear from one another. The emotional brain is biased to see the uncertainty found in trading as threatening. This brain and mind that you inherited was never built for the rigors of trading. It’s a liability that you, as a trader bring into trading as a biological bias – and you must retrain it to become a successful negotiator of uncertainty. The brain, with its bias to create a sense of certainty (safe from threats to self), creates highly reactive patterns to keep the illusion of control of circumstance in place. There is even a name for this preponderance – cognitive dissonance. The brain you bring to trading will not accept facts or positions that do not support the current belief structure about its capacity to manage uncertainty (threat). The more facts to the contrary to which you expose the embedded belief, the more entrenched the belief becomes. This all exists so that the brain/mind can keep up its illusion of control. It is this illusion of control that the trader brings to trading that must be altered for him or her to make the transition from certainty-thinking to probability-thinking. Letting Go of the Illusion of Control Trading effectively demands a probability mindset. There has to be a commitment to personal and professional development so that the trader can use the tools and skills of his trade, incorporating a set of beliefs that can manage probability and uncertainty. Otherwise, the trader stays stuck trying to produce certainty. This takes ontological change which most traders neglect, ignore, or avoid. (It represents change for which the outcome is uncertain.) Out of this resistance to challenge the myth of certainty, traders stay stuck in self-limiting beliefs that perpetuate the illusion of control. This is what has to change for a trader to make the jump from looking for certainty to managing uncertainty and risk. The very first step towards reconstructing the beliefs about the management of certainty (trading not to lose) that the trader naturally brings to trading is to wake up to them. Most traders have been mindlessly attempting to force both trading and the markets into patterns that can be predicted with certainty – more commonly known as "trading not to lose". This is the bias that has been embedded into our perception for countless generations. Most traders talk the talk of working with probability, but when their trading account’s health is used as the basis of assessment, a different story emerges. Fear of loss in the brain (and the confusion generated by uncertainty) is equated with the fear of death. This is what takes over the trading mind that is led by the prediction of certainty. When you look at serious hesitation problems in pulling the trigger or the hijacking of impartial thinking that happens while managing a trade after entry (like our friend in the vignette), this correlation becomes apparent. Probability-thinking and perception does not come naturally. Traders generally go through a long learning curve to move from the mind that they brought to trading (rooted in certainty-thinking) to the mind that trades successfully. The first step is to wake up from the blindness that keeps the trader from seeing the self-limiting beliefs that hold him in a pattern-recognition bias that force the mind to seek certainty rather than the management of uncertainty. It is this AHA! moment that opens the door to the possibility of change. What most traders discover is that the certainty bias is deeply entrenched and takes real work to change. They recognize that the comfort zone of the way they have been stands in the way of the mindset that is needed for success in trading. This is the first step in the new journey into the re-invention of the self. Only from there can the self be re-constructed from the inside out. In the opening vignette, this is the problem that the trader was experiencing. He was trying to change the self externally. By not grasping the power of biological pattern rooted in the need for certainty, he was never able to develop the skills and tools necessary to change the pattern-making machinery of his brain/mind. The pattern of belief was far more primitive and powerful than the puny tricks he used to try to change that pattern. In truth, he resisted changing into the person he needed to become. Instead, he confused short-term “feel good” states with the mechanics of change. He remained "blind to what he was blind to". He missed the first step – recognizing the bias toward certainty. It "had" him and it was so familiar that he could not “see” it. How Do I Use This Knowledge? I make the following assumptions when I evaluate whether a trader is ready for true psychological change. First, that he has been trading long enough to know HOW to technically trade. Second, that he can trade successfully in simulation where the risk of capital does not trigger the fear of uncertainty. So, look at your trading account. It will reflect the beliefs and biases that you bring to trading. If your trading account remains marginal or continues to need injections of capital, then you need to be asking yourself: What I am blind to that keeps me from achieving my potential in trading? Stay in that question. Then listen. What do you observe? Notice your resistance. Notice what happens to your comfort zone. Notice the tendency to pull back into your familiar pattern despite its lack of achieving success for you. What do you notice about your need to maintain a sense of certainty in the face of uncertainty? What beliefs (about the management of uncertainty or certainty) is this rooted in? Rande Howell www.tradersstateofmind.com

Plenty of traders prepare well for their day, knowledge wise. And that's an important element for performance readiness. If they don't, they aren't performing the minimum standard practice of a professional trader. Emotional mindset prep is another story. Emotions are not to be avoided, they are to be prepared. Actually zdo said it well a while back. It's not freedom from emotion - It is freedom of emotion that is sought. There is a level of emotional intentionality and volition that goes hand in hand with mental prep. Knowing the beliefs about the management of uncertainty and the emotions they are rooted in that you bring to the trading table is vital to an effective trading plan. An avoided fear of losing lurking around in the mind can really mess up a perfectly fine trading plan. Rande Howell

Trading forces an issue that, in most areas of a person's life, never shows up on the radar screen of their awareness. That issue is the distinction between uncertainty and fear. To the brain, the sequence is the triggering of uncertainty > ambiguity > confusion > fear. The emotional brain tethered this sequence together for survival value so that very real responses to threat would be triggered automatically without thought having to arise. This arises out of the brain's need to have certainty in predicting pattern. After all, having a saber tooth tiger bearing down on you, the very last thing the organism needs to do is think through the process of options. And the same emotional brain from back then is still present when you trade. It still perceives the ambiguity as confusion and still is biased to generate fear. After the threatening event happens the thinking brain produces an explanation that rationalizes the decisions that the emotional brain makes. That emotional brain, that directs thinking brain will not (without training) distinguish between psychological discomfort (not knowing) and biological threat. Because of this pre-disposition, it is imperitive that the trader learn to untether this grouping. A trader can train him or herself to experience uncertainty and build the circuitry that produces a different emotional state than fear. Concern (this emotion has an approach motivation to disruptions in the environment rather than an avoidance like fear). Once the feeling of the emotion is coursing in your blood stream, your thinking has already been contaminated (for good or for bad) by the emotion. Concern does not produce the same chemistry or quality of thought that fear does thankfully. It is much more options oriented. But to get to concern, the trader is going to have to train themselves in emotional regulation and applied mindfulness. Most traders take awhile before they take development of the brain/mind seriously. Most give the need for development lip service but neglect this element in their trading. This too is a product of the bias of avoiding uncertainty and looking for certainty. Once a perceptual map (that's the "you" that trades) has been wired, it becomes familiar pattern and is resistent to change. Trading in most cases will force the issue or the trader gets out of trading because they want to continue in the illusion of control that the bias of certainty gives them. That's the power of the feeling component of an emotion. The real question is whether the person is willing to retool the way the brain/mind works for the management of uncertainty rather than the prediction of certainty. For awhile, it is like swimming upstream against a strong current. But getting to uncertainty > ambiguity > confusion > concern creates the mind that can manage probability. I will be posting an article in the next couple of days about the illusion of control that addresses this. Rande Howell

The biggest problem I see that keeps traders stuck in mediocrity is their blindness to the need to change from a mindset rooted in predicting certainty of outcome to a probablility mindset where the trader learns to live with uncertainty. It takes internal courage to shift this fundamental biological and psychological bias in perception. Rarely is the mind that brings a person to trading going to be the mind that produces success in trading. The mindset that produces success in other domains of performance based on forcing a will upon the world does not translate well into trading success -- very different animals. Trading effectively demands a probability mindset. There has to be a commitment to personal and professional development so that the trader can use the tools and skills of his trade from a set of beliefs that can manage probability and uncertainty. Otherwise, the trader stays stuck in trying to produce certainty. This takes ontological change which most traders neglect, ignore, or avoid. Out of this resistance to change comes your description of the Seven Habits of Ineffective Traders. Rande Howell

In this post you are going to be looking into the nature of impulse and fear as the trader is experiencing them. The trader points out two problematic areas of his trading that he is working on. Earlier, he did not know why he was failing to perform. In his observation he is becoming mindful of what he has been blind to. It will also contain archetypal language towards the end that you may not be familiar with. The Trader 1. When what I am trading is not moving, I need to get better at sitting on my hands. Something in me keeps pushing me to pull the trigger -- and it often wins. 2. For every trade, I need to place my stop at the "If the price gets here, I was wrong" location and no closer. If the size of that stop is just too scary, I need to pass on the trade. This is the way he sets his stop. This is my response to this client I think trading live for you is important. Though good for learning methodology, learning psychology does not happen when trading simulated. Different worlds. When risk enters the picture, our hidden assumptions about uncertainty comes to light -- if you're looking for them. In your scheme this is how you are discovering your placement of stops from what I can see. They appear to be a mixture of standard textbook knowledge of stop strategy and your emotional reaction to them. Most traders I work with will create their stops based on a cognitive strategy that pre-sets the level of lose. They are setting their stops as a way to cut losses quickly in trades that go against them. (This is called the Destroyer acting with good awareness). They are doing this because their assumptions are built to create a win to loss ration of 2:1 to 3:1 --thus playing the edge they have in probability. They know probability is on their side, and that there will be losses -- so they are managing the probability that actually does go against them. This sets up stops as more of a standard practice mentality (probably boring for you) than a creative endeavor. My position is that the Destoyer (cut losses quickly) has more dominion that the Creator (what does my intuition or impulse say). If you are producing "scared", this would make it difficult to separate intuition from impulse under trying conditions. "Scared" indicates you are trading with the Orphan being in charge of the trading committee in the mind. The other point is "sitting on hands" as a way to manage impulse. Fear of missing out has already grabbed the brain/mind when this is happening. The important thing here is to trace the impulse back to its arousal phase before the motivation is urging you to act or worse -- acting. It is immensely important to be in a calm, detached, confident state of mind as you move through the process of watching set ups to evaluating set up to committing capital and risk by pulling the trigger. If impulse is there, the biology (at least) needs to be cooled down and a bouncer needs to be at the door of your trading committee that stops any part of the self from corrupting the mindset of calm, detached, confident. Destoyer, Creator, and Bouncer are part of the inner life of this trader based on Jungian archetypes. is learning how use these different parts of th self effectively that defines success in trading. Rande Howell

I get a number of questions from traders. Here is a trader who is discovering a disabling money narrative that has held his trading hostage. Let's take a look. Here is the trader's observation: Attached is the script that we discussed on Wednesday. When I finished writing this I realized that this does not happen every time, just most of the time. There are times that I calmly enter and manage the trade without feeling anything close to this level of uncertainty / fear. Let me know what you think. I am really looking forward to interrupting this dis-empowering script. Writing this made me somewhat frustrated that this was happening. I feel hostage by all this. This looks like inconsistency to me! The good news is that I now know what I am dealing with. Now, listen to the script that has been driving much of his trading. Before, this money conversation about uncertainty was outside his threshold of awareness. I want you to see what opens up to the trader as he starts observing and confronting this aspect of his mind. Script up to the point of seeing the flash: Generally from the review I am open to several setups as I am monitoring 5 symbols for trade possibilities. To help with this I set price alerts. To this point I am experiencing very little fear or anxiety. When a price alert goes off I begin closely monitoring the symbol for possible entry. Generally four questions follow: 1) Am I still interested in the setup given the price action that has already occurred? 2) What do I want to see, if anything, from the lower time period? 3) What price to enter? 4) What is my must? In other words, what will I see if my hypothesis is not currently playing out. I begin to feel uncertainty particularly with questions 2 and 3. I often hear things like the following: 1) Do I want to see an L1 failure first for additional trade confirmation? If I want to see the failure and it doesn’t happen then I won’t be in the trade. 2) What price should I take? 3) If I’m wrong how big will the loss be? What will I allow to hold to stay in the trade? Asking these question I begin to feel uncertainty / fear about the trade. I also hear “what if I’m wrong, what if this is a big loser”? With this the uncertainty / fear builds even more. If I decide to take the trade anyway, and with my hand on the mouse, I see the FLASH. This can lead to hesitation, etc….. This flash that he "sees" in his mind is actually the firing of an automatic fear response to uncertainty. From the flash there is an emotional cascade that hijacks his mind and his thinking becomes corrupted with fear of loss. Up to this point, this automatic response to uncertainty had been out of his awareness. Now, it is in his awareness, and he can begin to disrupt it and change it. Notice the build up to the flash. This is what has to be disrupted. This is a powerful moment in getting control of his psychology for trading. Based on this trader's AHA moment about the disruption to his good trading practices, what can you learn about your relationship to uncertainty and trading? Rande Howell

Trading does not come natural to the human brain. For the vast majority of traders, it has to be learned. From an evolutionary perspective, just a few short years ago we were all cavemen. In your ancestor’s world there was no reason to separate uncertainty from fear. The world was a dangerous place and if you experienced uncertainty in your dealings with your environment, there was a good chance you were facing a mortal threat. Uncertainty became glued to fear and anxiety as a survival trait. And that trait got transmitted to future generations -- long after the usefulness of glueing uncertainty and fear together. Your inner caveman still lives within you as you trade. Your limbic brain (caveman’s inheritance to you) still is still watching his environment (your trading screens now) and interpreting from an evolutionary bias that locks uncertainty and fear together – rather than distinguishing them from one another. This deeply embedded trait has also been uploaded into your psychology. This is the psychology of self that trades and experiences worry and fear when you are supposed to be impartially managing risk with your trading plan. Separating uncertainty from worry and fear (more primitive parts of your survival brain) – caveman – is what is required for a trader to evolve from fear based interpretations of uncertainty to risk management interpretations of uncertainty. So if you're having difficulty moving one set of psychological skills that proved okay successful in one domain of your life to success in trading, welcome -- this is typical. There is nothing "wrong" with you. But it does indicate that the "you" that your brain has organized you as needs to be changed. And that new psychological skills will need to be developed to replace your inheritance from caveman. Otherwise caveman will continue to participate in your trading. That's all. The mindset for the vast majority of traders has to be developed. Particularly the management of uncertainty and the meaning that becomes embedded tin he meaning making pathways of your brain (that's your perception). This is where you will find your self limiting beliefs about yourself. If you experience hesitation as you evaluate set ups for risking capital, if you are seized with fear as you try to pull the trigger, or if your heart pounds as you enters a trade (particularly when it goes against you), you are experiencing a biological predisposition that has shaped your personal psychology to avoid uncertainty -- that's your caveman trading along side of you, perhaps even taking over. It is the mindset that you take into uncertainty (that's trading) determines the probability of success. Evolutionary and psychological bias, in the vast majority of traders, will have to be examined and changed for this to occur. It takes emotional labor, and that's the price for re-development of the self designed for trading. It's a great personal development adventure. Traders often invest years in learning to know the self and developing a psyhology that trades effectively. This process is unavoidable. Where are you in the evolution of this process? Rande Howell

“The order of thinking that got you into the problem is not the order of thinking that will get you out of the problem.” Albert Einstein Fear Hijacks Thinking and Destroys Trading For the trader – the kind of thinking that got you into trading is not the thinking that will produce successful trading. That, successful and consistent trading, will require you to re-develop the way you think and perceive. And the first order of business is developing the capacity to manage the biology of fear. Until you do that, re-organizing your mind for peak performance trading is only a remote possibility. Yet, traders chase that remote possibility as they look for the Holy Grail that will make their trading successful and their dreams a reality. They are blind to what is hidden in plain site – the Holy Grail of trading is within them. It is your fundamental beliefs about yourself that create the state of mind you trade from. And emotions are the window that you use to see what makes you tick and react the way you do WHILE UNDER STRESS. A Mystery at the Trader’s Expo Because fear based thinking is so discomforting, traders avoid looking at themselves to see how to improve the performance of their trading. I’ll give you an example of what I talking about. At the recent Trader’s Expo in Las Vegas, I “people watched” traders looking at my booth from a distance. Traders would have a look of bafflement on their faces as they pondered whether they should talk to a trader psychologist – a “shrink”. Some were curious because they knew they had a problem that were not solving well and wanted to explore how examining their psychology of performance could impact their trading. These were the exception. Most, after being fearful of approaching, averted their eyes and went to talk to the really pretty females who were in the booths around us. Something about having to examine their psychology produced discomfort in them. And, instead of questioning such a reaction, they got sweep away by their avoidance. Then, there were the trader education groups who teach methodology. They would look at my banners, fall into reflection for a moment, and then come to speak with me. Do you know what they said? Here it comes…. “A trader’s psychology is the number one problem that we have in teaching people to become successful traders. We can teach them methodology, but until they get their emotions under control and their mind right – they will not become successful traders. We know that 90% of trading is in the head. How can we work together to better train our clients?” Out of this breakdown for trader education groups came awesome possibilities to create alliances with them – which is well and good. But back to the majority of traders who avoided a trader psychology booth because of the emotional discomfort it caused them. Based on the trader education groups that spoke to us about how few of their clients (the ones avoiding the trader psychology booth) currently are equipped with the “order of thinking” required to be successful traders, why do they avoid what they need to build a traders state of mind? Biology of Fear Can Be Managed- if Acknowledged Later in a Worry Management Workshop I gave at the Trader’s Expo, those brave traders who confronted their fear of coming to a trader psychology booth and sought to find out how to manage fear, learned why fear overwhelms dispassionate thinking and creates an emotional avalanche in trading. They also learned how to disrupt this fear and invoke a calm state of mind in the midst of the stressors in trading. And it was free. Imagine. By allowing fear to hijack their thinking, which produced avoidance of my trader psychology booth and my speech, they missed out on the opportunity to learn how to manage their fear. Fear breeds more fear. They will go home wondering why it is their lot in life to continue their losing ways when a possible answer was staring them in the face, but they were too fearful to investigate. And remember, it was not me that was saying it was their biggest problem. It was the very trader education groups teaching them how to trade – people who knew first hand – that made that observation. Your Fear Teaches Where to Look If you experience fear in you trading, the very fear will tell where to find the problem you need to solve. It is not in systems or methodology – it is your beliefs. Core beliefs do not like to be challenged and most avoid their psychological demons for a life time by placing the blame outside of the self. Others simply deny, avoid, or ignore self limiting beliefs they hold about themselves. Trading will not allow you to do that for long. In trading, your psychological demons will stalk you. You don’t have to go looking for them. They will find you. If you plan on becoming a successful trader, I encourage you to invoke the courage to face and listen to your fear. It will cause psychological discomfort, but it will not kill you. And it will teach you where to look in your current psychological organization for the part of you that needs to be re-worked to create an effective state of mind for trading. And if you decide to do that, you will need to develop the skills that enable you to regulate the emotion so you can learn from it – rather than avoid the tiny discomfort that keeps you from achieving your potential. If you would like to experience the presentation I gave at the Trader's Expo and test drive the Worry Management skills I taught at the Expo, go to my website and sign up for both free webinars. Good trading Rande Howell