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Rande Howell

Connecting Emotional State and State of Mind in Trading

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A trader recently asked meabout the connection between emotional state and the state of mind that drives a trader's performance So... what is the connection? Let's take a look:

 

What do you mean by the quote on page 21; "You do not determine what reality is “out there”; rather you fuse with possibilities that you bring forth into the world – and this becomes your reality".

 

Good question, and I'm glad you asked.

 

This actually happened to two clients of mine who used to trade side by side. Two traders look at the same set up and "see" different possibilities in the trade. One needs more confirmation because he fears losing money -- so he hesitates on the side line of the trade. He wants a better price so he can minimize the possibility of loss. Even when he decides to enter the trade, his order is not filled because no one would sell at the rock bottom price. The trade shot up and the trader did not lose -- he also did not gain. The world "out there" that he saw was fearful and he was focused on the possibility of not losing. This is the realityhe brought forth into the world. It did not exist "out there" -- it existed in his mind as the beliefs that colored his preception of "the world".

 

Meanwhile the other trader, sitting right beside him, seesthe set up completely differently and brings forth a different world based on this beliefs. He sees the set up and gets the confirmation from his methodology. He "sees" a winning trade if he gets in at a reasonable price. His order is filled, not at the lowest price, but within the price struture his methodology calls for. His belief is that the probability of a winning trade is on his side -- absolute price does not matter in his perceptual map of the market. He places his order and rides a winning trade and gets out before his target because he sees the trade going against him. He understands this as what the market is willing to give him at this moment. It's not right or wrong -- only his perception of market forces. A profitable transaction. Did he leave money on the table -- he does care about how he "feels".

 

He is trading to win -- while his partner was trading to not lose. Neither belief position is "out there" existing as hard, cold reality. Both existed as possibilities in the minds of the trader. Both brought forth different realities from the same situation -- onlydifferent eyes seeing the same thing side by side. One trader became so fused with "not losing" that that is exactly what he did. While his friend was fused with calm, impartial authority -- and he brought forth that possibility into being.

 

Both realities are real in that they happened. But both eventualities were "brought forth" into being by the beliefs that each trader was fused to. The winning trader, by the way, is a client of mine. He had begun to take responsibility for the way he interpreted (his beliefs) the market. And, in his re-organized belief system, he had challenged a hidden belief he was held hostage by -- that the market (the world) was a dangerous place, and you have to be careful. The re-constructed belief (based on a lot of emotional labor) was the the market does care and has no intent in any direction toward me. Freed from his fear, he could look and explore what the market would give him.

 

Both men brought forth realities based on the fusion of belief and possibility. One was mindful of his beliefs, while the other was mindless of the beliefs that were interacting with the infinite possibilities of the market -- and creating self limiting eventualities. The trade NOT TO LOSE guy is now a client of mind and is doing the emotional labor to re-organize his belief system.

 

This is why traders need to learn how to emotionally regulate their emotions and develop a trader-centric way of observing their thoughts and beliefs -- they are creating the reality you are experiencing. Not your sytem or methodology.

 

Does this help?

 

the best,

Rande

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This has truth in every aspect... but if it is in ones methodoly/strategy to wait for the better (lower in this case) price .. wouldnt that also constitute being a disciplined trader sticking to his rules, accepting this trade didnt meet his criteria, and look/wait for another trade....???

isnt not losing just as important as winning to protect your account balance

It's okay to accept losses if strategy is followed, but to lose when not following strategy may send conflicting emotions after....causing dought/fear in ones mind

Could this just be an indication his/her strategy needs to be revisited/modified, and not his mental state???

My 0.02c

Mark Roberts

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This has truth in every aspect... but if it is in ones methodoly/strategy to wait for the better (lower in this case) price .. wouldnt that also constitute being a disciplined trader sticking to his rules, accepting this trade didnt meet his criteria, and look/wait for another trade....???

isnt not losing just as important as winning to protect your account balance

It's okay to accept losses if strategy is followed, but to lose when not following strategy may send conflicting emotions after....causing dought/fear in ones mind

Could this just be an indication his/her strategy needs to be revisited/modified, and not his mental state???

My 0.02c

Mark Roberts

 

In a perfect world unimpedded by self limiting beliefs learned before you can think, your comments are on target. The trader in this post is real and is an excellent technical trader -- but is limited by a deeply held belief of NOT LOSING. He's been trading for 10 years with a consistent performance of NOT LOSING -- but not winning much either. He was quite shocked to learn how this belief had been underneath his radar and comtaminated his methodology. Once he freed himself from this belief, acquired as he was growing up, he rapidly moved into profitable trading.

 

He has always been a disciplined trader. The problem was that the discipline was based on fear, rather than calm authority. And this is where most traders trade. From their fears. And that's what they find.

 

You can change strategy til you are blue in the face, but it also needs to be accompanied by a change in state of mind. In this case, the trader discovered he had been trading from a sense of victimhood and his entry points and price were designed to NOT LOSE on an unconscious level. No amount of change of strategy is going to win over deeply held beliefs. That is why the vast majority of trading is in your head, not in your methodology. You have to drive that vechile of methodology with a well trained mind. That is exactly what this trader learned.

 

Rande Howell

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'Did he leave money on the table -- he does care about how he "feels".'

 

did you mean to say 'he does NOT care about how he "feels"?'

 

 

The re-constructed belief (based on a lot of emotional labor) was the the market does care and has no intent in any direction toward me.

 

Did you mean to say 'the market does NOT care'?

 

Thx, enjoying your posts.

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