Mindfulness and Fear Based Trading

[Rande Howell 10]

This is an excerpt from my forthcoming book, "Mindfulness: Mastering Your Emotions and the Inner Game". This is about the intersection of Fear, Uncertainty, Probability, and State of Mind and its impact on your trading.

 

Fear Based Trading:

Wrestling Control of the Mind From Limiting Pattern

______________________

 

"There's someone in my head but it's not me." Brain Damage – Pink Floyd

 

___________________

 

Diary of a Trader Waking Up to the Internal Dialog

 

“It's never going to happen for you. You’re never going to see the performance you see trading simulated with your real money account,” erupted the intrusive thoughts into Bill’s awareness. It sounded so final. And it sounded so on target that I believed it without question – yet part of me fought back.

 

“Whoa! Where did that come from?” astonished, Bill jotted the thought down into his trade log. Later while he reviewed the thought and emotion log portion of his trade log, he realized, “I've obviously have been dealing with that voice for years, but, out of my discomfort, I’ve avoided dealing with it.” The distinction of separating thought from identity was opening up a whole new can of worms for Bill. Now he was being asked to become mindful of the different characters present in his thoughts.

 

“This Mindfulness stuff is beginning to make a whole lot of sense. I had no idea that so much was going on in my mind while I’m trading – I just thought it was my dumb thoughts,” Bill recounted. And as he reflected on this new revelation, he discovered another voice also. Focusing hard he thought, “That’s the voice that continually tells a very discouraged part of me, "you’re gonna do it, keep fighting, keep going, it’s gonna happen." But it’s not as loud as the Inner Critic and it gets drowned out. When I make mistakes or have a losing trade, the Inner Critic berates me, "you’re an idiot; you’re a stupid ass."

 

But then there is an accompanying voice that says, "It’s ok Bill. No big deal. Making a mistake, and losing on a trade is part of the game. You have the skill set to make it up. Forgive yourself and let’s get in on this next trade." But the critical voice is louder and drowns it out. I think the fear of pulling the trigger on my analysis stems from me not wanting to make a mistake and be wrong. Being wrong adds fuel to the Inner Critic’s beratement of me – gives it confirmation.

 

“It’s this battle going on between this Inner Critic and this part of me that wants to prove himself – and the critic is winning. This fearful part of me seems to want to prove himself to this critical part of me – to prove that he matters; that he has purpose. But no matter what he does, it’s never good enough. It just goes on and on. And I get exhausted by the internal struggle and my trading day gets blown up,” came Bills analysis of this internal trading dialog going on his mind.

 

The most prevalent thought to pop up in my mind is that I'm basing my self worth on my success or lack of as a trader. As embarrassing as it is to admit, I want the accumulation of things and power that trading can give me. I want the recognition of family, friends, co-workers. I want them to see that the years of sacrifice reaped a reward. The crazy thing about this is that I'm a well liked and loved person by these people with or without trading but obviously its not good enough. I also want the recognition for my professional and financial success which I still haven't attained through my trading. I do have a sense of entitlement. I worked my ass off. I gave up everything to go after this dream. 6 years of sacrifice, thousands and thousands of hours over this 6 year period of studying and honing my craft. Sitting in front of this damn computer and I still haven't gotten what I think I deserve.

 

The thoughts are there, but I’m not being swept away by them as much as I used to. But I don’t feel detached from them either. The difference is that I’m not observing them and am aware of them. And I’m beginning to realize that I have been mindless to this conspiracy running around in my head. Because of my blindness to it, it has been able to sabatoge my efforts with relative ease – I’ve been asleep at the wheel. I haven’t been directing my life. This person inside my head that is not “me” has. This has to stop.”

 

Using Mindfulness to Uncover the Internal Dialog

 

Bill is making progress in his evolution as a trader. At first he sees no difference between his thoughts and who he is. Now, it is beginning to be different for him – and his trading. He is waking up to the powerful, and unseen, forces that drive his trading – his hidden beliefs about himself and his worth. It is these unseen beliefs, showing up as conversations in the mind, that has stymied Bill’s trading for years. Remember from previous chapters how beliefs become embedded into your neural circuitry. Once wired into, they become the oh-so-familiar voices that you come to identify as “you”. Because they are so familiar, the brain pushes them out of your awareness – where they bias your perception without your knowledge. It is here, out of your awareness, which they blow up your trading.

 

It is through these unseen and unexamined assumptions, that we interpret and understand the world. In Bill’s case, and 95% of traders, it produces mediocrity. To break free of these unexamined assumptions we must first become aware of them. Becoming mindful of these shadowy, hidden, conversations within the self is the first milestone of waking up and becoming the trader you can become. No amount of fundamental or technical analysis will substitute for awareness of the self organization you currently exist as.

 

In the vignette above, taken from a trader’s psychological trading log, you can see this in bold relief. Bill has experienced powerful financial success before he began trading. But in the course of trading for six years, he lost hundreds of thousands of dollars before he concluded he needed help with his psychological organization. He has a methodology trading coach. And when he is trading simulated, he is a master trader. Yet, when real money is risked, he is possessed by an internal struggle of self doubt after losing nearly all his life savings. Now, far removed from the large-and-in-charge persona he had developed to cover a deep sense of inadequacy, he discovers a fight going on within him. That internal struggle has been going on for his entire life. But it did not come to the surface until he began trading. It is the structure of this deeper fear that he needs to become mindful of.

 

Even then outside of his awareness in his mindlessness, the large-and-in-charge mask he wore drove his trading. The problem was that underneath it all was a sense of unworthiness and inadequacy that he had never had to address – until trading. This is his deeper fear – deeper than his fear of loss -- that he has been avoiding for years. It is inescapable in trading. In sales he learned he could bluster his way through – producing a false sense of self confidence that he hid from others and himself. Like a surgeon’s knife, trading exposed it. What, exactly, did trading expose about Bill internal landscape as it relates to trading?

 

People avoid dealing with their psychological demons very successfully before coming into trading. People, including you, distract themselves, they busy themselves, they bluster, they drink, they talk sports, they talk business, or they con themselves. They even do this as they enter trading. They talk a game. Then they discover, to their dismay, that the very psychological demons that they invested heavily in to avoid before trading are now stalking them. In trading there is no room to hide from our self limiting beliefs. You find them in your fear based trading. Now that they can not be avoided, let’s look and see what you have been avoiding.

 

Locating and Deconstructing the Internal Dialog

 

As Bill builds the skills of breathing, relaxation, self-soothing, and mindfulness – he learns how to slow down his thinking and discover powerful hidden beliefs that shape his trading – behind his back. When he first begins, his thoughts appeared to him as a blur (after all, he has avoided getting to know this part of himself for a long time). As he developed relaxation and mindfulness skills, the speed of his thoughts began to slow down. First they showed up as a blur and were of little interest to him. His belief was that all he had to do was learn fundamental, and particularly, technical analysis. From here, he would be able to trade and make buckets of money to fulfill his dreams.

 

The problem was that when he went from simulated trading to actually risking his capital, his trading fell apart. His putting capital at risk triggered his deeper fears of inadequacy and failure as a human being. This very fear he was able to cover up by developing a large-and-in-charge persona. Trading was merciless in exposing this hidden belief. His trading coach encouraged him to explore his psychology as it related to trading. But Bill, and most traders, brushed this suggestion aside believing (self deception) that they had the psychological part down – all they needed was methodology. They were going to find the Holy Grail, and it was going to be in methodology after trading platforms failed to deliver the goods. From many years of avoidance of discomfort, they ignored the sage advice. They ignored their thought life.

 

They ignored it until it smashed them in the face. This can come in the form of ten’s of thousands of dollars lost or, in Bill’s case, hundred’s of thousands of dollars lost. For Bill, and for you as a trader, thoughts have to be slowed down from the blur used to avoid the discomfort of unsettling thoughts. That is what Bill has learned to do by following the skills management guide presented in this book and through training.

 

As he developed the skills to slow down the blur of racing thoughts, they still raged by as a torrent of uncontrollable thoughts. But, even at this speed, he could begin to feel the emotion and meaning attached to the thoughts he had been trying to ignore. With a little more work, he was able to slow them down until he could identity them. That is where Bill is in the diary vignette from the start of this chapter.

 

This moved him from simply using emotional management tools to calm the self down to using observation skills to detect the dominant emotion/thought/belief patterns (internal dialog) driving his thought life – and his trading life. And it was not a pretty picture. He could understand why he had avoided it for most of his life. It made him uncomfortable. Apparently they had been an active underworld going on beneath his awareness that had powerful impact on his sense of self and his decision making – particular when risk was involved. What was this underworld of thought composed of?

 

One thing I want to make clear as we enter this section. All of us have an internal dialog. It is inescapable. We are all faced with challenges or struggles in life – they are unavoidable. Trading exposes these challenges, and your adaptation to them, like a mirror in your dressing room. The mirror in your dressing room reveals all the warts and blemishes that you attempt to hide from the world and from yourself. The difference is that in trading, you are forced to look into the mirror and acknowledge your incompetencies. The very things you have been avoiding in real life.

 

In real life, you can avoid the mirror by busyness and all sorts of distraction. You can cloth yourself so that you, nor anyone else, see the flaws. In trading, your trading account is the barometer, not the avoidance mechanisms of the mind. Here, we are looking at thought patterns that exist within all humans – this is what I am calling the internal dialog.

 

Often you distance yourself from the discomfort of these self beliefs showing up as thoughts in your mind. They become painfully real and can become debilitating in trading. That is actually the good news because it actually forces you to examine what your really believe about yourself and trading. As long as you continue to avoid them, they will own your trading. And you forfeit the possibility of learning from your mistakes.

 

If you recognize that your trading performances are a reflection of the beliefs that you bring to trading, you are in a much better position of finding them. Most traders give lip service to a belief they “should” hold, but when trading performance does not match the surface belief, they do not delve deeper into their personal psychology.

 

Here they would find their core beliefs that they, most likely, hide from themselves. Mindfulness is the methodology I teach to help people to get to this level of understanding of themselves and their trading. Here change in performance becomes an indicator of change in core belief about the self as a trader – and as a human being.

 

To learn more about the book,Mindfulness: Mastering Your Emtions and the Inner Game or to attempt a free webinar, go to http://www.tradersstateofmind.co m

[Guest OILFXPRO]

Truly great article.

 

Other factor that come into play are natural stress responses under pressure to protect one's property ,the trading equity in this case ,Our beliefs are we must protect our property from losses , we often increase position size add to losing positions , average down losses , go counter trend to fight the market.and defeat the market.We even believe we can control the market , like we controlled our businesses , during our emotional outbursts.

 

Are beliefs and biases not part of our ego?

 

I came into the market with a load of beliefs , they cost dearly .Fortunately I have now learned to flow with the market , accept the profits the market gives , accept the profits when the market wants to give , never go against market , respect the market , walk away if market wants to take , remove all your personal biases and beliefs , look for those opportunities when the market wants to hand over money and flow within the safety nets of the market.

 

Mark Douglas's Disciplined trader is a great read ,along trading in the zone .I intend reading Rande's book.These authors have greatly helped me .

[steve46 12]

A couple of comments

 

First, I judge a person's expertise in part whether or not they can A) deliver a concept in a simple and direct fashion and B) whether that communication "cuts to the heart of the matter"

 

If instead they use jargon, and require a lot of verbiage (and after reading it you are still uncertain as to how to use the information) then I have the impression that THEY really don't understand what they are talking about...and I can go a step further, and say that it is also likely that they don't have first hand experience from which to draw upon....

 

In my opinion, "mindfulness" is irrelevant.....in contrast....a sense of "adult perspective" is critical and underlies everything a successful person does in life. A person displaying childlike perspective can certainly be mindful....and like all children, that "mindfulness" becomes focused on the gratification of their immediate needs. An adult can delay that gratification, and withstand significant stress all the while maintaining a mindful consciousness....and that ability to manage emotions is key to the learning process.....

 

In terms of actually helping a struggling trader, I can describe what an adult does to manage his/her emotions.....and after several exposures to the stresses of trading, a person motivated to learn, to make money, to change their life for the better, will seize this opportunity and make a new life for themselves.....a childlike person......will not.....and cannot.

 

Its about that simple...

 

Thanks

[Guest OILFXPRO]

There is a lack of understanding of how emotions control us and make us do things we would not , instead of us controlling our emotions.

 

The guy who fell in love , stole a million from his employer , and tried to keep her impressed with wealth .The guy who became so angry , that he did something he would never do.The person who committed suicide , controlled driven by emotions to relieve him of his pain and suffering.

 

Perhaps Rande can elaborate how wildest beliefs and thoughts may often materialize into reality under emotional control.

[zdo 20]

A couple of comments

 

First, I judge a person's expertise in part whether or not they can A) deliver a concept in a simple and direct fashion and B) whether that communication "cuts to the heart of the matter"

 

If instead they use jargon, and require a lot of verbiage (and after reading it you are still uncertain as to how to use the information) then I have the impression that THEY really don't understand what they are talking about...and I can go a step further, and say that it is also likely that they don't have first hand experience from which to draw upon....

 

In my opinion, "mindfulness" is irrelevant.....in contrast....a sense of "adult perspective" is critical and underlies everything a successful person does in life. A person displaying childlike perspective can certainly be mindful....and like all children, that "mindfulness" becomes focused on the gratification of their immediate needs. An adult can delay that gratification, and withstand significant stress all the while maintaining a mindful consciousness....and that ability to manage emotions is key to the learning process.....

 

In terms of actually helping a struggling trader, I can describe what an adult does to manage his/her emotions.....and after several exposures to the stresses of trading, a person motivated to learn, to make money, to change their life for the better, will seize this opportunity and make a new life for themselves.....a childlike person......will not.....and cannot.

 

Its about that simple...

 

Thanks

 

No way in hel would I ever qualify for a discourse with Steve… I’m just too flippant and silly and… but someone else out there might need to hear this - so…

Steve, you’re making some fkn immature assumptions jk

To assume that since you (and the small cohort you have experience with) can pull it off by just ‘being mature’ … to assume that since ya’ll are all squared away, that every other individual can get it together by just bringing an "adult perspective" … an ‘aware ego’, and not dealing with and bringing into inclusion any ‘disowned subpersonalities’ / ‘archetypes’ / ‘wotchamaycallits’ is just sheer dum ignernc bubba ----whoops excuse me --- that,sir, is just sheer naivite...

 

... :severalirreverentsmilyfeces: ...

[steve46 12]

If what you want to do is to offer a rebuttal.....suggesting that I make "immature" comments and then writing a series of barely comprehensible word salad sentences might not be the best way to prove your point (whatever that is)....

 

and on to other things....personally I have come to like Rande and his posts....clearly there are folks who will benefit from his book and should buy it....and although I don't have any experience with him professionally, I think there are folks who will benefit from his services as well...I simply don't agree with what I perceive to be his philosophical viewpoint.

[zdo 20]

What I’m really finding ‘mmature’ * is the emphasis on OR’s instead of AND’s

It takes -

‘Maturity’ AND ‘mindfulness’… AND ‘virtues’ AND …

...Not really a “rebuttal” at all…

 

 

* one more time – jk ... those :winx: have no meaning to you?

If you’re so locked down in ‘responsible self’, ‘judgmental self’ ‘protector/controller’, whatever, etc that you can’t tolerate any levity, then -more than just "like Rande and his posts", you might benefit from giving him a call … yes, even you - compatible "philosophical viewpoint" or not.

… and if even you could benefit, then the other(s) this post is really talking to might benefit too…

 

… and btw, something we do agree on, peeps - RH 'stuff' is not for everyone

[steve46 12]

I assume that when a person posts comments on a public forum, then the post is meant for everyone who reads it....I think most people would agree...

 

I appreciate levity but then again I am not struggling to learn this profession...for those folks, I think the "levity" doesn't work....what they are looking desperately for, is a lifeline, something that really works.......but what the heck, I'll try your approach...and direct my comments to them....

 

Look at the attached chart...I posted this on another thread and right away I got some snarky comments about how "practical" and "usable" it is (basically doubters suggesting that it just won't work).....deja vu.....and my response to all is the same.....you need a couple of things to succeed in this endeavor.....a workable system and by that I mean anything that you can display on the screen that provides 1) a way to determine trend and 2) a way to identify risk and select entries....after that however you still need one more thing...that "one more thing" is something you can't buy, you can't get it on the Internet, you can't get it from your Doctor....you have to have a way to manage your emotions long enough to take the trades, and hold on to the position long enough to either take profits or get stopped out....you have to be willing to do both. That's what this business requires....by all means buy a book if you think it will help...why not....by all means hire a consultant to help you if that works for you....again why not...it comes down to whether or not you can find the tools you need to get to your goals...

 

Good luck..

Edited June 27, 2013 by steve46

[steve46 12]

A word about meditation

 

I don't do it.....and yet if I want to slow down my mental processes I know how to do it (I use breathing exercises) and yes in my opinion they (the breathing exercises) help me to quiet my mental dialogue and manage the emotional response that I sometimes have, in response to stressful events....

 

Now I have seen all kinds of people try meditation (which I and others call "mindful") and what I have observed is that its a flip of the coin....that is to say....some folks seem inclined to think that they are in some ways better off because of the practice, while others (that I have interviewed) have simply shrugged their shoulders as if to say, well it really didn't do much (as far as they can tell)....and as I have stated previously (long ago) I use breathing exercises (that could be thought of as a form of mindful meditation) to show struggling traders how to 1) identify and characterize the impact of stress as they trade and 2) to manage and in some way reduce the effect of stress as they trade....however.....the folks I work with are adults, not "adult-children" (children in adult bodies)....is this what Rande is suggesting in his book?

 

We don't really know...

[Guest OILFXPRO]

Rande

 

How would you retrain the "new trading brain" .You need to change the beliefs with the true trading beliefs and skills.The problem is where are you going to get these beliefs and skills to retrain .You can give them as much emotional regulation , but if you can't change the beliefs and skills to act appropriately in trading execution ,but it may not work.

 

The belief systems we know of for appropriate trading execution are polluted by failed traders (authors) who wrote books with so much crap , misinformation internet sites run by owners with biased and false information in many cases , biased information of internet marketeers of software , indicators and automated software and biased information from the world full of trading educators (100 % failed traders).

 

To sum this up an author stated in his book "If I had a system that worked , I would not tell anybody".You go around forums and internet sites and you get the same statement.

 

The belief system needed for the trading brain is not available .It has to be developed by the individual through intuition.

[Rande Howell 10]

Truly great article.

 

Are beliefs and biases not part of our ego?

 

I came into the market with a load of beliefs , they cost dearly .Fortunately I have now learned to flow with the market , accept the profits the market gives , accept the profits when the market wants to give , never go against market , respect the market , walk away if market wants to take , remove all your personal biases and beliefs , look for those opportunities when the market wants to hand over money and flow within the safety nets of the market.

 

Mark Douglas's Disciplined trader is a great read ,along trading in the zone .I intend reading Rande's book.These authors have greatly helped me .

 

I don't use the term ego in my work. The framework I use sees a self that has been organized by the brain in response to the environment in which it lives. From this point of view, the self can be fluid. And can be re-organized, incorporating more effective beliefs and biases about the nature of the environmnet around them.

 

Traders are constantly projecting their beliefs about their capacity to manage uncertainty of life as they trade. The feedback loop is the trading account. It will show you how your current organization of self can manage ambiguity. It truly becomes a mirror into the self. And if you are going to be a student of trading, not incorporating feedback into the construction of the self is an act of self deception.

 

I encourage people to read Douglas's work. He does a great job of describing what the trading mind needs to look like. The problem, always, is how do you build that mind. That is where my work is focused.

 

BTW -- TL reposted this article from a while ago. My book has been out for at least 2 years. I was actually writing it when I posted this.

 

Rande Howell

[Rande Howell 10]

Rande

 

How would you retrain the "new trading brain" .You need to change the beliefs with the true trading beliefs and skills.The problem is where are you going to get these beliefs and skills to retrain .You can give them as much emotional regulation , but if you can't change the beliefs and skills to act appropriately in trading execution ,but it may not work.

 

The belief systems we know of for appropriate trading execution are polluted by failed traders (authors) who wrote books with so much crap , misinformation internet sites run by owners with biased and false information in many cases , biased information of internet marketeers of software , indicators and automated software and biased information from the world full of trading educators (100 % failed traders).

 

To sum this up an author stated in his book "If I had a system that worked , I would not tell anybody".You go around forums and internet sites and you get the same statement.

 

The belief system needed for the trading brain is not available .It has to be developed by the individual through intuition.

 

Good luck with this line of reasoning. In mindfulness and the development of the Observing Self, people begin to realize that they and their thoughts, they and their beliefs are not the same. There is a witness to the coming and coming of thought and circumstance. It is awakening this faculty of our humanness that we have the tool needed to change the beliefs that are embedded into our circuitry. I see that happening all the time. It does require work and rigor with the self. Getting the mind opened has been happening for thousands of years.

 

Rande Howell

[Rande Howell 10]

A word about meditation

 

I don't do it.....and yet if I want to slow down my mental processes I know how to do it (I use breathing exercises) and yes in my opinion they (the breathing exercises) help me to quiet my mental dialogue and manage the emotional response that I sometimes have, in response to stressful events....

 

Now I have seen all kinds of people try meditation (which I and others call "mindful") and what I have observed is that its a flip of the coin....that is to say....some folks seem inclined to think that they are in some ways better off because of the practice, while others (that I have interviewed) have simply shrugged their shoulders as if to say, well it really didn't do much (as far as they can tell)....and as I have stated previously (long ago) I use breathing exercises (that could be thought of as a form of mindful meditation) to show struggling traders how to 1) identify and characterize the impact of stress as they trade and 2) to manage and in some way reduce the effect of stress as they trade....however.....the folks I work with are adults, not "adult-children" (children in adult bodies)....is this what Rande is suggesting in his book?

 

We don't really know...

 

The traders described in my book. The traders who post here. The traders who don't post here. They are all human beings working on their competencies, both technical and emotional, as a trader. And they are falllible. It is rare for a person to come to trading with a mind that is going to produce success in trading. No matter how successful they have been in other persuits. Trading requires a retraining from an urgency to act to create possibility (so useful in many endeavors) while trading requires the skill of patience to be developed so that the trade comes to the trader, so they don't chase the trade. There can be various reasons for this urgency bias. The system still has to be rebuilt for trading. And I work with a number of trader trainers who recognize that KNOW HOW is rarely enough. A mind has to drive that KNOW HOW. If you can train that with the simplicity you speak of here -- good for you.

 

And if traders are not adults when they first get to trading, they sure will get the opportunity to grow into adult functioning with the dawn of every trading day.

 

Rande Howell

[steve46 12]

So I like this (previous post) response Rande....clearly people DO have the option to decide at any point in time to overcome their largely self imposed limitations....on a personal level I don't see very much of that happening....but I know the possibility exists....I've been there.

 

From the standpoint of trying to teach people.....I start by screening for adult behavior first, and THEN I look at other factors that might help a person to make that leap....I also believe that try as you may.....people will generally NOT make significant changes unless motivated in a significant way...I try to impress upon struggling traders just how different life can be IF they can obtain success in this endeavor...sometimes that works...more often than not however people hang on to the self limiting beliefs and behaviors that have directed their lives previously....and that (in my opinion) is a shameful waste....

 

I like your basic concept and I imagine that a certain group of folks will benefit....I hope you have success with it...

 

Good luck

Steve

Edited July 3, 2013 by steve46

[Guest OILFXPRO]

So I like this (previous post) response Rande....clearly people DO have the option to decide at any point in time to overcome their largely self imposed limitations....on a personal level I don't see very much of that happening....but I know the possibility exists....I've been there.

 

 

Good luck

Steve

 

A leopard can not change it's spots.

[Rande Howell 10]

A leopard can not change it's spots.

 

You're right. But he can change his mind and alter his course based on circumstance. We are born with predisposition, but are not chained to it, unless you believe that to be so.

 

Rande Howell

[WVTrader 10]

Here is another great resource on the subject, very clearly laid out.

 

Mindfulness in Plain English: 20th Anniversary Edition: Bhante Gunaratana: 9780861719068: Amazon.com: Books

 

Rande, this is the first I have heard of your book and look forward to digesting it.

 

My wife had just asked me the day before I read this post, "Why bother doing all this introspection if you're going to come up with things you don't like?" I didn't have a good answer for her other than I just knew that I had to. I sent her the post and said this is the answer to your question.

 

Thank you for breaking it down!

[tradingwizzard 10]

This is an excerpt from my forthcoming book, "Mindfulness: Mastering Your Emotions and the Inner Game". This is about the intersection of Fear, Uncertainty, Probability, and State of Mind and its impact on your trading.

 

Fear Based Trading:

Wrestling Control of the Mind From Limiting Pattern

______________________

 

"There's someone in my head but it's not me." Brain Damage – Pink Floyd

 

___________________

 

Diary of a Trader Waking Up to the Internal Dialog

 

“It's never going to happen for you. You’re never going to see the performance you see trading simulated with your real money account,” erupted the intrusive thoughts into Bill’s awareness. It sounded so final. And it sounded so on target that I believed it without question – yet part of me fought back.

 

“Whoa! Where did that come from?” astonished, Bill jotted the thought down into his trade log. Later while he reviewed the thought and emotion log portion of his trade log, he realized, “I've obviously have been dealing with that voice for years, but, out of my discomfort, I’ve avoided dealing with it.” The distinction of separating thought from identity was opening up a whole new can of worms for Bill. Now he was being asked to become mindful of the different characters present in his thoughts.

 

“This Mindfulness stuff is beginning to make a whole lot of sense. I had no idea that so much was going on in my mind while I’m trading – I just thought it was my dumb thoughts,” Bill recounted. And as he reflected on this new revelation, he discovered another voice also. Focusing hard he thought, “That’s the voice that continually tells a very discouraged part of me, "you’re gonna do it, keep fighting, keep going, it’s gonna happen." But it’s not as loud as the Inner Critic and it gets drowned out. When I make mistakes or have a losing trade, the Inner Critic berates me, "you’re an idiot; you’re a stupid ass."

 

But then there is an accompanying voice that says, "It’s ok Bill. No big deal. Making a mistake, and losing on a trade is part of the game. You have the skill set to make it up. Forgive yourself and let’s get in on this next trade." But the critical voice is louder and drowns it out. I think the fear of pulling the trigger on my analysis stems from me not wanting to make a mistake and be wrong. Being wrong adds fuel to the Inner Critic’s beratement of me – gives it confirmation.

 

“It’s this battle going on between this Inner Critic and this part of me that wants to prove himself – and the critic is winning. This fearful part of me seems to want to prove himself to this critical part of me – to prove that he matters; that he has purpose. But no matter what he does, it’s never good enough. It just goes on and on. And I get exhausted by the internal struggle and my trading day gets blown up,” came Bills analysis of this internal trading dialog going on his mind.

 

The most prevalent thought to pop up in my mind is that I'm basing my self worth on my success or lack of as a trader. As embarrassing as it is to admit, I want the accumulation of things and power that trading can give me. I want the recognition of family, friends, co-workers. I want them to see that the years of sacrifice reaped a reward. The crazy thing about this is that I'm a well liked and loved person by these people with or without trading but obviously its not good enough. I also want the recognition for my professional and financial success which I still haven't attained through my trading. I do have a sense of entitlement. I worked my ass off. I gave up everything to go after this dream. 6 years of sacrifice, thousands and thousands of hours over this 6 year period of studying and honing my craft. Sitting in front of this damn computer and I still haven't gotten what I think I deserve.

 

The thoughts are there, but I’m not being swept away by them as much as I used to. But I don’t feel detached from them either. The difference is that I’m not observing them and am aware of them. And I’m beginning to realize that I have been mindless to this conspiracy running around in my head. Because of my blindness to it, it has been able to sabatoge my efforts with relative ease – I’ve been asleep at the wheel. I haven’t been directing my life. This person inside my head that is not “me” has. This has to stop.”

 

Using Mindfulness to Uncover the Internal Dialog

 

Bill is making progress in his evolution as a trader. At first he sees no difference between his thoughts and who he is. Now, it is beginning to be different for him – and his trading. He is waking up to the powerful, and unseen, forces that drive his trading – his hidden beliefs about himself and his worth. It is these unseen beliefs, showing up as conversations in the mind, that has stymied Bill’s trading for years. Remember from previous chapters how beliefs become embedded into your neural circuitry. Once wired into, they become the oh-so-familiar voices that you come to identify as “you”. Because they are so familiar, the brain pushes them out of your awareness – where they bias your perception without your knowledge. It is here, out of your awareness, which they blow up your trading.

 

It is through these unseen and unexamined assumptions, that we interpret and understand the world. In Bill’s case, and 95% of traders, it produces mediocrity. To break free of these unexamined assumptions we must first become aware of them. Becoming mindful of these shadowy, hidden, conversations within the self is the first milestone of waking up and becoming the trader you can become. No amount of fundamental or technical analysis will substitute for awareness of the self organization you currently exist as.

 

In the vignette above, taken from a trader’s psychological trading log, you can see this in bold relief. Bill has experienced powerful financial success before he began trading. But in the course of trading for six years, he lost hundreds of thousands of dollars before he concluded he needed help with his psychological organization. He has a methodology trading coach. And when he is trading simulated, he is a master trader. Yet, when real money is risked, he is possessed by an internal struggle of self doubt after losing nearly all his life savings. Now, far removed from the large-and-in-charge persona he had developed to cover a deep sense of inadequacy, he discovers a fight going on within him. That internal struggle has been going on for his entire life. But it did not come to the surface until he began trading. It is the structure of this deeper fear that he needs to become mindful of.

 

Even then outside of his awareness in his mindlessness, the large-and-in-charge mask he wore drove his trading. The problem was that underneath it all was a sense of unworthiness and inadequacy that he had never had to address – until trading. This is his deeper fear – deeper than his fear of loss -- that he has been avoiding for years. It is inescapable in trading. In sales he learned he could bluster his way through – producing a false sense of self confidence that he hid from others and himself. Like a surgeon’s knife, trading exposed it. What, exactly, did trading expose about Bill internal landscape as it relates to trading?

 

People avoid dealing with their psychological demons very successfully before coming into trading. People, including you, distract themselves, they busy themselves, they bluster, they drink, they talk sports, they talk business, or they con themselves. They even do this as they enter trading. They talk a game. Then they discover, to their dismay, that the very psychological demons that they invested heavily in to avoid before trading are now stalking them. In trading there is no room to hide from our self limiting beliefs. You find them in your fear based trading. Now that they can not be avoided, let’s look and see what you have been avoiding.

 

Locating and Deconstructing the Internal Dialog

 

As Bill builds the skills of breathing, relaxation, self-soothing, and mindfulness – he learns how to slow down his thinking and discover powerful hidden beliefs that shape his trading – behind his back. When he first begins, his thoughts appeared to him as a blur (after all, he has avoided getting to know this part of himself for a long time). As he developed relaxation and mindfulness skills, the speed of his thoughts began to slow down. First they showed up as a blur and were of little interest to him. His belief was that all he had to do was learn fundamental, and particularly, technical analysis. From here, he would be able to trade and make buckets of money to fulfill his dreams.

 

The problem was that when he went from simulated trading to actually risking his capital, his trading fell apart. His putting capital at risk triggered his deeper fears of inadequacy and failure as a human being. This very fear he was able to cover up by developing a large-and-in-charge persona. Trading was merciless in exposing this hidden belief. His trading coach encouraged him to explore his psychology as it related to trading. But Bill, and most traders, brushed this suggestion aside believing (self deception) that they had the psychological part down – all they needed was methodology. They were going to find the Holy Grail, and it was going to be in methodology after trading platforms failed to deliver the goods. From many years of avoidance of discomfort, they ignored the sage advice. They ignored their thought life.

 

They ignored it until it smashed them in the face. This can come in the form of ten’s of thousands of dollars lost or, in Bill’s case, hundred’s of thousands of dollars lost. For Bill, and for you as a trader, thoughts have to be slowed down from the blur used to avoid the discomfort of unsettling thoughts. That is what Bill has learned to do by following the skills management guide presented in this book and through training.

 

As he developed the skills to slow down the blur of racing thoughts, they still raged by as a torrent of uncontrollable thoughts. But, even at this speed, he could begin to feel the emotion and meaning attached to the thoughts he had been trying to ignore. With a little more work, he was able to slow them down until he could identity them. That is where Bill is in the diary vignette from the start of this chapter.

 

This moved him from simply using emotional management tools to calm the self down to using observation skills to detect the dominant emotion/thought/belief patterns (internal dialog) driving his thought life – and his trading life. And it was not a pretty picture. He could understand why he had avoided it for most of his life. It made him uncomfortable. Apparently they had been an active underworld going on beneath his awareness that had powerful impact on his sense of self and his decision making – particular when risk was involved. What was this underworld of thought composed of?

 

One thing I want to make clear as we enter this section. All of us have an internal dialog. It is inescapable. We are all faced with challenges or struggles in life – they are unavoidable. Trading exposes these challenges, and your adaptation to them, like a mirror in your dressing room. The mirror in your dressing room reveals all the warts and blemishes that you attempt to hide from the world and from yourself. The difference is that in trading, you are forced to look into the mirror and acknowledge your incompetencies. The very things you have been avoiding in real life.

 

In real life, you can avoid the mirror by busyness and all sorts of distraction. You can cloth yourself so that you, nor anyone else, see the flaws. In trading, your trading account is the barometer, not the avoidance mechanisms of the mind. Here, we are looking at thought patterns that exist within all humans – this is what I am calling the internal dialog.

 

Often you distance yourself from the discomfort of these self beliefs showing up as thoughts in your mind. They become painfully real and can become debilitating in trading. That is actually the good news because it actually forces you to examine what your really believe about yourself and trading. As long as you continue to avoid them, they will own your trading. And you forfeit the possibility of learning from your mistakes.

 

If you recognize that your trading performances are a reflection of the beliefs that you bring to trading, you are in a much better position of finding them. Most traders give lip service to a belief they “should” hold, but when trading performance does not match the surface belief, they do not delve deeper into their personal psychology.

 

Here they would find their core beliefs that they, most likely, hide from themselves. Mindfulness is the methodology I teach to help people to get to this level of understanding of themselves and their trading. Here change in performance becomes an indicator of change in core belief about the self as a trader – and as a human being.

 

To learn more about the book,Mindfulness: Mastering Your Emtions and the Inner Game or to attempt a free webinar, go to http://www.tradersstateofmind.co m

 

well, how the heck should I say this.......it must be me, but I find this psychological thing kind of useless.........been trading more than 7 years now and nothing there I can use......maybe reread for the 10th time "Reminiscences of a Stock Operator"

[WVTrader 10]

well, how the heck should I say this.......it must be me, but I find this psychological thing kind of useless.........been trading more than 7 years now and nothing there I can use......maybe reread for the 10th time "Reminiscences of a Stock Operator"

 

I'll tell you how I would say it in a word, "BLESSED"

 

I would venture to say you are a rare breed Wizard...

[Guest OILFXPRO]

well, how the heck should I say this.......it must be me, but I find this psychological thing kind of useless.........been trading more than 7 years now and nothing there I can use......maybe reread for the 10th time "Reminiscences of a Stock Operator"

 

 

So you were born with a trading mind?How does it detach emotions from trading ?

 

How can anyone detach their emotions from trading?How does one become a mature trader?The first time I was assaulted , I bit the seheit out of the offender and got done for ABH , second time time I threatened to do it and got threatening behavior , third time I had learned to walk away from people trying to beat the shite out of me.

 

Mind you Reminiscence was about a gambler not a trader. , you will get more skills in my trading room about being a skilled trader than being a gambler's follower.Was it not a fictitious story ?

[tradingwizzard 10]

So you were born with a trading mind?How does it detach emotions from trading ?

 

How can anyone detach their emotions from trading?How does one become a mature trader?The first time I was assaulted , I bit the seheit out of the offender and got done for ABH , second time time I threatened to do it and got threatening behavior , third time I had learned to walk away from people trying to beat the shite out of me.

 

Mind you Reminiscence was about a gambler not a trader. , you will get more skills in my trading room about being a skilled trader than being a gambler's follower.Was it not a fictitious story ?

 

being more technical and using SL is just a way to detach emotions when trading.........hey, I appreciate the insights given on the original post of this thread, but let's'not complicate things.....simple things work best.......use clear examples and normal words for everybody to understand and it should have more success... but again, maybe it's just me

[Rande Howell 10]

Here is another great resource on the subject, very clearly laid out.

 

Mindfulness in Plain English: 20th Anniversary Edition: Bhante Gunaratana: 9780861719068: Amazon.com: Books

 

Rande, this is the first I have heard of your book and look forward to digesting it.

 

My wife had just asked me the day before I read this post, "Why bother doing all this introspection if you're going to come up with things you don't like?" I didn't have a good answer for her other than I just knew that I had to. I sent her the post and said this is the answer to your question.

 

Thank you for breaking it down!

 

You're welcome.

 

Rande Howell

[Rande Howell 10]

well, how the heck should I say this.......it must be me, but I find this psychological thing kind of useless.........been trading more than 7 years now and nothing there I can use......maybe reread for the 10th time "Reminiscences of a Stock Operator"

 

What I like about the work that I do is that it is self selective. People either connect to it or they don't.

 

The part that puzzles me is why do people who claim that they are not interested in learning about the psychology of trading end up reading and replying to material on the topic.

 

Rande Howell

[tradingwizzard 10]

What I like about the work that I do is that it is self selective. People either connect to it or they don't.

 

The part that puzzles me is why do people who claim that they are not interested in learning about the psychology of trading end up reading and replying to material on the topic.

 

Rande Howell

 

hi Rande.....not saying I am not interested.....en contraire

[zdo 20]

Rande,

 

"puzzles" me too...

 

it's everywhere up here... A thread about an individual indicator or 'What's your favorite indicator?' shows up and the "you shouldn't be using indicators" posters show up...

 

The Regular Session has started...

 

zdo