Lessons from the Pros

Specialty Skills

Beware of Your “Rep” When You Trade

Tracy was still angry with her husband even though the argument happened last night. She thought that since she “slept” on it that things would look a little differently today…they didn’t.  She and Bob had a good relationship, but sometimes “he could be so stubborn,” she thought to herself. In fact, her anger had caused her to forgo a very important part of her pre-market preparation. She traded the YM E-mini and her daily routine included identifying yesterday’s high, low, open and close with pivot points as well.  She normally would check the overnight high and low on the globex and establish significant demand and supply levels along with the pivots.  Additionally, she would involve a number of other indicators before identifying whether or not there were high probability set-ups stemming from her Macro Trade Plan.  But, today, she was very annoyed, frustrated and stressed.  When faced with a potential set-up that she would normally double check, she barreled ahead, almost haphazardly scribbling down her trade plan and entering the trade.  She was engrossed in her thoughts regarding Bob and did not realize that what she “saw” as a set-up was in fact a fake-out.  She had entered to go long at what appeared to be a significant demand level when in fact if she had checked her time frames closely she would have noticed that there was a larger time frame price pattern that held a strong indication of a further drop in price.  To make matters worse, she violated her rule as well and moved her stop thinking that the price action was going to reverse.  It did not reverse and she took a significant loss.  Tracy looked at the charts with contempt, her eyes boiled with anger as she placed another trade and another making several additional rule violations and ended her trading day with a stack of losses.  She had begun her trading session out of alignment.  She was extremely distracted by her emotions which caused her to distort what the charts were showing and to execute against what later she realized was better judgment.   Tracy had let other “parts” of herself that were out of alignment make important decisions.  She had allowed her “rep” to trade her account.

We all have “reps” or “parts” of ourselves that are tied into ego functions of self-promotion (the pretentious self puffery that is self-absorbed and out of touch with reality) and self-protection (the fear based thoughts, which limit the expression of our highest and best self).  Your “rep” is never wrong, has no blemishes, makes no mistakes, is always cool and is out of touch with reality.  Your rep keeps you from attending to what matters most in the trade.  You cannot resonate with reality if you are operating in a tunnel-vision stupor that is driven by out-of-control emotions and thoughts that are connected to limiting beliefs.  Successful trading requires you to be in the moment, fully available, fully present and in the now.  If you are thinking about what happened a few moments, minutes, hours or days ago, you cannot be fully present and therefore will not have all of your resources at your disposal.  Additionally, to be fully available means that you are accessing and activating all of your internal and external resources to bear on what you are doing.  In this way you are aligned in body, mind and emotions working in the same direction and toward the same goals.

You don’t have to be mentally ill to have different personalities reside in your body.  It is quite normal to have various “parts” of yourself emerge at different times depending on what is going on at the moment.  The rep is only one part of perhaps many parts. In fact, these parts of the self speak different languages and see different things as well; that’s because the mental filters that are processing information are based upon paradigms and limiting beliefs that frame and give meaning to what is coming in through your senses.   So you literally see and hear things differently from what is reality, based upon which part is showing up.  How many times have you been stopped out of a trade that was based upon a price pattern that you had previously identified only to look again after you were stopped out and realized that it “looked” totally different from what caused you to execute that trade.

The markets are representations of an organic process; they represent all the hopes, fears, and decisions of everyone executing a trade.  When you trade you climb into the skin of the market and see yourself in its reflection.  And, of  course every blemish, character flaw and weakness that you have is in that reflection, because you “express yourself” while in the markets.  The successful trader can “feel the markets” through insight and intuition that has been developed through countless hours of observing market charts; but she does not get lost in those feelings.  The successful trader has an intimate understanding of the delicate balance between emotional intelligence, i.e., managing emotional volatility through protocols, routines and habits.  They focus on doing the “right” things habitually (following trading plans, rules, money management and position sizing) as if their life depended upon it…and their trading life does depend upon it.  In this way they set themselves up to get the right results habitually.  They know that consistent successful execution is intimately related to mastering this process.  It becomes a Zen of trading by losing the ego attachment and using mind management tools that engage the subconscious to work for them rather than against them.  This is accomplished by redefining the relationship to the trade.  The objective is to be in the flow; that is, a detached interaction where (even when a profit is involved) we are not attempting to aggressively bleed the situation dry but come away having done well.  To be and stay in the flow you must be fully self-aware and “watch” what you are doing.  You want to activate the “internal observer” and this is accomplished by relaxing at every opportunity and creating the habit of being fully present, in the moment for the moment; fully available and in the now of the trade.  In this way you can then access and activate internal resources that can shift you from a state of fear, frustration, irritation, and stressful tension to a state of relaxation, mental clarity, and self-confidence with focused intention on doing the “right” thing in the trade.  There are many, many internal resources that you have, many of which, you may not even be aware.  But, it is very difficult to be available to accessing and activating internal resources without activating the internal observer. Tracy would have done herself a world of good had she activated her internal observer by taking her emotional temperature before she began her trading session. By taking her emotional temperature she would have identified that she was too “hot” i.e., she was angry, irritable, annoyed and otherwise distracted.  After realizing that she was not fully available, in the moment, fully present and in the now she could then use mental and emotional tools like taking a deep breath and asking questions relating to her thoughts and feelings.  This could help her to “state shift” into an emotional position that is aligned in body and mind while connected to her highest and best trader…her A-Game.

When ego investment and emotions rise, trading becomes a reflection of the ego, in other words defensive reactions to neutral events and inflated self-seducing illusions that really distort reality.  Overly invested egos create a sort of delusion, and consequently, what you thought was a great trade was in reality a “fake out” or something that came from internal bias not the objective reality of the charts.

So, my friend, your ego is not your amigo.  You’ll want to get the internal observer involved early and often.  When you notice that your “rep” is out and about to take control of your trading platform, fire the rep and get back in touch with what matters most in the trade.  It’s of paramount importance to be fully available, fully present and in the now of the trade so that you can activate and access your internal and external resources, thereby bringing your A-Game.  Furthermore, you’ll want to use mental and emotional tools to maintain your A-Game at the platform.  We teach mental and emotional tools in the Mastering the Mental Game On-Location and Online courses that can help shake you out of that rep delusion.  Also, read my book “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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