I have often discussed with my students how awareness or the lack thereof is profoundly important to trading. About 95% of everything that goes on in your brain and mind is out of your awareness. Just consider that your unconscious brain is responsible for all the communication between cells, organs, muscles and bones as well as motor functions, respiration, heartbeat, immune functions, overall regulation and so on and so on. In fact, only about 3% falls under the purview of your conscious mind. So, the vast majority of your system and what it is doing is out of your awareness…and that’s a good thing.
Can you imagine having to think about breathing, beating your heart or defending yourself against micro-organisms? It would be a disaster to say the least. The same goes for thinking. You make immediate, unconscious assessments of not only internal but also external environments to scan for threats. This also means that many if not most of your beliefs, biases, attitudes and values, i.e., your thoughts, are also below the water-line of awareness. So, when you fail to follow your trading rules the genesis of this negative behavior is often unbeknownst to you. Now, what does this mean for your trading?… Lots!
How often have you violated a trading rule, such as moving a stop in the path of a threatening price action, where only moments before you swore you wouldn’t? Then later, in a moment of exasperation, you asked yourself: Why can’t I keep my commitment to rules? I would imagine that this has happened over and over again; but what are you going to do about it?
Asking the question above is a start, but rather than view the issue from the standpoint of a question born out of frustration, the better option is to ask a series of questions from a position of appreciative inquiry, which is essentially using gentle introspection to uncover the origin of the bad behavior.
What is meant by gentle introspection? Firstly, it is the avoidance of self-loathing and destructive name calling. Beating yourself up has very little positive value other than having a likely ineffective slight deterrent effect for a small number of people. Stop and consider the number of times that your out-of-control behavior has been curtailed by calling yourself an idiot or something equally as abhorrent…my wager would be never. Secondly, gentle introspection is asking a highly effective question, such as: What must I be telling myself or believing to feel the fear that drove the bad behavior? This question begins to address the very heart of the driving force of all behavior, and that is core belief. Core beliefs are mostly out of your awareness, so if you are attempting to change behavior and do not deal with underlying structures that the behavior stems from, then change is all the more difficult, and for some near impossible.
In conjunction with asking questions is, of course, documenting the information that’s being uncovered. This is a major step that will afford the ability to compare notes on other trading rule violations with the aim of detecting bad patterns of thinking, feeling and doing. Once begun, this emerging pattern of thoughts, emotions and behaviors will not only surface, but will continue until the pattern has run its course; that is unless you are using a pattern interrupt.
By the time you have seen the price action moving towards the stop, filtered the information through your unconscious belief system and inferred a meaning (like I’m going to lose and that’s bad), felt the onset of fear that the unconscious belief created and the resulting desire to reduce the discomfort of fear with an urge to move the stop; the pattern has appeared like a runaway train coming out of a tunnel and barreling down the track towards you… the damsel in distress tied up on the rails, and it is TOO LATE! Not even Dudley Do-Right can save you. You give in and view the commission of the dastardly deed (moving the stop) as if disembodied. You experience the culmination of the pattern by violating your trading rule and actually moving the stop.
This is a process of engaging the system and uncovering information needed to effectively resolve the issue. Using a journal to track and evaluate your limiting beliefs, thoughts and emotions will, over time, provide you with these data. Additionally, ask questions of your unconscious like: What must I do differently to deal with this issue? Also: What can I do to change this limiting belief? In this way, you will recruit the power of the unconscious and identify critical behaviors so you can take crucial action to begin to change the limiting beliefs that were the original culprits of your trading rule violations. Writing down and analyzing those internal data are critical to your trading success. You will name it to tame it.
This is what we teach in the Mastering the Mental Game online and on-location courses. Ask your Online Trading Academy representative for more information. Also, get my book From Pain to Profit: Secrets of the Peak Performance Trader.