Lessons from the Pros

Specialty Skills

Keep Your Trading On Track

Jackie looked at her screen with a stunned expression as the fact began to seep into her consciousness…she had just experienced the largest loss in her trading history. She felt sick to her stomach, her head ached, and she was shaking.  It all began like most mornings. Jackie started her trading day by checking the overnight markets, she checked the news, she checked her watch-lists, and then planned her opening trades.  She looked at the charts she was going to use, identified pivots, supply/demand levels and pinpointed high-probability entries and exits.  All appeared to be in order, but her first trade went against her.  She didn’t panic; opening trades can often go that route.  She took a deep breath and continued.  She mapped out another entry and it happened again.  “Hold on!” she heard herself say.  “What’s going on?”  Her overall plan for the day seemed airtight; that is, before it all began to fall apart.  As the day trudged on it was more of the same.  Trade after trade…after a while Jackie traded as if possessed, like she were in a fog, a bad dream.  It didn’t matter that she had rules and limits that she had set, she just kept entering and entering with violation after violation.  At one point, she remembered looking at a long green candle and thinking, “….this could save my day.”  It didn’t matter that a small voice inside was shouting although barely audible saying, “…don’t chase that trade!”  It was too late though, she was caught in a spiral of out-of-control trading…and she knew it, but couldn’t stop herself.  She even realized as she placed the oversized position on and decided not to put a stop in that she was setting herself up for disaster; but it didn’t matter, she was barreling forward, full steam ahead going straight for a brick wall.  But just maybe, she hoped, the wall would open up, just maybe this price action would go her way and just maybe she would win.  The prospects of this elusive possibility had intoxicated her thinking as her eyes had become wild with anticipation.  But then the bucket of ice water hit her full in the face as the price action hit a significant supply level and began to plummet.  It fell softly at first, then screamed straight down in a sea of red.  It dropped, and dropped and dropped, as her account hemorrhaged from the deep gash that this ill-conceived trade had brought upon her.  And, the bad part of it was that she couldn’t figure out why it happened…but the worst part of it was that this was not the first time.  How could she do so well and then in one fell swoop, erase weeks of disciplined trading.  She didn’t know what to do because she didn’t understand why it was happening.  She desperately wanted to change but was unwilling or unable to see how.

Trading path

Jackie like so many traders was caught in a wave of bad trading habits and it seemed as though she were drowning.  You can’t change what you can’t face and you can’t face what you don’t know.  You must gain awareness of your unconscious limiting beliefs that drive unconscious conversations (out-of-awareness things that you tell yourself), leading to negative emotions like anxiety and fear; which motivate negative behavior that flies in the face of your A-Game – your highest and best trader.  The fact of the matter is that you are only aware of a small part of what is going on in your mind/brain.  The largest part of your thinking is out of your awareness, or unconscious.  See, the mind is like an iceberg, the tip is the only part that can be seen above the water line and comparatively speaking it is a very small part of the whole.  The rest of the iceberg is huge and it is below the water line.  Your consciousness is very similar.  Your conscious thoughts are but a small portion of the mind, the overarching part of you that controls all of your involuntary behavior like breathing, heartbeats, cell function, growth, immune system, etc., is sub-consciousness, totally out of your awareness and so is much of your thinking and beliefs.  That is how it’s possible to have unconscious conversations with yourself that are driven by unconscious limiting beliefs.  These limiting beliefs, for example, I’m not good enough or I don’t deserve to win or I’m such a dummy; drive unconscious conversations for example, “… I shouldn’t enter this trade – but I want to because it might go in my direction – and I’ll make money – and I’ll be right – and I’ll feel good – even though I don’t have a plan – and I could crash and burn – and that would mean that I’m stupid – but I’ve just got to do it.”  You’ve got to root out the limiting beliefs that drive the unconscious conversations by becoming aware of them; that is, by self-reflection, introspection and journaling and slowly pulling back the layers of the proverbial onion of your consciousness, level by level.

One way that can help is called the Three “D” Process.  I’ve used this formula with my students for years.  Here’s how it goes. The first D is for Discovery.  After you have identified an issue, like chasing trades for example; ask yourself: What am I feeling? The answer might be “anxiety and fear.”  Then ask, “What am I telling myself?” I am telling myself that, “I’ve got to get in on this trade or it’s money lost.”  Going further ask, “What belief is causing me to feel this way?”  I am believing that there are not enough good trades so I must take this one.” What triggers this feeling? A trigger might be the long green candles.   What is happening just before I get this feeling? Just before the feeling surfaces I may have had one or more losses.  The process may take awhile, anywhere from a few minutes to a few hours in some cases; but keep at it because the information that you uncover is highly valuable to your progress.  After you have identified answers to these questions be sure to document them…write them in your Trade Log or Journal.  Also, keep asking and pulling back layers for more insights.

The next D is for Decide.  Once you have the information about your internal thoughts, emotions and beliefs that are driving behaviors and in turn creating results that you don’t want, you’ll want to analyze and decide on tools that could be instrumental in helping you to overcome and resolve these issues.  One thing to keep in mind however, is that “decide” is not a single event but a process of being proactive in your confrontation of the issue(s); and, preemptive in actively reducing the incidence of the issue(s) from happening in the future.  For instance, there are many reprogramming tools available to you like hypnosis, changing beliefs (a neuro-linguistic-programming tool), and Emotional Freedom Technique (a tool that can help you to lower and in most cases neutralize emotional tension).  All of these tools and the people who teach them can be found on the internet or in your bookstore.  Or, you may choose to learn these tools and others in the OTA On-location and Online course “Mastering the Mental Game.”

The last D is for Design.  Most people trade and live by default; that is, they just allow their thinking and therefore their doing to just happen, which can often lead to unwanted results.  Also, when things happen in their environment, they react automatically, which is behavior that is driven by unconscious conversations and beliefs.  If your internal conversations are all supportive and your beliefs positive and powerful you don’t have anything to be concerned about; and, you wouldn’t be experiencing so many unwanted results if your unconscious conversations were all positive.  It is much more powerful to live and trade by design.  To identify what you want, like eliminating “chasing trades.”  Then design your response by looking at the tools you have available and putting together a strategy of how you are going to use them in order to effectively resolve the issues.  As an example you could lower the emotional intensity by using Emotional Freedom Technique; then use a changing beliefs tool to address the limiting belief(s) that are driving your thinking.

Here’s another tip: After you have “Discovered” the bad pattern – like chasing trades – and you have put it in your journal and “Decided” what tools you are going use, you might also use your trade plan as a way to anticipate the issue.  In other words, when you are preparing for a similar trade as the one where you have experienced significant losses due to out-of-control trading, you can put a tool (like Emotional Freedom Technique) to use in your plan so that through anticipation of the emotions flaring you can “choose” to act differently with the help of the tool(s) you utilized.  In this way the plan is a guide to help you not only navigate your way through the trade, but as well to manage emotions that can severely distract you from what matters most in the trade.

Trading is too important to leave up to chance.  You’ve got to manage the moment and design how and what you are going to do to move forward.  Being deliberate in your method is only going to help you, as opposed to shooting from the hip and “hoping” things will turn out OK.  Ask your Online Trading Academy representative for more information on how you can get in the “Mastering the Mental Game” online or on-location courses.  Also, get my book: From Pain to Profit: Secrets of the Peak Performance Trader.  Until next time,

Happy Trading,

Dr. Woody Johnson


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.

Join over 170,000 Lessons from the Pros readers. Get new articles delivered to your inbox weekly.