Lessons from the Pros

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Making Patterns of Thinking Work for You

Patterns are recurring sets of images, events, objects, forms, etc.  When events or situations keep coming up, eventually you will recognize them as a pattern.  Of course patterns can be either supportive or destructive to your performance.  Patterns that occur in your thinking or behavior can also be referred to as programs.  Programming happens throughout your life, but some of the most substantive and strongest programming happens in early childhood.  The important thing is to be aware that you have patterns or programming because it is difficult if not impossible to change your programming if you don’t know what is underlying it.  Are you plagued by out of control behaviors, meaning that you have said over and over that you won’t move a stop, or trade without a plan, or chase a trade only to do that very thing again and again?  Have you made promises to yourself to do that important thing for your trading like create a plan, or learn and follow a strategy or keep a money management commitment…but you didn’t?  All of us have from time-to-time fallen through the commitment cracks.  These behavioral implosions are patterns of thinking, feeling and doing.   But what separates those who excel from those who only wish they could is a willingness to turn failure into feedback, losses into lessons and focus their attention on doing only what it takes to get the consistent results that they want.  This is done by measuring, tracking and documenting thoughts, feelings and behaviors.  You do this in order to get a handle on these faulty patterns and uproot, extricate and neutralize them.  In that way they can be replaced by patterns that are in your best interest.  Most people, however, are unwilling or unable to go the extra mile and put forth the effort to replace faulty patterns, that is…to change.  They get into a rut and find it easier to just stay there. They like to complain about what they are stuck in, or who has lead them astray, or why they aren’t as talented, smart, rich, creative or lucky as those who succeed.   They begin to become comfortable with that rut while simultaneously cursing it.

You see, that rut was once a smooth dirt road early on, full of promise and possibilities; and then the storms of tribulations and the rain of misguided relationships came, creating a muddy path.  Then, life drove on it, the tires mashing the mud into deeper and deeper crevices making movement along the path difficult enough.  But, when it dried, what was difficult before appears impossible now due to the hard, intractable grooves that seem to hold back any semblance of progress.  In this scenario it takes, resilience, resolve and internal resources to use any foothold, toehold or traction to move, albeit sometimes slowly, ahead.  That is the nature of personal change.  You must realize and recognize that what goes on in you has an overwhelming influence on what goes on around you.  In other words, the results that you get are directly related to what you do.  Going further, what you do is controlled by how you feel; and how you feel (your emotions) is run by what you think.  So, personal change means manipulating what you think, feel and do.

Personal change (growth and development) cannot happen unless you are willing to confront your issues; head on, with courage, and a willingness to get outside of your comfort zone.  There is no growth and no development inside of the comfort zone.  Additionally, it is all but impossible to confront issues or ruts in your path without knowing that they are there, or how deep.  Most of what goes on in your brain and mind is not known to you; that is, this information is out of your awareness.  To put it another way, only a small percentage of what goes on in your brain/mind is in your awareness.  That means those motivators (the underlying core beliefs and values of your life) of the thoughts (the precursors to feelings) must be discovered through introspection and self-reflection.  Those faulty patterns must be rooted out…one pattern at a time…one trade at a time.  For this to happen methodically and with structure, it is best done by using a tool that is designed to be used along with your trading.  We are talking about a Thought Journal…one of the most important trading tools you must have in your tool box.

A Thought Journal tracks, measures and documents what you are thinking, feeling and doing when you enter, manage and exit a trade.  It is necessary because most of this data is out of your awareness.  For instance, consider this.  You have a long bias and you have identified both a significant demand zone and a supply zone.  The trend is down and the price action is about to re-enter the supply zone for the first time.  You have determined that it is a clear “short” set-up.  You enter a trade plan noting the set-up, rational, entry, stop and target.  As you follow the price action it gets to the appointed entry; “but” you fail to “pull the trigger.”  Now, you may know why you did not or could not pull the trigger…you felt “fear” and this emotion kept you from doing what you told yourself you were going to do.  Ahhh, but do you know “why” you felt fear?  That is to say, do you know what you were telling yourself…the unconscious conversation that caused you to feel so much fear that you couldn’t pull the trigger?  Once you ask yourself the question, “What was I telling myself to feel this fear,” then you write the event in your Thought Journal.  It could be next to, under, on a separate page or in a separate book or computer page from your Trade Plan and Trade Log.  Now, remember that long bias.  Well, you may not have been aware of that long bias and the underlying thought may have been, “This price action is going to continue to go up…I can’t short…I’ll lose.”  Let’s say that this event (type of trade) happened 4 times over the next month or so; and every time that it happened you logged it into your Thought Journal.  Then, the next time that it happened you heard yourself say, “Wow, every time over the past several set-ups like this when I failed to pull the trigger, I told myself the same type of thing.”  Then, as the light is going on in your head, you have not only identified a faulty pattern, you have also unearthed the very thought and limiting bias that ran the emotion (fear).  So now you have the information, the data, and you can begin to confront it by changing your thinking.  This is the power of having and using a Thought Journal.

Let’s face it; you’ve got to use all of your internal and external resources to bring your A-Game to your trading platform.  One of those tools is your Thought Journal.  Use it, early and often.  If you do you will methodically uproot, extricate and neutralize your faulty patterns…one pattern at a time…one trade at a time.  And, you will begin to identify and establish replacement patterns.  This is making patterns work for you.

May all your trades be green.

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.