Lessons from the Pros

Specialty Skills

What You Say To Yourself Can Help You Change Your Trading Results

What are the results that you are getting in your trading and in your life? If they are results that you do not want then you must “change” something. Albert Einstein once said, “You can’t solve a problem at the same level of thinking that created it.” That very important quote has been modified to read; “The definition of insanity is: Doing the same thing over and over and expecting a different result.” It’s considered insanity because if one is doing that then there is a fundamental rejection of reality and one is in contempt of the law of “cause and effect.” One of the most important things we must do, especially with regard to trading is to “resonate with reality” meaning that it’s of tantamount importance to approach the environment with your eyes open and avoiding falling prey to illusions and/or delusions. Either one can be debilitating to the point of destruction to your trading results. Illusions are intentional or inadvertent misconceptions.

What You Say To Yourself

of what is actually happening in the charts. Let’s say that you identified what looked to you to be a symmetrical triangle price pattern and it coincided with a 240 minute time frame demand zone that had formed over a 4 month time period. Then you prepared a plan based upon odds enhancers and a calculated reward/risk ratio that indicated that this was a high probability trade. After placing your buy order you were subsequently stopped out. Upon doing a postmortem you looked back over the chart and lo and behold where was the symmetrical triangle? It had disappeared! It dawned on you that it was not really the price pattern that it appeared to be. It was an illusion and your calculations were based upon what you thought you saw. Now, if this keeps happening and you continue to respond to things that aren’t there and consequently losing then you must “change” something; that is if you want to start winning.

Change, is not only necessary but it is also difficult. Many of you have been getting results in your trading that are consistently discouraging, that is, not what you want. So you must change something either in your Mechanical Data (items that have to do with the mechanics of the trade like entries, exits, stops, targets, strategies, indicators, and news) or, you must change your Internal Data – (thoughts, emotions or behaviors) that are directly related to your outcomes. We have often talked about tools, techniques and concepts that are designed to help you to think, feel and do differently. In today’s article we will take a closer look at the thought process and the importance of not only “what” you say, but “how” you say it. In other words what are you using to carry the load of what you’re describing has a lot to do with the impact of that thought on your emotions and of course your behavior. The language that you use to describe what happened in a trade, how you managed that trade, or how you are describing the results you got from that trade has a huge influence on your emotional experience and therefore what you do. Actually, every result that you get is determined first by what and how you think. Thinking determines how you feel. And how you feel will drive how you respond. So, it is imperative that you hold your thoughts close to your vest and monitor the language you are using to describe what you are saying. This is how you begin to first make sense of and afterword effectively manage the swirl and sway of all those trading variables. Now, if you haven’t figured it out already, we are talking about “metaphor.”

Metaphor is a literary figure of speech where an image, object or story is used to represent or explain an idea and the reference helps the concept to be understood. When the markets are described, they are often referred to as “a fight between the bulls and the bears.” Or, when a loss is incurred some might talk about how it is “eating away at them” as a way to illustrate the emotions that they feel about that loss. Or, what about “trying to hit a home run” when entering into a trade – this would define your extreme intentions regarding the kind of profit you were pressing for. Each of these examples is an image or symbol and tells a story to represent the situation that you want to convey. Even though each example is only a brief phrase, they convey a lot of information. That’s part of the power of using metaphors. It’s like the picture that’s worth a thousand words, the metaphor through images and symbols tells a story; and often the story can be emotionally compelling. Here are a few more. In order to get something done you “put it in gear.” With difficult choices, you’re “staying on the straight and narrow.” You “grab the bull by the horns” when you accept a challenge. The lexicon is replete with metaphor, and it is powerful. Emotions are activated on conscious and as well unconscious levels through metaphor due to the rich symbolic association with concepts, both painful and pleasurable.

Metaphors can be really inspiring, supportive, motivating and uplifting or they can be daunting, disturbing, unnerving and destructive to your performance. You see, they are often closely connected to your core paradigms and mental models about life. They present as a mental structure that embodies your rules for living, and rules for trading. Take a look at this statement, “the market’s a thief and steals my money.” This brief phrase can be highly toxic to how you envision the markets and more importantly to how you react or respond to situations in your trading. For example, when someone says something like, “the markets out to get me” they are accepting of a notion that they are at the mercy of outside forces. What you tell yourself determines how you feel and how you feel drives what you do. Going further, when you use a powerful image rich phrase that is connected to your inner most limiting beliefs about your ability or “inability” to succeed, you are creating either a barrier between you and the results that you want or a battering ram to punch your way through to good outcomes. In order to create substantive change, it’s important to identify and reconstruct the underlying metaphors that drive your stories about you, your abilities and the markets. For example let’s take the metaphor, “I am as dumb as a rock because I lost on this trade.” If you said that to yourself, what kinds of emotions would you probably feel? Most would feel a level of anxiety and anger. Negative emotions like these don’t promote positive actions. They rob you of stamina and the ability to follow through with your rules and they rob you of getting the results that you want. On the other hand, if you use positive metaphors that are motivating they will help to establish rock-solid responses to trading situations through uplifting images and symbols that are connected to empowering core beliefs. What about the metaphor example, “I am trading with the courage of a lion?” As you consider this metaphor, take a look at how you feel. Your emotions are probably much different from the metaphor, “I am as dumb as a rock because I lost on this trade.” This is how you ratchet up your ability to create changes in your thinking. By uncovering negative metaphors and changing them you put yourself on a fast-track of doing things differently and therefore getting different results.

Change comes from facing fears, doing something differently, and getting outside of your comfort zone. But, you can’t do differently without thinking differently. Becoming self-aware is crucial to your development as a trader. You must monitor your thoughts, feelings and actions in order to begin to modify those that aren’t working for you – especially metaphors. Bringing your A-Game to the platform and doing what it takes to keep it there is what will make the difference in your performance. This is what we teach in “Mastering the Mental Game” courses. Ask your Online Trading Academy representative for more information. Also, get my book “From Pain to Profit: Secrets of the Peak Performance Trader.”

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.