Lessons from the Pros

Specialty Skills

Working Against Yourself Does Not Work In The Trade

When you think about it, most of the issues that you experience with trading are moments of internal dissonance.  What I mean is that we human beings more times than not in tight situations are operating at cross currents with ourselves.  So often a trader will come to a “fork in the road” where they must make a choice; for instance giving in to an urge to move a stop or allowing the stop-loss to do its job.  These decisions happen constantly; and how you manage these internal conflicts determine your results.  Consider the following:

Trading Conflict“It’s not supposed to do that!” Carl growled through clenched teeth.  He couldn’t believe it…”And after I had done all that preparation,” he thought.  You see, the frustration he felt stemmed from the part of him that actually assumed that the trade would work.  He was trying out a new strategy that he had learned on the internet.  “Hadn’t he seen the video, and hadn’t they showed him example after example of how it was ‘flawless’” he heard his inner voice grumble.  But, even though he wanted to believe so much, part of him still shouted in his head a muted “no” even as he was executing the trade.  His anger was only matched by the confusion that clung to him like an ice-cold wet t-shirt.  Just then the confusion turned to internal contempt at the decision to do it at all.  “You idiot!” he swore at himself.  “Why would you think it would work?  Here you’ve been studying solid ‘supply/demand’ strategies for months and you fall for some internet scheme just because they showed you a few videos and said it was flawless?” Clearly Carl was highly conflicted and out of alignment.

It’s common to be conflicted, whether buying a burger, deciding on a movie, or trying to get up in the morning.  While trading it happens all too often as well, for instance, when getting caught in the middle of one of your parts saying go on move that stop before you get stopped out for a loss; while another internal voice is desperately attempting to keep you from violating one of your rules…again.  Consider the number of times you have promised that you would develop a Trade Plan, or that you would use your Thought Journal and Trade Log with greater frequency only to fail to follow-through over and over.  It’s very difficult to remain focused on what matters most when you are being pulled in opposite directions.

It’s helpful to know why conflict is so prevalent in your system and why it’s so difficult to stay on purpose and on target when the chaos presents itself.  Internal parts of you are simply programmed patterns of thinking, feeling and doing that encompass a section of your life.  These programmed patterns are downloaded from your parents and other influential people in your life from the earliest ages when significant events, positive or negative, pleasurable or painful, happened to you.    For example, a child who is told that he is dumb, and who later becomes embarrassed in the classroom by the teacher, and later still is laughed at by his peers upon making a mistake in a recital might develop a programmed pattern about his abilities.  This programmed pattern of thinking (I am not smart), feeling (anxiety associated with leaning) and doing (making frequent mistakes due to the distractions driven by the emotions) can become a blueprint of how to respond.  In other words, as he grew these downloaded programs became reinforced when similar events happened.  Actually, your personality is a mixture of different sub-personalities or parts that have “fired” together and therefore they have “wired” together thereby forming the programmed patterns.

So, veering off the planned course can become pretty easy when your parts begin to argue very different points of view.  What is important first is to identify where you want to go.  As Stephen Covey says, “Begin with the end in mind.”  What are the results you want to have created with your trading?   After you have identified the aim then monitor your thinking, feeling and doing.  However, you can’t monitor your thinking, emotions and behavior unless you are self-aware.  You must be sensitive to what is taking you out of your comfort zone because this is normally the first discernable signal that you are in conflict.  This signal is usually a feeling (like butterflies in the stomach) or emotional anxiety when you are about to violate a rule like moving a stop.  When you “feel” the signal ask yourself: What must I be telling myself to feel this way? Then wait for your subconscious to answer.  Often, you’ll be able to identify the faulty thought(s) behind the feeling or emotion, as in, “… I don’t want the price action to take me out and then go in my direction.”  At this point you can document the thought, and then design a response that is in keeping with your highest and best goals.  You are now more likely to be in alignment rather than in conflict.  After documenting this process over time, programmed patterns will emerge.  As they appear you can confront the thinking, feeling and doing one issue at a time.

Most people live life by default, from unconscious incompetence (you don’t know what you don’t know).  The successful trader is prepared to design his or her responses and avoid the knee-jerk reaction by documenting the responses that are rendering unwanted results.  It takes diligence to stay on track, but the more you document the conflicted thinking the less intensity and power it has to bring up negative feelings and emotions.  You’ll begin to decrease the chatter from the ego-driven parts that are causing the veering and you will concurrently increase your supportive internal dialogue.  Once you start doing that you’ll be closer to alignment; that is, having your parts go in the same direction and for the same goals.

Your A-Game is dependent on your congruency.  To have your best available in the trader trenches is required for consistent success.  Half-hearted attempts at remaining focused will only leave you vulnerable to chaotic unconscious conversations that will lead eventually to bad decisions.  This is what we teach in Mastering the Mental Game Online and On-location; that is, how to bring your highest and best trader to the trading platform.  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.