Most traders spend a large amount of time fighting themselves on the path to trading success, often without fully realising what it is they are fighting against.
When a run of bad trades erodes their trading account emotions are high and expectations get lower and lower. This is why for so many new traders scalping is the easiest way to experience at least some trading success.
So what are our trading minds fighting aginst and why should every trader understand this?
Understanding how your brain works goes a long way to understanding yourself. Becoming congruent with yourself on all levels is a core tenet of trading psychology. Self knowledge is the power which provides you not only with confidence, but it gives you a feeling of empathy for yourself and the many mistakes you will invariably make during your trading career.
True trading mastery does not arise from forcing yourself into a trading straight jacket, but rather it arises from an in depth understanding of yourself and using the two sides of your brain, the emotional side and the analytical side in harmony with each other.
The brain works like a muscle
In the beginning we learn by repetition. Once a certain behaviour is deeply engrained neural pathways are established a behaviour becomes automatic. We do not have to consciously think about it any more. This is why repetition is a useful tool to establish new trading behaviours. Developing a sound trading mind set through repetition of specific trading habits can be of immense value , particularly for beginning traders. The brain works like a muscle: The more weight you practice lifting the stronger it gets.
However, the problem arises when traders have acquired poor trading habits, like overtrading, exiting positions too early, poor risk management, bottom picking, or picking market tops, to name but a few. Once established in the trading mind poor trading behaviors a difficult to change.
This is so, because the brain will automatically repeat a behavior, once it is established. This is true even if a trader becomes aware that a particular behavior causes trading losses. For example, if you have made money in the past picking market bottoms or picking tops your brain creates the memory of a positive emotional charge. You will repeat this behavior because your brain now sees bottom picking or top picking as a valid trading strategy which created a feel good emotion even though from a strategic trading view point this strategy might not be a good trading habit to establish.Once a habit is emotionally anchored in your trading mind set it will take more than awareness to change it.
Understand how your mind works, and stop blaming yourself.
Fear of losing causes traders to exit positions too early and the resulting feeling of safety creates an incorrect anchor which is strengthened each time you repeat this habit. The point is this:Your brain will always seek to protect you. The untrained trading mind does so by oftentimes making incorrect associations, thus lulling you into a false sense of security.
This is the real reason why trades find it difficult to break poor trading habits.
The only way to get out of the fix is by working on your trading psychology. Spending time on improving your trading psychology is an essential part of your trading plan. This goes for the beginning trader and experienced traders too.
Consistent trading success is first and foremost a matter of developing cognitive awareness.
Instead of being immersed in your emotions, thoughts and feelings you can learn to become an impartial observer of them. As an old Buddhist wisdom says: “To the calm mind the entire universe unfolds.”
A calm trading mind sees more of the markets, while fear, impatience, impulse trading, or over analysing the markets create mental static. Mental static causes anxiety and disconnects you from yourself. You begin to feel ungrounded and your trading goes off track. The intuitive side of your brain stops functioning and the old part of the brain, the amygdala, the seat of raw emotions and fight or flight responses take over.
Time spent on clearing old conditioned behaviour increases your cognitive awareness and will be reflected in greater trading success and joy of trading. You will fee better about yourself in general too, I promise you as much as someone who has walked the path and learnt along the way.
