by Rande Howell
David had never known fear he could not conquer before now. Both as a competitive karate champion and a business man, he had controlled his fears – not allowing them to get in the way of victory. David was a very successful, “large-and-in-charge” executive. There was no mountain he could not climb and no situation he could not conquer. By sheer will power and a commanding presence, he could set a goal and make it happen. And he had the success to prove it.
He had sold his business, and, with a large amount of cash he was ready to attack his next venture — trading. He believed that all he had to do was to learn a methodology and he was ready to take on trading. In his mind, trading was just another challenge to master.
Three years later, he had hit a brick wall. He was not losing much, but he was not winning either. Instead, David was losing his nerve once he entered a trade. After entry, he often became so frazzled with a trade initially bouncing around that he lost his nerve and would bail out on a trade before it could refresh.
This aspect of the uncertainty, so common to the trading world, was an alien concept to him. He had always been able to conquer doubt. By sheer will, he had forced his way to success. But trading was a very different world, with different rules, than the world he knew. David saw the handwriting on the wall. It was time to re-tool his skills.
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A Need to Control Uncertainty
David’s problem is that he has been successful in other domains of performance. He is so comfortable with his belief system (which had, after all, produced success in one area of his life) that he is now oblivious to what produces success in trading – particular managing uncertainty. And it is a problem rooted in both his biology and psychology.
David’s brain, like any brain, is going to avoid chaos or uncertainty and will organize the mind to seek certainty as a way of ensuring survival. This is called adaptation. Once the brain locks in on a successful strategy for creating certainty in a world of uncertainty, it habituates the solution in a self-fulfilling pattern. These hard-wired patterns become our beliefs from which our psychology arises.
Listen to David as he explains his Type A Personality:
“My wife calls me a control freak. And I do need to control things. For my entire life I have felt that I have to be in control. And this attitude worked. I thought it was me, but I have learned that this need to control was the way my brain adapted my sense of self to the circumstances of my life.
When I was growing up, I had to be in control. After my parents divorced, I lived with my mother and we were hard pressed to keep a roof over our heads. Mom worked three jobs and I was in charge of the house, and my sister, by the time I was eight years old. If I had not been in control, things would have fallen apart. And that was not going to happen.
It’s these very traits that formed me. When I left home, it was just natural for me to be in control and to run things. I had a gut sense of how to manage and overcome challenges. This served me well until I began to trade.”
Biology Meets Psychology of Trading
David’s brain adapted him to successfully negotiate the difficult circumstances of his formative period. This adaptation of self, his predisposition, was a perfect set-up to become a successful executive and businessman. His control-centered Type A Personality had served him well in business and competitive sports.
Here’s the glitch, though. The pattern-producing brain, always biased toward creating the feeling of certainty, had created pre-conditions that were counter-productive in the world of trading. In trading, there is no controlling uncertainty by using sheer willpower. Rather, a successful trading psychology is built around the management of uncertainty – not its control.
To become success in the domain of trading, David (and all traders) must build a new psychology where uncertainty is at first tolerated and later managed. Because your brain is mandated to create a feeling of certainty out of the uncertainty of life, a trader will have to build a new psychology intentionally. Your brain was never built for trading where the trader understands that he cannot control the outcome of the markets – he can only control how he responds to the market’s action. This is where there is a great divide – between the pre-disposition of our brain’s desire for certainty and our mind’s need to manage ambiguity.
David developed his psychology by being born into a particular history and adapting to it successfully. The brain will always lock in this success as self-fulfilling pattern. It then becomes the way our mind perceives the world. For traders who refuse to change the way they perceive ambiguity, they will always fear uncertainty.
This is David’s dilemma – giving up the illusion of control. His Type A Personality has been a very successful adaptation – so it is hardwired into his neuro-circuitry as a self-belief. Yet this belief that the outside world can be controlled and made to conform to your vision does not work in trading in the markets. Trading requires a very different emotional and mental disposition. It requires that you develop a mindset that allows you to take what the markets are willing to give you.
Reconstructing a Mindset
David is in the process of re-tooling his mindset. He is moving away from trying to control events (so successful in his previous career) and embracing a mindset built to manage uncertainty. What he has come face to face with is his fear of uncertainty. He calls this, “the glitters”. The environmental pressure he grew up in was all about controlling the potential of chaos to destroy his mother’s home. Later, as it became the shaper of his psychology, it evolved into a generalized need to have the power to force things to go his way. It is this fear of uncertainty, and the way a trader deals with ambiguity, that has to be re-understood so that a more effective mindset can be developed for trading.
As David embraced emotional regulation training, here is what he is now saying:
“Focusing on my breath during my trading the last few days has definitely helped me keep my wits about me, but I can certainly feel the fear response trying to take over so I know I have lots of work to do! I see that when I enter a trade, I am no longer in control. I can’t make it do what I want. I am seeing my need to control comes from how I learned to manage uncertainty. Once I experienced uncertainty, it was a short ride to my fear of loss of control. I can interrupt the pattern from taking control of me now. But I’m a long way from being comfortable with not having control over external events. What I am learning is that I can have control over how I respond to the uncertainty of not being in control. Once you’re in the trade, it requires a different mindset.”
Learning to interrupt the arousal of anxiety by breathing and relaxation, David is now acknowledging the honest fear behind his need to control. With his biology of fear calmed down, he is learning to soothe his fear rather than push it away. He no longer is beating himself up when he triggers to fear. He is recognizing that he is simply bringing his learned dispositions that have been on automatic into his trading. Now when these pre-conditions trigger, he has the opportunity to re-train them.
He is learning both on a psychological level and a biological level that fear, like risk, is to be managed, not controlled. He watches for the tell-tale signs of an emotional hijacking – eyes bulging, tense muscles, breath held, and a clinched fist. He interrupts this bio-emotional arousal before his mind is hijacked. He then soothes his fears by talking himself down. And he acknowledges that, once he enters the trade and takes off a chunk of the risk at the first ping, he is not in control anymore. He had control until he pulled the trigger. Now his job is to manage his reaction to uncertainty. But my staying calm, his mind is no longer being overwhelmed by fear when he does not have control of outcome. He takes on the mindset of a defensive coordinator rather than an offensive coordinator – which is far more comfortable.
He is learning to shift psychological gears from the kind of mindset that evaluates set ups that give him an edge to a mindset that manages the emotional turbulence that can come when capital is actually at risk. In the first mindset, discipline and impartiality are needed to spot the opportunity and to act on it. In the second mindset of managing the trade once capital is committed, a heavy dose of self-soothing is required to keep the uncertainty of managing the risk from snowballing into fear or panic. This is the intersection where trading, biology, and trained psychology meet. It did not come natural for David, self admitted Type A control freak that he is. But, as he discovered, he is trainable.
The skill sets he learned included emotional regulation, mindfulness, and internal dialog management. He also had to re-discover and develop a self-soothing aspect of himself that he had never used before. He discovered that self-soothing was a powerful internal strength that every trader needed to develop to keep his mind thinking clearly during the ambiguous times of riding the trade. By learning how to do this, his trading is far less stressful and more profitable now.
