Developing Real Emotional Discipline for the Challenges of Trading

Articles on Trader Psychology by Rande Howell, Trader Psychologist




Why Does Discipline Break Down in Critical Moments?

     Just try to tell or force your emotional brain to stay calm, cool, and collected while facing something beyond your control and potentially dangerous.  You know what this feels like – you feel it every day when you risk capital.  Despite your conviction to be right, you know that the outcome of the trade is uncertain.  Under these conditions, try to exercise your emotional discipline to maintain your rational mind.

     See yourself in the situation.  Get into it for a moment.  Let a memory bubble up when discipline broke down.  Take it in.  Focus in on the memory.  Feel it.  You steel yourself up, ready to fend off any emotion that surfaces.  You’re in control, right?  Force it to your will.  At first you’re okay, for you have been taught to control emotions.  Feel the emotion build as you resist it.

     Then something happens.  Start with the activation of the emotion.  Push against it trying to stop it.  Feel the emotion revving up.  Notice what happens in your body.  Where do you feel the muscle tension?  In your shoulders?  Neck?  Gut?  Notice your jaw.  What sensations do you feel in your body?  Any queasiness?   Is there a lump in your gut or throat?  And what about your breathing?  Are you holding your breath or breathing rapidly?  Notice how real it feels.  Let it get stronger.  You have just activated the emotional brain and its primitive survival instincts.  Notice how it sweeps reason and discipline away.

     Not only are you experiencing the activation of an unwanted emotion (fear or greed), you are also feeling it grow (all those biological markers described in the second paragraph) – getting ready to spring into action and take over your mind.  That “springing into action” (when you feel the emotion and its urgency to act) is the chemistry of the emotion surging into your body and brain, preparing you to act NOW without the need for thought.  Reason has now been blown out of the water.  Thinking is now dominated by fear or greed rather than reason, which is needed for successful management of probability. 

     And your mind – what’s happening to your mind?  Is it racing?  Are you falling into self-doubt?  Do you have an urgency to act right this second without thinking it through?  Or has your mind frozen?  Maybe your mind has become fixated and developed tunnel vision so that you don’t have access to your trading rules at this critical time.  Your mind has become slave to the very emotions that you are trying to prevent.  And now, in the midst of this emotional hijacking, you act from the fear and/or greed that you tried to stop, rather than the reason and logic needed for success in trading.

Misunderstanding Discipline

     How many times has this happened?  It’s not that you haven’t tried hard to be emotionally disciplined in your trading.  Trying hard is not the problem.  The problem is the way you understand discipline.  Misunderstanding how to achieve trading discipline guarantees that you will continue to lose emotional control of your mind when you face the challenges of exposing yourself to trading’s uncertainties.  You pit an emotional brain’s default programming of needing to be right, needing to be in control of outcome, and needing to predict with certainty what will happen against the reality of not being in control of outcome and you have a formula for emotional hijackings.  The truth is that your emotional brain hates randomness and is wired to predict outcome because it craves deterministic outcomes – which are not possible in trading.

     Your notion of discipline is trying to force what cannot be done – trying to predict patterns that make you feel confident in being able to control outcome.  But no matter how many indicators you have, how great the computer programs are that you use, or what other special knowledge you have access to, it is impossible to predict outcome out of a pattern.  A very different kind of discipline is required to prepare you for the management of probability when the mind you brought to trading craves determinism.

Why Does Discipline Break Down?

     In seeking the answer as to why discipline breaks down in trading, start with your misunderstanding of emotion and its relationship to thinking.  Emotions are not psychological in nature – they are not in your mind.  Instead, they are deeply biological in nature.  Their connection to thinking is that they take over thinking and cognition.  That is the point that is missed.  People are taught from the cradle to separate emotions from the reason of thinking.  In this view, rational thinking (what you want to have while making trading decisions) represents the absence of emotion as a component of cognition.  How many times have you heard, “If only my emotions didn’t get in the way, I would be able to think clearly and make better decisions while trading?”

     This statement sounds so self-evident.  Who would not want to think rationally without emotions while trading?  It would make life so much easier.  By force of will, you keep trying to control your emotions as you trade by pushing them away, and/or by denying them – this is the standard practice of discipline as it is currently taught in trading.  Yet the emotions keep erupting through this notion of discipline and compromise the rational mind.  The more you resist dealing with the emotion effectively, the more it persists. 

     If you understood emotions – and your emotional nature – better, you would see the fallacy of this approach.  The very discipline you are trying to subject your emotional nature to while trading is exacerbating the very problem you are trying to solve.  Remember, the more you resist the emotion, the more it persists.  Controlling emotions (particularly primitive fight/flight ones) by force is not going to work.  What is it you are missing about the nature of emotions and their relationship with you that could open a very different door of understanding in working with them?

The Nature of Emotions and You

     First, emotions are biological.  They were there long before the thinking brain ever showed up.  And as the thinking brain evolved, emotions grew in coordination with the seat of thinking – the neocortex.  Emotions are biological action potentials that coordinate activity between the organism (you, the trader) and the environment (the markets).  At the core of emotion’s purpose is the need to keep you alive in the environment in which you dwell.  And losing capital is seen as a biological threat to the emotional brain.

     Just a few short years ago our cavemen ancestors lived in a very different world than the one that we now inhabit.  It was dangerous and he/she had to have their wits about them to survive.  They were not endowed with the powerful thinking brain that we now take for granted.  Instead they had an emotional brain from which, over time, the thinking brain evolved.  So our early caveman ancestors had to learn to survive before the advent of thinking as we understand it.  And the emotional brain was there to adapt us to the dangerous world back then.  Originally it operated without the component of thinking that modern man takes for granted.  This is the same emotional brain that you bring to trading today.

     The lesson here is that primitive survival emotions evolved to respond to life threatening situations before thinking ever came on line.  The emotion will fire based on primitive survival instincts rooted in fear, aggression, and approach motivations. When our cavemen ancestors faced a dangerous saber toothed tiger, in the blink of an eye the emotion activated, built up a head of steam, chemically flooded into the body, and put the body in motion – all without thought being a factor.  This is why thought is mostly by-passed today when an emotion fires while you trade with capital at risk.  The thinking brain was not party to the original construction of the brain.  And if the emotional brain deems something is threatening in its environment, it fires and acts WITHOUT thinking having a part in the decision.  This is exactly what your survival instincts were designed to do, and they did it well for the environment to which they adapted.

     When thinking did show up much, much later in the evolution of humans, it adapted to serve emotion.  This is where you really have to make a turnaround in your understanding of emotion and cognition if you are seeking success as a trader.  Your thinking is totally dependent upon your emotional state, for thinking produces explanations or narratives that support what the emotional brain has already decided. 

     This presents a dilemma in trading.  The emotional brain cannot tell the difference between biological threat and psychological discomfort.  Every time you experience the challenge of putting capital at risk with an uncertain future, you are signaling the emotional brain that a threat to its well-being is at hand and action needs to be taken immediately.  The survival instincts of the emotional brain (fight/flight response) take over the functioning of the trading mind.  Instead of making decisions devoid of emotion with a rational mind, you are making decisions with a mind consumed by survival based primitive emotions.

     Every time you engage uncertainty and experience vulnerability, you are reawakening this instinctual emotional process.  There is no escape from it, just as there is no freedom FROM emotion.  However, with applied effort you can retrain the way the brain responds to uncertainty so that you have freedom OF emotion.  Along with that freedom OF emotion comes a redefined notion of discipline.

Emotional Discipline Redefined

     The standard that defines conventional notions of discipline is centered on being emotionally tough, being able to “take it”, and forcing your will upon emotions to control them.  This approach may have been successful in other areas of your life, but generally produces disastrous results when employed in trading. But if we begin examining discipline from an Emotional Intelligence perspective aided by an enlightened understanding of emotions and cognition, a very different understanding of discipline becomes possible.

    In my work I define discipline as the capacity to maintain order under pressure.  But how do you do that?  First, and foremost, you stop denying emotions and, instead, start turning toward them – no matter how uncomfortable that may be initially.  Remember, emotions are not a choice.  They are a part of the very fabric of your capacity to respond to challenges in your (trading) environment.  And if you accept that the default programming of your brain when exposed to uncertainty is a felt sense of vulnerability, emotional discipline is about how you respond to your vulnerability in the face of uncertainty. 

     Traditional discipline is about getting tough and forceful in the face of vulnerability.  You are not listening to the needs of your vulnerability for reassurance and calming down.  Instead you are trying to force the emotion into submission.  And the more you resist, the more the emotion persists until it becomes an enraged 800 pound gorilla creating pandemonium in your trading mind – and your ability to perform under pressure.  This approach does not work, no matter how “right” it feels.  (The trading account is the final arbiter of effective emotional and mental discipline.)

     A more emotionally enlightened way of working with emotions (particularly fear, aggression, and greed) is to notice them and turn toward them, rather than denying them.  It is this “turning toward” the discomfort of a negative emotion that turns discipline into a new direction.  In turning toward the emotion, you acknowledge it and the information it is trying to tell you.  The first order of business in this new model of discipline is to disrupt and then calm the emotion BEFORE it works up a head of steam.  That is done through emotional regulation – diaphragmatic breathing and muscle tension reduction.  Next, instead of yelling character assassinations at yourself in the name of discipline, you self-soothe your fear instead.  You use calming language spoken from a state of self-compassion, and the fear responds to this approach by lessening its intensity. You will find this a far more effective way of “maintaining order under pressure”.  This is the new discipline in action.

     Discipline is also defined in my work as the Ruler archetype.  Discipline is the emotional program in the emotional brain that is motivated to “maintain order under pressure” (essentially lead) and the Ruler is the voice of this emotional program in the mind.  And it is the one that needs to be activated and brought into working awareness to bring forth a disciplined state of mind.  I am going to give you an example of this force (or potential voice) that lives within you.  What follows is a short article I wrote for another publication that illustrates discipline as the Ruler archetype. 

The Masculine Journey: Guest column by Rande Howell

     Men certainly face challenges defining their masculinity in this modern age. Gone are the traditional avenues of historical masculine expression that men simply fell into without having to think. They are no longer the sole bread winner for the family.  A woman’s authority of her financial freedom has cut much of the sense of the traditional power of men in the family unit. And now many men find they have female bosses that shock their sense of masculine tradition. For many, this age of uncertainty has brought confusion to the quest for masculine identity.

     But all is not bleak. In that confusion there is also the birth of new possibility for defining the core of masculinity. Instead of falling into roles, without thinking, that define what it is to be a man in this modern age – a different exploration can be opened as a possibility for defining the attributes of positive masculinity. What now becomes possible, when no longer blinded by the traditions of history, is getting at a deeper sense of a man’s inborn masculinity. 

     This is the archetypal journey into masculine nature. Let me explain by an example. In a family far, far away, a boy was born. That boy grew up under the influence of a violent father. That boy, on a deeply primitive level made a decision that would define his masculinity for years to come. He declared he would never be like his father. He would never abuse power. The one thing he swore was that he was never going to use power to feel his authority as a man. Instead he would use diplomacy.

     This unconscious strategy worked for many years until he and his business partner came to near blows in their business. Instead of protecting his turf, he diplomatically averted the powerful struggle by selling his share of the business. He became a rich man due to the sale, but there was an emptiness to it. There was a disturbance deep down inside of him that kept growing until it erupted from his unconscious mind to his conscious mind one night.

     It happened in a dream. In this dream he found himself right in the middle of a pride of lions in the middle of the night. He was scared, but also together enough to realize that he needed to escape before the lions noticed him. As he tried to sneak out from their midst, the lions spotted him. He began to run and the lions began to run after him. Now he was running for his life.

     One lion in particular caught up with him and put a paw on him to stop him. Bleakly, he turned to look the lion in the eye bravely. The lion looked at him and said, “We are not here to harm you. We are here for you to claim us.” The man bolted up from the dream while the lion was still speaking. And he wondered, “What on earth was that?”

     Over time the man realized that by forsaking his father’s form of masculine power, he had also pushed that part of himself out of the working awareness of his mind. Now the interior power of his masculine soul was knocking on the door of his tidy understanding of being a man. What he also realized is that masculine power has a dark side as well as an empowered side to it. In his formative period he had tasted the dark side of masculine power and decided that he wanted nothing to do with masculine power. 

     Looking through new eyes, he realized that the power within him had never gone away. It had only gone underground. And now, as a mature man, he was ready to reclaim this aspect of his manhood. He recognized that the power rooted in his masculinity was a gift far beyond his reckoning. His job was to prepare his mind and soul to accept this gift and claim it as his own masculinity.

     Masculinity is a journey. Often the traditions of history become a prison that binds the inner man – much like the man in this true story. Yet, now, in this moment of history, there is a unique opportunity to tap into the richness of claiming a deeper sense of your inherent masculinity. The inward man will seek to grow and claim the power. That power ultimately is a gift from God and for which you are steward. Do you hear it speaking to you?


     The Ruler archetype, or emotional program, is simply part of our inheritance as human beings.  Learning to awaken it and bring it into working awareness is the task of developing a new vision of discipline.  Discipline, as it is developed, comes from the inside to manage the mind that engages uncertainty.  It is always present.  It is you who has to become aware of the power of discipline living within you. 

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