Mastering Fear and Impulse in the Moment of Uncertainty - From Mindlessness to Mindful Trading

Articles on Trader Psychology by Rande Howell, Trader Psychologist




"Other traders must know something I don’t.  Why can’t I just plan my trade and trade my plan?  It seems so simple until capital risk is real – then it gets edgy.  You’re told that all you have to do is stay rational. Just keep emotions out of it and trade what you see right in front of your eyes.  That’s all I need to do!  What’s so hard about that?  I keep telling myself that no one trade is important – that this is a probability thing.  But that is not what I do.  If I could do that, things would be very different. Instead, I experience unintended drama.  Fear will shut me down.  Or I get swept away, jumping into trades that, in hindsight, I had no business getting into.  Then after I lose a few trades, my aggression comes out…I’ve got to make my money back.  I keep thinking that I’m going to turn the corner, but I must confess, trading is harder than I first imagined."  

            What is the real problem that makes it so difficult for you to stay emotionally centered while trading?  Let’s redefine the problem traders have with their performances in trading.  And get a better understanding of the problem of inconsistent performance so that the core of the problem can be revealed - so you can go about solving the real problem rather than just trying to put a band-aid on a symptom of the problem.


Every day traders walk into a trap and get blindsided emotionally. They have no idea what they are getting themselves into when they engage the uncertainty and risk found in trading.  They don’t grasp that instinctive decisions are being made and acted upon without conscious awareness – but they see it happening to them.  Often their experience prior to trading came from a world where they appeared successful in controlling their destiny by sheer hard work, a winning attitude, and persistence.  And of course, they then try to apply the same principles of winning, or prosperity psychology, to trading.  And when they do not succeed, they try harder.  Then harder.  But the harder they try to force their old winning mindset to fit their new world of trading, the more persistent the problem of consistent profitability becomes.  Traders get and stay stuck in this quandary despite their best intentions.

Based on their past success, the last place in the world they would look for solutions to their trading problems would be in their own psychology.  They feel that their mindset is an asset to their eventual success and they need to simply find and fix the problem.  Yet no matter how many toys they buy, courses they take, or teachers they have studied with – the problem of consistent profitability is still there vexing them.  They cannot shake it.  Somewhere there is a crack in their plan for success.  Emotions still get in the way.  Whether it is based in fear or aggression, emotions still hijack their performance and it costs money and time.  Only after hitting a brick wall repeatedly does trading psychology get on the radar screen of the trader.     

What You Do Not Understand Will Hurt You

Ignorance of your human and emotional nature is the fast lane to destructive trading.  Emotions are inseparable from thinking and, consequently, trading.  It is the height of mindlessness to believe they are separate.  Yet little effort is given to developing the emotions tied to trading performance.  Instead only more Left Brain knowledge is taught.  In fact, you do not have emotions – they have you.  Let me illustrate this point.  Your brain is composed of two separate spheres – the Left and the Right Brain.  And they are connected by a communications link called the corpus callosum.  The corpus callosum facilitates both sides of the brain to work together, combining the emotions of the Right Brain with the logic of the Left Brain.  When they are working together in synch, your brain functions on a high level – perfect for the demands of trading.  And what is striking about the two halves of the whole brain is that each half is about the same size as the other.  You’d think people would notice that – but they don’t. 

In the way trading is taught and practiced, only the Left Brain (center of logic and reason) is developed.  What happens to the Right Brain in trader development?  It is ignored or given superficial platitudes instead of real training.  So the mind that traders bring to trading is built from a highly developed Left Brain where knowledge is developed about theories of working with Probability.  But the Right Brain is not trained to complement the reason and logic of the Left Brain when exposed to uncertainty and risk, with no reset button. Instead, the Right Brain is pushed aside and left to the original primal programming developed in another time and place.  And therein, lies the big problem for traders who seek a stable mind to work with the uncertainties and risks of trading. You are literally asking an emotional brain, developed for short term survival in a dangerous world from another time, to stop reacting to the danger of uncertainty and risk because of your naivety.  Reality does not work this way, as your trading account will attest.  You must understand fully that one half of your Brain (and, therefore, the mind that arises out of it) is devoted to emotion.  You need emotion (not just reason) to develop the brain for engaging the uncertainty and risk of trading.


The problem is that the emotional brain you brought to trading (through no fault of its own) is not up to the task.  It is still rooted in an understanding that uncertainty and risk are bad for the survival of the organism (that is you, the trader).  It still is scanning the horizon for saber toothed tigers and other dangers that threaten survival in the short term. All that knowledge you have developed for effective trading is useless if the emotional brain being used to work with that knowledge is straight from your caveman ancestors.

            Who do you think wins when the Emotional Brain is triggered to survival instinct while your Left Brain is trying to think rationally?  It’s a no-brainer – but traders keep trying to force survival emotions into submission so that they can trade “without emotion”. Trying to force an undeveloped emotional brain to engage uncertainty and risk calmly and patiently is going to lead to emotional hijacking. Literally, the Emotional Brain just cuts off contact with the thinking Left Brain – there is no struggle.  From that point, all action is driven by primitive emotional programs (fear and aggression) while the thinking brain is simply shut down until further notice. 

Your Emotional Brain is your partner in trading performance whether you like it or not.  And it is an equal half of your mind’s engagement with uncertainty.  Probably the most important one.  Why?  Because the emotions of your Right Brain make a decision first – then the rationalizing Left Brain creates a story to support whatever your Emotional Brain has already decided.  That’s because all thinking is emotional state dependent.  This is what gets traders in trouble.  They believe that their rational self is in charge.  It’s pure deception.  Yet that is what traders are usually taught as emotional state management.  Think about the last time that a trade went against you and you reacted.  In the fear/aggression response to the trade going against you – notice the thinking that was going on.  It was supporting the emotional response of the Right Brain.  It is not being rational.  Rather it is creating a story that leads to revenge or helplessness.  Only after all the excitement is over does the reason of the Left Brain come back on-line and you can hear yourself ruminating, “What was I thinking?”  The emotions of the moment determined the kind of thinking that the Left Brain produced.

And all this is happening underneath the radar of your thinking brain.  This is the mindlessness that you have to awaken from – in trading it will rob you of your potential.  It is estimated that more than 90% of the decisions you make under the stress of trading are made by the emotional brain – with the thinking brain only making an appearance in a supporting role.  I know this is not the way you’d like it to be.  But if you can grasp that the emotional brain has this much influence over your success or failure – and it is wired to abhor uncertainty and risk – it becomes apparent that this HALF of your brain needs to be developed to work with Probability. 

This can open a huge door for you as a trader and the way you engage the uncertainty and risk of trading.  The Right Brain does not want to do what you are trying to force it to do.  And the more you attempt to force it – the more it will continue to hijack the needed thinking and reason of the Left Brain.  Even though the Emotional Brain is designed to want to be in control and to be right, it can be taught to engage Uncertainty and Risk very differently than the way it evolved.  And that is good news. 

Re-Designing the Right Brain for Probability Management

The brain and mind you bring to trading every day, when responding to the danger of uncertainty, is rooted in fear (avoiding threat) and aggression (attacking threat or opportunity).  These pathways are so etched into your neuro-circuitry that they are called the fight/flight response of the sympathetic nervous system.  It is built to respond to threats in the environment reactively and very fast by bypassing thought (or the Left Brain function).  This is just the primitive emotional programming with which all human beings are endowed.  So your brain is simply doing the job that evolution evolved it to do.  But you are not stuck with what nature gave you. 

Fortunately there is another pathway that can trigger when the brain (or the trader’s mind) engages uncertainty with real risk.  That other pathway is called Approach Motivation.  Approach Motivation is characterized by curiosity, openness, acceptance, and patience.  It is not a reaction to potential threat, but an openness to possibility.  So when the brain engages Uncertainty with the potential of loss, the Attack and Avoid Motivation of the sympathetic nervous system is hardwired to respond to the vulnerability caused by the Uncertainty.  But with training, the brain can learn to engage Uncertainty and vulnerability from Approach Motivation.  This leads to a completely different way of responding to uncertainty.  From the rarer Approach Motivation, different emotions arise from the encounter with Uncertainty and vulnerability.  Discipline, courage, patience, and clear thinking create a curious, patient mind that takes on a long term view rather than the short term survival, instinctual wiring of fight/flight.

This happens on a subconscious level - as Malcolm Gladwell described in his book Blink…in the blink of an eye.  The brain can be re-trained to shift from sub-cortical (subconscious) survival reactivity when encountering Uncertainty (fight/flight) to the Approach Motivation where both Left Brain and Right Brain are working as a coordinated team.  The vulnerability experienced as a result of encountering uncertainty and risk is simply part of the human experience.  But you can radically change the emotions that show up in the midst of that vulnerability that give rise to the mind that engages the moment - changing from Attack/Avoid Motivation to Approach Motivation.  The trader needs the Approach Motivation to develop a long term success mindset for managing Uncertainty.  This is the emotional development that traders need to embrace.  The Left Brain needs a partner so that it can deliver its promise of reason and logic.  And the Right Brain needs development so that it can deliver the emotional goods needed by the Left Brain.    

Becoming a Patient Trader Through Mindfulness

Notice the jump in mindfulness that has to be made in order to become witness to the deeper drama going on when you are trading in an environment of uncertainty and real capital risk.  Staying mindless in trading is going to keep you stuck in self-limiting emotionally reactive patterns.  Coming to a new understanding of the problem you face every day in trading can open a very new door in learning how to manage the mind you bring to the moment in trading.  The brain can be re-trained for the conditions of the trading environment.  The first step of mindfulness is noticing that the brain and mind are very different that you thought they were.  Instead of mindlessly using your brain and mind as a battering ram, you can mindfully develop the brain and mind to integrate emotion and knowledge to produce a highly effective awareness for the management of your experience of uncertainty.  Defining the real problem can help you set your trading free from the limitations you have inadvertently established. 


That very real problem is that the brain/mind you bring to trading is not going to work with the demands of managing the uncertainty of trading.  The brain wants short term control over outcome and it wants to be right – a formula for trading disaster.   You need a mind that is focused on performance in the moment, rather than outcome.  The brain can be trained to do this.  It is the trader that has to wake up to this reality.  It becomes a choice.  Every time you evaluate your trading account, it is telling you what choice you are making.  The question that arises from this reckoning is simple:  Do you choose to be right, or do you choose to be effective?  And your trading account holds the mirror of truth.

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