Mastering the Secret of the Patient, Disciplined Trading Mindset

Articles on Trader Psychology by Rande Howell, Trader Psychologist



You got it – with all that training and knowledge gained, you are poised to achieve your trading dreams.  You know this stuff and you work hard.  You are ready to win and grow wealth. Confidently you put money on the line.  Then, WHAM, when the money is real, you hit the brick wall again, again, and again. Suddenly your trading mind is hacked and you spin out of emotional control, again.  Trying harder next time simply does not help.  Despite your best efforts, something is missing that blocks you from achieving the success you know is possible.  But nobody is talking.  And maybe, just maybe, you do not want to hear that the problem is you and your secret, primitive brain.

There is a gap between your dreams and the reality of trading that you did not know is there.  Nobody told you how to deal with your emotional nature and the brain on trading.  And your brain refuses to see what it does not want to see.  It’s the tight-lipped secret that nobody (including you) wants to talk about.  Except those people who really, really want trading success.

The Secret to Mastering the Trading Mind

No matter what you have been told, the brain/mind that you brought to trading CANNOT bring you success in trading.  In fact, it will lock you into failure.  For the success you are seeking, you will have to rebuild the brain/mind you bring to trading against the will of your survival brain.  And that, if you are motivated, can be done!  The brain is built for short term survival and needs to feel like it’s in control (which it is not while trading).  And it is freaked out by the Uncertainty, risk, and speed of day trading.  You experience this as fear or aggression in your trading that takes over rational thinking in moments of stress.  This will not change with experience, trying harder, or trying to exert control.  Your brain has to be re-trained.  

Here is the problem though.  The more evidence that you give your brain that its old ways are wrong, the tighter it will cling to the old beliefs and resist embracing new empowering beliefs.  This is called cognitive dissonance and is based on primitive limbic learning.  This is the struggle between your ancient survival-motivated emotional brain and your new thinking brain.  Fortunately, if you can get your brain unstuck, your emotional brain can be developed to engage Uncertainty, risk, and speed from a patient, disciplined response rather than the reactive response so common among traders.  This is the very gap that has to be bridged for you to develop the mind that trades well.  And it can be done.  You can learn how you how to retrain the emotional brain so that it is emotionally disciplined when you face the Uncertainty, risk, and speed of trading.  All that trading knowledge is useless until you master the emotions of trading.  This is the door to success that few open.

Emotional Learning Is Different from Rational Learning

We like to believe that we can make effective change happen by applying logic and reason to our problems.  And when we have the logic right, then change will happen because you think that your deepest beliefs can be changed by reason.  This sounds true, but it does not work this way.  As an example, take the logic of “anything can happen at any time” or “no one trade matters – keep exercising your edge and it will work out”.  This logic makes sense to you.  It seems true until you try to apply it in real time, with money at risk, while you are making trading decisions.  The logic of beliefs breaks down in the face of the powerful underlying emotional beliefs that drive the brain to act in favor of short term survival instead of long term benefit.  Beliefs about your capacity to manage Uncertainty become locked in place and are highly resistant to change no matter how much evidence to the contrary is presented to the emotional brain.

Emotional beliefs are created when the limbic brain engages the perceived threat of Uncertainty.  It suddenly feels vulnerable to the perceived danger.  And it quickly finds a solution to the problem, usually by aggression or fear, and then locks that solution into the brain’s automatic emotional responses.  Now, when the brain encounters a situation that generates Uncertainty, it has learned a solution to dealing with that threat that fires automatically – long before the message gets to the thinking centers of the brain.  Thinking is hijacked so long term thinking is simply not possible in this highly charged moment.  Instead, tried and true limbic learning triggers for short term survival solutions.  Logic and Reason never entered the picture.  You experience this every time you plan your trade, then in the midst of stress, you CANNOT trade your plan as logic dictates.  Instead, you fall back to primitive beliefs that drive your behavior under the pressure of stress and Uncertainty.  Logic is simply hijacked in the face of Uncertainty.

The Emotional Belief activated and took over the body and brain’s response long before the thinking brain had a chance.  Meanwhile the trader is still trying to force the logical belief “no one trade matters” onto a limbic system that “believed” it was under attack and needed to act for its very survival.  When you froze at an entry point and could not pull the trigger, you experienced the power of emotional learning running slipshod over logical (but very shallow) beliefs.  Or if you have felt attacked by a trade going against you and feel you need to fight your way out of the situation, throwing good money after bad, you have felt the aggression that the emotional brain is capable of when in survival mode. 

Then, like a thunderstorm, the emotional learning quietens down (after all the damage is done) and the thinking brain comes back on line – and you are (again) baffled by your illogical behavior.  You never saw the short term survival bias coming.  And once it left, you are left wondering – what just happened?  Was that really me that acted so irrationally?  I’ll do better next time.  I’ll go over my logical and rational affirmations again and practice my mental visualizations so I’ll be better prepared next time.  That way my emotions will not get in the way of my need to stay logical when I trade.  This is how traders deceive themselves all the time. 

They double down on the logical solution again and the emotional brain gets more resistant to changing its survival beliefs because the trader is trying to force-feed logic and reason down the emotional brain’s throat – which only makes the emotional brain cling to its survival beliefs even more.  This is where traders get and stay stuck.  By not learning how emotional learning works, the trader does not have a clue about how to solve the problem they are experiencing.  Trying to be logical and approach emotions through reason seems so right, but is so wrong.  So how do you work with emotional learning so that beliefs can be changed at the level of emotional response to uncertainty rather than holding beliefs that emotions can be changed through logic?

Waking Up to Emotional Reality

Your Emotional Brain evolved millions of years before the Thinking Brain began to develop in human beings.  So emotions have a huge head start over thinking.  And the relationship between emotions and thinking is even more complicated than you might imagine.  Emotion and Reason work together – with reason serving emotion.  In fact, your reasoning ability is really more about rationalizing.  The Thinking Brain rationalizes a story to support what the Emotional Brain has already decided.  It will concoct an explanation (with little or no evidence to support it) that seems true - if only in an emotional way. 

The more you push against the beliefs of the Emotional Brain, the more insistent the rationalizing Thinking Brain will become in its support of the prevailing emotional belief.  Even if there is no evidence to support the emotional belief and there is only evidence that shows the emotional belief as wrong – the Thinking Brain will make up evidence (then stick to the fabrication as true) so as to support the prevailing emotional belief.  It is this relationship between the Thinking and Emotional Brain that makes trading such a difficult endeavor in which to work successfully.  The final arbiter of success in trading is the health of your trading account.  No matter how many fabrications the brain makes up to feel certain about its rightness, the trading account busts the age old relationship of confirmation bias and is highly resistant to changed beliefs.  The buck truly stops at the trading account.  It is also why so few people ever become successful in trading.  They cannot get past the brain’s insistence of being right – even when the evidence shows that the belief is wrong.

But why won’t the brain admit that it’s wrong and develop more effective beliefs for managing Uncertainty?  Because it is a brain seeking short term solutions to adaptation and survival – this is its prime directive.  Thinking is simply a neurological behavior that supports this primitive motivation.  It is not independent of the brain nor its emotional background.  It is this very bias that the trader has to overcome to develop the coveted Probability Based Mind. 

The place to start is with understanding emotion from a biological and evolutionary perspective.  Emotions are not psychological.  They are biological in their nature and they take over psychology when exposed to stress, risk, and speed of interaction.  A more accurate definition of emotion is:  biological action potential (BAPs) that coordinate activity between the organism and the environment. By definition, if there is a change in status in the environment of the organism, an emotion is automatically triggered into responding to the change – thereby maintaining a survival dance between the organism and its environment.  The moment that an emotion shows up on the scene, the biases inherent to the emotion coerce logic and reason to create alibis to support the very bias that needs to change for improved performance.  It’s a Catch 22 moment.

Now let’s add one more element to your understanding of brain, emotion, and thinking.  Your brain has a great need to control and when not in control, it experiences vulnerability, which plunges it into fight/flight.  This is the dance of survival being played out right under your nose as you trade.  In trading, you inadvertently activate this fear of losing control every time you risk capital to the Uncertainties of the market.  Add the speed of day trading to the mix and you have a perfect storm.  You have a brain that wants control, but cannot have it – which is already going to set it on high alert.  Then if you add risking capital to that, your ancient emotional brain perceives it as risking your life.  And it is happening so fast – speed.  This is the perfect storm that trading presents to the emotional brain.  No wonder your rational self is hijacked so easily when trading.  You are duplicating the dangerous world for which your emotions adapted you in order to survive. 

You have created a perfect replica of the caveman’s dangerous environment right in your trading world.  And it is on all-alert.  This is the problem that has to be solved if you are going to adapt your brain from its survival based biases and assumptions that precede thinking to the Probability Based emotions that give rise to the disciplined mind in the midst of ambiguity.

It Starts with Emotional Regulation, Then Mindfulness

Until you are able to manage the intensity of the survival emotions in response to Uncertainty, nothing can change – the emotional responses are locked into neural pathways that are reactive in nature.  Trying to force change by sheer willpower only strengthens the power of the primitive biases that drive the perception of the trader.  Regulation of emotion can de-fang this process.  By calming the emotion down BEFORE it hijacks the Thinking Brain, a door opens to the possibility of change.  When you learn to regulate emotion, then Mindfulness becomes the tool that lets you explore what performance beliefs are being activated to generate the emotions that trigger when Uncertainty and risk are engaged.  

The development of Mindfulness allows the trader to step out of his or her biases and implicit beliefs that drive limbic learning.  This is a big deal.  Imagine a time where you thought to yourself – “What was I thinking?”  Now imagine being able to discern what you were thinking when your trading mind was hijacked.  This is a powerful skill.  Suddenly you are able to see what you have not been able to see – the hidden biases of the primitive brain steamrolling your Thinking Brain.  Every trader that seeks to build success in trading is going to have to master this tug-of-war going on in his/her brain.  Learning how the powerful survival instincts of the emotional brain operate and influence (hijack) rational thinking is the game changer. 

Understanding how the Right Emotional Brain and the Left Thinking Brain work together to produce the Probability Based Mind is essential.  Otherwise the biases and implicit beliefs of the survival oriented Emotional Brain stays a secret to the trader.  Emotional Regulation and Mindfulness are the essential skills needed for adapting the brain and mind for performance in trading.  You become designer of the mind that trades rather than drifting in the mind that was shaped by evolution and natural selection.  The potential in you is there.  It DOES have to be developed.  Come join us.  Learn how to develop the trading mind and bridge that gap between your dreams of success and the reality of trading.

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