Train the Brain: Build a Patient Disciplined Trading Mind from an Emotionally Reactive Brain

Articles on Trader Psychology by Rande Howell, Trader Psychologist




It’s the trader’s emotional roller-coaster ride, and it’s confounding.  You have only one head, but you have two very different brains – the Left and the Right Hemispheres.  And in trading, they are most likely working counter to one another - to your detriment.  They both bring totally different attributes to the table of the trading mind, where one is prized and the other is treated like an undesirable relative you cannot avoid.  In modern society the logic and reason of the Left Brain is preferred and encouraged, while the emotional and intuitive centers of the Right Brain are discounted and ignored.  This is where the trouble begins, because both work as a unit to shape the world the trader sees.

The problem is that modern trading is taught as if the Left Brain (home of Logic and Reason) are the only allowable attributes of the brain to be used in the analysis and execution of trading.  (Only Left Brain thinking is allowed!)  In fact, the influence of emotion and intuition from the Right Brain is intentionally pushed to the margins of awareness in the hopes that the trader can operate in a world of pure logic and without the influence of emotion on his/her decisions.  (If only this could be done.)  Most traders believe that emotions are to be controlled or left out of the calculus of the trading mind.  (“Trade without emotion” or “leave your emotions at the door”.)  Look at trader education courses and you will see relevant emotional education left out of their coursework, or highly marginalized.

Is this trading paradigm working?  No, it never has.  Traders with great knowledge, logic, and reason are constantly trading from a brain and mind sabotaged by fear of some sort or by aggression that leads to over-trading, revenge trading, and impulse trading.  There is a serious problem – one that just about everyone is trying to deny.  Despite the desire to ignore the impact of emotions on the quality of the trading mind (to ignore that we have one head with two brains) the lack of emotional intelligence in traders’ skill sets keeps raising its ugly head every time the trading mind is hijacked.  It’s not going to go away until you learn about your emotional nature – and then learn to work with it.  Are you listening?

What Does One Head: Two Minds Mean to Trading Performance? 


While you stare at charts evaluating potential and then act on that potential, your two brains are on the job, whether you notice or not.  Your major focus is almost certainly on the one you are familiar with, which you believe represents who you (as a trader) really are – the Left Brain.  All that charting, all that evaluation, all that understanding that you are working with is right out of your friend – the Left Brain, your partner in trading.  You are so comfortable with this trading partner that you probably do not even notice it working, crunching the numbers, and living in probability land.  It seems so natural.  But that is only half the story.

The other brain – your Right Hemisphere – is also in operation.  But most of the time your Emotional Brain is behind the scenes doing its job – looking for threats and opportunities on the horizon – but the main focus of its work is below the threshold of your awareness, where over 95% of your decisions are actually made.  You just do not notice the instinctive process.  And because the emotional brain does not “think” the way the Left Brain does, you are not accustomed to noticing that it is around, doing its job in the background.  It’s just you and your Thinking Brain doing the job of trading.  Adding to the phenomenon of the work of your Emotional Brain simply falling into the background of your awareness, the thinking component of your Left Brain is highly coveted and desired in today’s world.  So the thinking comes forward in your awareness and the role of emotions is pushed into the shadows of your working awareness.  Everything seems good to the unsuspecting trader.  But remember what it is doing – it is scanning the environment on the lookout for trouble before it gets to you (fear based brain) or looking for a potential meal (leading to the urgency to act).

Up until this moment it is easy to ignore that the Right Hemisphere of the Brain (where your emotional nature resides) is making a contribution to the collective trading mind.  The trader does not notice that he or she is calm, relaxed, and patient. These are just familiar emotional patterns that have sunk beneath conscious threshold.  The trader does not notice these emotions that are working with the rational thinking of the Left Hemisphere.  To the trader, it seems as though he or she is trading without emotion, but nothing could be further from the truth.  All thinking is emotional state dependent.  But in their lack of emotional intelligence and awareness, the emotions giving rise to thinking are simply ships passing quietly in the night.  At least until the thalamus sensory region in your Right Hemisphere spots a potential threat on the horizon.

That “threat” could easily be a signal that tells the trader that a set-up is forming.  To the primitive Emotional Brain that forming set-up is a threat to short term survival (the only kind of survival the Emotional Brain understands).  The forming set-up represents the threat of uncertainty and biological risk – danger of potential loss of short term survival.  Within nano-seconds a signal is sent to the amygdala to prepare for fight/flight, if the threat continues.  Meanwhile, the trader (connected only to the logic of the Thinking Brain) only sees a potential set-up on the horizon.  He or she misses the emotional input from the Right Hemisphere because he/she has learned to ignore emotions.

The Emotional Brain has woken up and the trader did not have the emotional intelligence to notice the watershed moment.  Time moves on.  A confirmation occurs.  This is a solid set-up.  Time to prepare for possible entry.  To the trader, this is all logic driven, but he is not attuned to what is going on in the other half of his brain – the Right Hemisphere. (Remember that this is literally half your brain that is being ignored.)  With the confirmation, the thalamus sensory area hits an alarm.  Now, by its survival instinct estimation, a serious potential threat to short term survival is real.  If the trader enters that trade, there could be loss.  The Emotional Brain does not distinguish between psychological stress and biological threat.  It sees potential loss of life (not money) and goes to its private line to the amygdala.  It’s time to crank up a fear response to this threat.  The trader experiences a burst of anxiety and starts second-guessing the rapidly approaching entry point.  Another confirmation.  The trader, already nervous and experiencing self-doubt, starts looking for a suitable entry point.

The more the trader tries to stay logical about the entry point, the more the emotion of fear ramps up.  The emotion pushes back.  He freezes.  He cannot make himself pull the trigger.  Self-doubt about it being a good entry point or not abounds, as well as self-condemnation.  He curses himself for not taking the trade.  The trade opportunity passes and the trader has a sigh of relief (that’s the limbic reward system giving the brain a squirt of dopamine or endorphin for a great job of short term survival).  Now the behavior is becoming solidified as a neural pattern and will fire more easily next time.

Clueless to the participation of the Right Hemisphere of his one brain in the myth of his rational (beyond emotion) mind, the trader is left wondering what just happened.  How did emotion jump into the logic of his trading plan and blow it up?  Meanwhile the trader has just experienced what one head, two brains looks like when they are not acting together in concert.  The emotional brain is your partner, whether you like it or not.  You had better learn to accept that there are two brains at work when you engage uncertainty and risk or you will continue the same old self-limiting patterns.  Thinking will not get you out of this problem.  It is part of the problem.  It is also part of the solution.

The Integrated Trading Mind

When you look at the Right and Left Hemispheres of the brain side by side, it seems hard to believe that traders consistently try to trade with half a brain.  The Right Hemisphere is big.  It’s half the brain.  Who in their right mind would believe that, under the stress of uncertainty, you could just ignore the influence that half your working brain has on brain functioning?  Yet that is exactly what traders attempt to do.  And no wonder there is such a high failure rate among traders trying to do just that!  There is also a communications network (the corpus colosseum) that integrates the separate function of both Brain Hemispheres into a functioning unit.

The Left and Right Hemispheres of the one brain do have a lot of work to do to get the brain ready for trading.  The Right Hemisphere (the Emotional Brain) was built for another time and place.  It evolved much earlier than the Thinking Brain of the Left Hemisphere.  It is literally built with a bias to control outcome in short term survival situations.  (This is a big problem in trading since you have to let go of the illusion of control.)  The Emotional Brain wants to be right, even if it is proven wrong.  And it wants to predict outcome.  And you, as a trader, are triggering these built-in biases every time you saddle up your computers to trade.  This is what makes emotional intelligence so essential for the trader building a brain and mind for the management of uncertainty.  Unless you learn to manage emotion and use emotion effectively to create the mind that trades, you will continue to fall directly into the line of fire of the limbic brain of the Right Hemisphere.  It’s that simple.

Put under pressure without training, the limbic brain (with its bias toward controlling outcome and not being able to tell the difference between psychological stress and biological threat) is hard wired to trigger to the fight/flight response of the sympathetic nervous system (SNS).  You experience this every time you have entry problems, trade impulsively, fall apart when the trade goes against you, take premature profits, beat yourself up after a loss, or fall into over-confidence (then failure) when you win.  These are simply the successful short term survival strategies of the emotional brain.  They worked great for millions of years, as our ancestors became a very successful species.  However the evolved strategy does not work in the Probability world of trading.

What has to occur for success in trading is that you are going to have to become the designer of how the Limbic Brain engages Uncertainty with the Thinking Brain.  You already know the short term survival strategies of the Emotional Brain that no longer work for trading.  But that does not mean you just try to cut off emotion at the root (which cannot be done).  There is not FREEDOM FROM EMOTION possible.  But there is FREEDOM OF EMOTION.  This is where you become the designer of the emotional response to uncertainty.  And this is where the Right and Left Hemispheres of the Brain come into a new cooperative arrangement.

Beliefs in Action

The beliefs that the limbic brain has formed determine how your whole brain engages Uncertainty.  These beliefs spring into action the moment that uncertainty with risk is engaged.  They are not verbal.  They really are not beliefs on the level of the Limbic Brain.  They are KNOWINGS made from experience.  If the knowing is successful in solving the problem the knowing is integrated into the organism’s (trader’s) emotional response to changes in the organism’s environment.  When those Limbic Knowings cross the threshold of the corpus colosseum into the thinking brain of the Left Hemisphere – presto – you get psychological beliefs. 

If you want to change your performance in the face of uncertainty (i.e. trading) you have to change the Limbic Knowing – that is what is driving the beliefs of the Thinking Brain.  This is the integration of the one Brain’s two Hemispheres – Right (Emotional) and Left (Thinking).  The first task is for the Thinking Brain to acknowledge that Emotions have always driven thinking in the first place.  And because of that, Thinking and Emotions are inseparably linked and must learn to cooperate as a unit.  The second task is similar.  The Emotional Brain has to develop trust in the Thinking Brain.  Trust that the Thinking Brain will learn how to use emotion to create the mind that thinks.  This is FREEDOM OF EMOTION.  Now an integrated approach to uncertainty and risk can be developed.  This is the traders mind.  Train the brain – there is one brain, but two spheres.  Both show up when you engage uncertainty and risk.  Ignoring one and glorifying the other does not work.  Training them to work cooperatively does.

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