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What Behavioral Conditioning Can Do To Your Trading (And How You Can Fix It)

behavioral conditioning

Automatic patterns, otherwise known as default patterns of thinking, feeling and doing are conditioned programs that are linked to beliefs and thought preferences and they quite often can work against you. Behavioral conditioning begins from your earliest days of being with family, teachers, counselors, coaches and all manner of authority figures. These conditioned behavior patterns, or responses to reoccurring events, represent all that you have learned and/or experienced throughout your life. When they are triggered, these automatic or default patterns continue until the situation is over; that is unless you intervene in some way. Of course, all conditioned behavior patterns are not negative or bad. It is vital, however, to recognize and adjust negative automatic default patterns that are conflicting with your ability to follow-through in your trades. Trading is counter-intuitive which greatly adds to the challenges. For instance, humans are loss averse. We are much more opposed to relinquishing a gain than we are attracted to acquiring it. Studies show that losses tend to be twice as powerful when it comes to behavioral conditioning as are gains. This bias can cause you to exit a trade prematurely or to move a stop when it is threatened by the price action. Another example is that people are prone to go with the crowd when clearly this sort of trading can quickly cause you to chase trades and jump in after extended rallies or sell-offs, triggering more losses.

You cannot modify a negative default pattern if you are not aware of the thoughts, emotions and behaviors that comprise it. You must become aware of them first. Default patterns have energetic inertia; meaning that whatever your baseline behavior there is a great internal pressure to maintain that baseline behavior. You can’t change what you can’t face, and you can’t face what you don’t know. The greater part of everything that goes on in your brain and mind is out of your awareness. This is especially true when core beliefs, preferences and values are involved; and this is where the underpinnings for conscious thoughts are generated. Consequently, you must be willing to “pull back the layers of the onion” in your brain/mind by keeping a trade log and thought journal in order to measure, verify and document internal data (thoughts, emotions and behaviors) that greatly impact upon your ability to plan your trade, trade your plan and keep your trading commitments. You must become self-aware; that is, you want to monitor your thinking, feeling and doing. Notice that self-awareness is far from being self-absorbed. To be self-absorbed is an ego function, which is driven by defensiveness, insecurity and fear-based behavior. Self-awareness will increase self-knowledge and understanding by finding out those limiting beliefs, preferences and internal standards of taking action so that you can work on changing them.

One way to raise self-awareness is to take your emotional temperature from time to time; especially when in a trade. Feelings, either in your body (as tension in your head) or emotions like fear, are often the first signals that something is not going well. For example, if you’re in a trade and notice head tension or mounting fear and a few moments later get the urge to move a stop, the first noticeable signal that something’s wrong would be the feeling or emotion. Basically, it means that you are checking in with yourself to see whether you are emotionally too hot (anxious, excited, angry or greedy to name a few) which can lead to impetuous behavior; or too emotionally cold (doubt, worry, fear, boredom, etc.) that can cause you to freeze in a trade or act out of frustration.

Free Trading WorkshopWhen you notice the uncomfortable feeling/emotion there is an opportunity to “interrupt the emerging negative default pattern” that got started by what got your attention; such as the price action drifting toward your stop. When this happens take a deep breath and count to 10 while simultaneously changing your physical position. Then ask yourself this question: What am I telling myself or believing to feel this (fluttering stomach, tension headache, anxiety, fear, etc.). Once you identify your internal dialogue, you can begin to deal with it by challenging the negative thought or limiting belief. Ask yourself: Is that true, is that absolutely true? Interrupting a negative default pattern as it is being triggered allows you to do some purposeful behavioral conditioning; replacing those automatic negative responses with positive ones.

Self-awareness is one of the first steps to self-management and self-discipline. Become deliberate in what you do by becoming aware of and deliberate about what you think. Then you can design your responses rather than operating by automatic negative default.

Trading is psychological warfare. The struggle stems from the countless ways that trading challenges your character flaws, faults and weaknesses. Trading requires personal accountability and self-imposed limits. Your highest and best trader, trading in your highest and best interests is the only suitable position to trade from. Otherwise you are placing yourself under unreasonable, undesirable and unjustifiable risk. Don’t permit yourself to continue to trade under the influence of automatic negative default patterns. Recognize, root-out, deactivate and replace automatic negative default patterns by becoming deliberate and trading by design. Protect your capital.


Written by Dr. Woody Johnson, Online Trading Academy Instructor. Dr. M. Woodruff Johnson has actively and successfully traded stock options, forex and futures since 2000. He is the former Executive Director of the Kaiser Permanente, Watts Counseling and Learning Center. He holds certifications in Accelerated Learning, Neurosensory Development and hypnotherapy, and he is a Certified NLP Master Practitioner. Dr. Woody is also an Associate Professor and teaches graduate psychology courses at Pacific Oaks College and Ryokan College. He has provided clinical staff services in hospitals and community clinics as well. He has a passion for helping others to achieve their goals and get the results in trading and life that they desire. Dr. Woody has been using mind/body healing techniques both professionally and personally with much success for many years. He is the author of “From Pain to Profit: Secrets of the Peak Performance Trader.”


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