For the most part, it goes without saying that having a strong belief in your abilities, such as they are, is a very important cog in accomplishing anything of value; not the least of which is trading. Of course, in the service of accuracy it must be said here that having belief without skill, knowledge or relevant resources is like believing that you can, slip on some sneakers and run a marathon without ever exercising. Now granted, even without the skill it is likely that you would go a heck of a lot farther and faster if you completely believed in your ability, but you would eventually succumb to your body’s limitations and may do some damage in the process. All said, the bottom line is that belief is powerful enough to beat cancer, heal wounds, put more energy in your tank than you thought possible and propel you into the consistently successful trader of your deepest desires.
I’ve often talked about the results formula; that is, T + E + B = R (thoughts, emotions, behaviors render results). This formula represents how results, outcomes and consequences are generated each and every time. In other words, those three variables are always present. That’s not to say that there may not be, from time-to-time, other intervening factors, but thoughts, emotions and behaviors are forever present. Think about it for a moment. When you get the urge to move a stop, chase a trade or exit a trade prematurely it is driven by an emotion, like fear, anxiety or greed to name a few. These emotions do not come from a vacuum – they are triggered, generated, initiated and determined by thoughts.
Thoughts have many iterations: verbalizations, mind movies, values, internal processes, biases and beliefs, many of which are out-of-awareness. These thought expressions are internal representations of what you perceive environmental experiences to be. On a fundamental level they express what you interpret these experiences to mean as you juxtapose them with a current belief about something similar that has already happened. This is true especially if your interpretation is danger and threat…like an impending loss from a stop-loss that is about to be hit. As the price action moves closer to the stop, the novice would perceive the chart movement in the occipital lobe (where vision is processed) which would be picked up by the amygdala in the limbic system and interpreted as danger and threat based upon past experience. Danger and threat are then transformed into fear and anxiety…this is a thought process.
Now, simultaneously the prefrontal cortex (where executive functions occur) processes this information and the fear and anxiety are verbalized into something like, this price action is going to take me out and that means that I am an incompetent trader. The verbalized thought then produces another emotion, such as panic, which in turn conjures images of the trader losing all of their money and subsequently becoming homeless. This is taking it to the extreme to illustrate the point of how quickly you can become hijacked by the limbic system and prefrontal cortex.
At this instance there is an elevated perception of negative emotional arousal (extreme discomfort bordering on pain) which prompts an ego driven defense mechanism seeking to reduce the discomfort by introducing a pain-relief action in the form of an urge to move the stop. Now, at the root of all of this is a fundamental limiting and irrational core belief that could be verbalized as I must never lose…because I would be judged as less-than, proving that I am a loser, which would generate considerably more pain. With this underlying out-of-awareness belief in play, the trader would be lost in a seemingly never ending loop of perceived danger then panic then urge to get relief by violating a rule. Of course, the aftermath of yielding to the violation is more discomfort in the form of self-anger, self-loathing and confusion as to why you are caught in this loop and can’t seem to figure out how to stop it.
Here is an intervention that is designed to help get you off the merry-go-round. Ask yourself, what must I be telling myself or believing to feel this fear or other emotion. This action will incite a conscious and unconscious search; thereby pulling back the layers of the onion and drilling down into the real reason why you continue to do the same thing and expect a different result. The answers may not be available immediately, but in due time will produce the pathway to uncovering the core belief that is contributing to the frustration, frazzlement and fragmentation causing you to blow off the rules and entertain detours away from your A-Game.
Once you uncover that limiting core belief, change it to reflect its opposite. For example, I must never lose can be modified to read, small losses are a part of doing business and every small loss gets me closer to a big win. Then embrace the change and incorporate the new belief by attaching it to a mind-movie that shows you making a trade where the price action is moving towards your stop but rather than reacting with intense negative emotional arousal, you see yourself taking a deep breath, closing your eyes while scanning the body to find any tension and, where you experience that tension, breathing into it while alternately tightening and relaxing that part. This works because you can’t be relaxed in muscle body and at the same time experience negative emotional arousal. Repeat the process several times along with the affirmation(s) and it will create new brain pathways that will begin to fire together and subsequently hard wire together, meaning that you are training your brain in another more appropriate approach to the same issue.
Over a short time this practiced reaction becomes the default mechanism. Do this for every rule violation while keeping in mind that the rule violation is not about the loss, which is what your logic is telling you, the rule violation is about reducing the discomfort and potential pain generated by the perception of danger and threat.
Written by Dr. Woody Johnson, Online Trading Academy Instructor