I don’t know how long you’ve been trading but I’ve been doing it for over 10 years now. After everything is said and done, what I’ve noticed is that the endeavor is purely psychological in nature.
Now, you might be saying, “Well no, a market edge and a risk management plan have to come first. Without those, there’s no trading, only gambling.”
I agree, in part — a trader needs a system (a market edge coupled with a risk management plan). No question about that.
Still, mindset determines whether or not you trade that system the way it wants you to trade; it determines whether or not you control your risk and take your signals when they appear.
Wouldn’t you agree?
So in that sense, Mindset has to precede everything else because it is what you bring to the game. You have it or you don’t have it but, in any case, it can be worked upon and developed.
The Seek-to-feel-good Mind
One major step in this quest to self-mastery is working with emotions. One reason we struggle with them is that, in our lives, we tend to judge some emotions as ‘bad’ or ‘negative’ because they feel unpleasant; they create uncomfortable sensations in our bodies, and so we don’t want them.
And on the other hand, there is what we perceive as ‘good’ or ‘positive’ emotions and we do like these ones because the sensations associated with them are pleasant so, naturally, we want more of them.
You have to think of your mind as an addict; it likes/seeks to feel good. And so, if it judges some emotion to be ‘good’, then it’ll automatically try hard to get more of it. Conversely, if it judges some emotion as ‘bad’, it’ll try even harder to get rid of it.
But, judging, if you haven’t noticed yet, sets you up for a struggle with your feelings which, in turn, sets up a major behavioural problem for us as traders: If we’re constantly craving some feelings while pushing away others, then there’s no way we’ll ever be able to trade our set of rules consistently and reach consistent profitability in the markets.
Because following our rules implies doing uncomfortable things.
No emotion in itself is ‘bad’
In the Trading Psychology Mastery Course, I encourage you to let go of judging your feelings altogether and to see them for what they are: a stream of nondual, ever-changing sensations and urges, continuously passing through your body.
Because you see, just because some of these sensations and urges are uncomfortable doesn’t mean they’re ‘bad’.
For instance, if you grew up with parents who didn’t openly express feelings like affection and love, then growing up, you may find such feelings uncomfortable. Does that mean they’re ‘bad’?
And isn’t it interesting that many people judge/fear ‘bad’ emotions, yet they’ll often pay good money to watch a horror movie or read a thriller, precisely to experience those very feeling!
Interesting phenomenon, isn’t it?
No emotion in itself is ‘bad’. ‘Bad’ is just a thought — it’s a judgment made by your mind. And if you believe that thought (and fuse with it) —if you literally believe that the feeling is ‘bad’—then, naturally, you’ll struggle with it all the harder. (And we all know where that leads, don’t we?)
The art of detachment
Great traders – those who are great in behavior — have realized the damage that excessive attachment can do to their trading account and their overall well-being, and, one way or the other, they’ve learned the art of detachment.
Detachment simply means that you are no longer defined by your thoughts and feelings and sensations. It means to distance yourself from those internal occurrences in a way that always grants you freedom of choice and action.
For instance, you’re feeling fearful, your mind is telling you not to initiate a particular trade. On the other hand, your rules say that you should. As uncomfortable as it is, you initiate the trade anyways.
But how do you do that — how do you create space between your thoughts, feelings, sensations and yourself? More simply, how do you detachment yourself?
Suppose your mind says, “I can’t enter this trade because the MACD reading isn’t conclusive [or just insert any other excuses here].”
You could then acknowledge, “I’m having this thought and the feeling in my body is uncomfortable.”
Then, you could reply, “Thank you, Mind, but your judgment/ opinion goes against my plan. I’d rather follow that.”
Labelling the troubled thought allows for a quick acknowledgment that a troubled thought and its associated feelings are arising at the moment and they want to drive your behavior.
Change always starts with this initial awareness.
Let’s look at another example. Suppose you have a trade on with open profits. Your mind then says, “I have to close this trade [but your target hasn’t been reached yet].” You could then acknowledge, “My mind is making judgments.”
But what if that particular judgment is useful?
Then you have to adopt a pragmatic approach and ask the question: is this thought helpful? All the while making sure that you do not fuse with the thought, not taking it to be you — you’re just objectively aware of it.
Now, experience with trading your own strategy (and its rules) will tell you whether or not you should close your trade, but using this mental technique makes you aware of the process of judging. So that it’s not an automatic process anymore. You’re aware of it and, because you are, you then have a choice in how much you buy into those judgments.
As you apply this little mental strategy in your life, you’ll come to understand (via your own experience) that the thinking mind and its associated feelings can deceive you.
On the other hand, your trading plan is always right.
By the way, notice that I never told you to try to stop judging. The truth is that you can’t. Your mind is an expert at judging; it’s one of the things it does best and it’ll never stop doing it for as long as it’s alive.
But you can learn to let go of those judgments when they arise; to witness them objectively without creating more judgment about the judgment. And you do that simply by detaching yourself from them, as in the above two examples.
Suffice it to say, the mind has lots of ways to get us to stray from our trading rules. It does so by either directly intensifying our bad feelings or else to get us to waste a huge amount of time in useless judging/ opinionating.
So, from now on, try as best as you can (make it a firm intention) to catch your mind in the act when it tries to hook you with these judgments and opinions. Then simply refuse to play the game. It can be as simple as that!
Don’t play the damn game and simply thank your mind (in a gentle friendly manner) for trying to waste your time, money, energy and focus.