Articles on Trader Psychology by Rande Howell, Trader Psychologist
Re-thinking Positive Thinking for Successful Goal Attainment
Standing in front of a mirror, Steve visualizes the success he desires in trading. He imagines himself trading with confidence and winning trades abundantly. He watches his equity curve grow in his mind’s eye. And he imagines having all the money his coming prosperity will bring as he continues his work with the law of attraction. As Steve confidently looks into the mirror, he feels the confidence in his bones as he affirms, “I am a disciplined trader. I am a confident trader. I am a winner”.
Believing in his future success, he begins his trading day with a positive state of mind ready to manifest it in his trading. And before he realizes it, he has already lost emotional control and falls back into the old patterns of sabotaging opportunities that he knows he should be nailing.
What Went Wrong on the Road to Successful Trading?
There are many “Steve’s” in the trading world. You probably have your own personal version of under-achieving your potential in trading. Not because of the lack of trying, but by not having the necessary mental and emotional skills for success in trading. Many, like our friend Steve in the vignette above, have used affirmations and visualizations (i.e. positive thinking, hypnosis, and other stuff also) as part of their success tool chest, with varying degrees of achievement.
Yet, when applied to trading (where willpower or perfectionism provide no control over outcome), the code of success outlined by the accepted paradigm of affirmation and visualization technology does not deliver the goods for most people. At first glance, it seems counterintuitive and just plain wrong that affirmations and visualizations (used with guided meditations) would be counter-productive in producing effective trading. But the losing record speaks for itself.
These techniques appear to work in other fields, so why not in trading? It is not so much that their effectiveness is not useful in trading when properly understood. It is HOW they are used that creates problems for developing the trading mind. In the emotional technology I teach, they are used to a degree – but not as ends to themselves, as they are typically taught. It is understanding their place in a process that produces effective action that will harness their power (while recognizing their limitations).
First, Find an Effective Measuring Stick
Affirmations and visualizations "sound" true. They “feel” right and you want them to work. You also hear a lot about them. They are preached to us from various sources from business consultants, to self-development experts, to life coaches, to sports psychologists. And visualizing success does make you “feel” good. Real good. Feeling the sensation of imagining money in the bank, winning at the game of trading, and bringing home the bacon produces a dopamine/testosterone rush that is hard to beat. It feels so good that it has to be true. Right?
Wrong. Many of the affirmations and visualizations used by traders trigger the equivalent excitement of winning the lottery. That very excitement is emotional chemistry that destroys the mind needed for successful trading. The level of excitement may be useful for sales and for sports, but not for trading. Trading requires low levels of excitement so that rational thought can become the major kind of thinking done by the trader. Excitement begets disordered risk-to-reward evaluation that leads to impulsive and over-trading.
So, right off the bat, you can see that focusing on the outcome you would like to experience (winning the trade) is actually counter-productive for an effective trading mind. Instead, the mind has to be focused on managing the process of trading. Remember, you cannot control outcome no matter how much Silva Mind Control you try to impose upon the markets. But you cancontrol the mind that you bring to the execution of the trade (the process). So, your mind needs to be focused not on the feeling of outcome, but on the feeling of self-control during the trade.
The beliefs rooted in the feelings you bring to the management of the process of trading are reflected directly in the performance of your trading account. It is not what you sayyou believe that counts. What counts is the reality of your beliefs about your capacity to manage the unknown as demonstrated in your trading account. The mind is way too sneaky to be trusted. Many traders profess to own certain beliefs outwardly, but when tested by the black and white truth meter of their trading account, the professed beliefs are not reflected in successful trading performance.
The trading account is the truth meter that a trader uses to really see what is going on in his trading mind.
Second, Positive Thinking Can Get You Into Trouble in Goal Attainment
In his book, Rethinking Positive Thinking, researcher Gabriele Oettingen asserts that positive thinking, when used as historically prescribed, is often counter-productive for achieving goals. Instead of energizing motivation to achieve goals, positive visualization and affirmations actually resulted in a reduction of the motivation needed to achieve goals. The brain fell into the rest/digest cycle of the autonomic nervous system after visualizing goal attainment. This zapped the energy needed to strive towards the goal.
What worked, though, was holding the positive visualizations simultaneously while acknowledging the obstacles of achieving the goal. Itwas this dynamic tension between the dream and the obstacles faced that created the mind that was motivated to strive effectively for goal attainment. Carl Jung said it another way - "It is far more enlightening to turn toward our shadow nature and learn from it than to continually turn only toward the light of awareness." You have to face down the obstacles to your success. It is this struggle that gets the motivational juices flowing. To do that, you will need to turn toward what you have been avoiding.
It is the obstacles you must master in order to achieve the goal. It is not the brute force of willpower that wins the day. Nor is it the mistaken intolerance of the perfectionist that makes possible consistently profitable trading. Rather, it is turning toward the self-limiting beliefs running beneath the radar of your unexamined mind and transforming them that will win the day.
Those self-limiting beliefs are evidenced in the health of your trading account. Your true belief system is being projected onto the markets with every observation you make and every action you take. What you see and trade are based on the beliefs you hold about your adequacy, your sense of mattering, your sense of worth, and your sense of power to stand in the wake of the world. And these beliefs are reflected in your trading account – not what you would like to believe about yourself or what you have convinced yourself that you believe. Your trading account becomes the mirror that allows you to see what hinders your progress.
Trading Requires a Mastery of the Self for Long-Term Success
Driven by the motivation of short term money to solve all your problems or to prove the self, traders and active investors deceive themselves and never look deeply into their deepest beliefs and what drives those beliefs. This leads to stress and burnout over time – and a lot of suffering in the interim. Yet, the short-sighted focus on goal attainment by magic is ever present. It seems so right and true. (And so easy to get hooked into.)
If you are listening attentively, your trading account still calls out your name. It tells you the truth – whether you want to hear it or not. If you know what to look for, it shows you where the obstacles to your success can be found. It is the darkness of your shadow nature that has to be mastered to trade well over time. The light of positive thinking and its derivatives dances in partnership with the shadow nature of the obstacles that must be mastered. Both are required for the motivation to become the change you want to see in your trading.
All heroes have to be tested before they become who they can be. They are tested by the obstacles they find in their journey of self-discovery. Without the obstacles, they would never become the hero who claims victory. Turning toward the obstacles and embracing them is the mark of the hero within. He or she is tested, and those tests provide the birthing of the trader who can handle the uncertainty found in trading and in life.
Do you avoid the obstacles to your success, or do you turn toward the obstacles and learn who you need to become? Trading makes it a black and white decision unlike any other endeavor. And you hold the mirror (if you commit yourself to listening to your trading account) that reflects the obstacles to your success – and the promise of a more effective trading mind. With the development of mindfulness, it becomes a conscious choice.