Beliefs That Sabotage Traders

Discussion in 'Psychology' started by Rande Howell, Mar 1, 2011.

  1. “On the surface executing a simple written trade plan should not be difficult, yet I am not able to do this simple task consistently. What I understand is that this sabotage comes out of self limiting beliefs that I am blind to. I’m not sure what beliefs are driving my performance, how do I find them?” remarks a deeply passionate, but troubled, trader.

    Biological Bias to Believe in Prediction

    The first problem is that trading is in many ways is a very unnatural environment for the brain to negotiate. The brain is constantly attempting to produce certainty in a world that is uncertain in its nature. This bias toward certainty closes down the kind of probability mindset that trading demands. What that looks like in trading is trying to predict what the market will do rather than take advantage of what the market is willing to give you. And the trader experiences fear of loss or exhilaration of winning rather than the ebb and flow of probability.

    Belief That the Market is a Dangerous Place

    The second piece of this problem is that uncertainty becomes fused to worry and fear. Uncertainty then becomes synonymous with worry and fear. This is a particular wiring that has to be de-constructed and rebuilt so that uncertainty can be dealt with from more empowered emotions and states of mind. It's not going to change just because you say so though. Changing neurally hardwired beliefs is not easy; just ask any dieter or recovering alcoholic. To our ancestors, uncertainty was a bad thing. And our brain evolved to jump to conclusions because any explanation was better than staying in the confusion that uncertainty can cause. To the ancient brain any explanation is better than confusion. This wiring of perception is downright dangerous in trading.

    The market does not care if you are present in it. It has no negative or positive intention directed toward you. It simply is. The mindset, or belief, you bring to the market is what opens or closes the range of possibilities that become probable for you.

    Belief in the External Validation of the Self

    This is confusing assessment of performance with judgment of being. The second part is that in facing your psychological demons, we have a bias to look outside the self to assign blame and responsibility. I actually have traders put a mirror near their screens so they can see themselves and hold themselves responsible for the mindset that is being reflected back at them because emotion state meaning is embodied in the muscles that work the eye.

    At the core of poor performance (assuming competency in methodology) are self limiting beliefs rooted in a sense of inadequacy (not good enough), a sense of not mattering (must win to prove myself), a sense of not being worthy (having to prove your value as human by your performance), and of powerlessness. The value of a human being becomes externally validated (trading performance) rather than a reflection of his current skill level.

    Skills are something that can be improved and mistakes show you where you need to improve -- rather than being a reflection of the self. But it is both biologically and psychologically easier to deceive ourselves and project blame and responsibility to the outside world. We even develop personas, handles, and other cover ups to mask our deepest fears rather than confront them. The problem is that if they stay hidden, they will continue to sabotage your trading and trading account.

    When you are experiencing a fear of loss, a fear of pulling the trigger, a fear of not being right (perfectionism), a fear of loss while in a trade, or are beating yourself up after a loss -- you are experiencing the deeper fear based beliefs outlined above. Your brain's adaptation to them has produced a familiar pattern of belief that has hijacked your thinking.

    Trading as Mirror to Self Limiting Beliefs

    Trading becomes a mirror to the deepest sense of self. But you do have to develop the courage to confront the inner garbage that has taken up residence in your belief system and rigorously change your beliefs about self. Traders can take many years wandering around in the wilderness before they really begin looking at themselves rigorously and realizing that it is their beliefs that are trading. This is when they come to the motivation to re-invent their beliefs. Most traders come to develop a deeper sense of their spirituality to do this. This is where you move from a sense of self that uses external validation to determine their value (cars, houses, etc) to sense of self that is grounded in a sense of worth beyond their understanding and found inwardly.

    A deep sense of their worth as a human being allows a trader to access the discipline, courage, impartiality, and compassion that is part of his human heritage. Moving beyond the need to prove the self by performance to a past relative, culture, or person opens a vast new door in the state of mind that becomes available to the trader. Your beliefs can be molded to take advantage of what the market is willing to give you. Your beliefs move from self limiting to self empowerment.

    As an evolving trader, what does this stir in you?

    Rande Howell
  2. Shagi


    Kudos for that well thought article.

    It's like a habitual thief who knows he is doing wrong but goes ahead fully concious knowing he is doing wrong. An alcoholic who sips a drink conciously knowing his liver is on the brink of being toast. A trader who conciuosly makes a mistake of not taking the trade, chasing the trade, taking profits too early. There is always a reason for justiying the act.

    On that journey my experience is that it is what one thinks that produces how you feel and act. It's like trying to get angry without first having angry thoughts or getting sad without first getting sad thoughts. If you change how you think you will change how you feel and act. How do you change this - well conciuosly guard your thoughts its your first line of defence.

    It's easier said than done to de-couple one's mind from such destructive influences no wonder why trading is a losing probability for most. Trading is rigged for everyone to lose right from birth and its a near impossibility for the majority to change their mindset.
  3. Fear of not succeeding is not good. And fear leads to hesitation which I think is the biggest problem for most new traders.

    You can talk about psychology, keep a strategy, fear and not being disciplined. I the end you need experience to be able to adapt to different market conditions. One month you make a killing by contrary trading, and the next month you enter a trending market which require "buy and hold" strategy. If you don't realize this and keep on doing the same thing you will not succeed.

    You cannot write down a trading strategy on a piece paper and stick to it. This will not make you consistent profitable trader. You need to adapt and analyze the market all the time.
  4. You're right. Trading becomes the mirror to the beliefs you fell into while you weren't looking. The good news is that we can change those beliefs that shape our lives and our trading. It requiries an inquiring mind, courage, and a strong motivation to improve the self. The same things it takes to build a peak performance state of mind for trading.
    Rande Howell
  5. jjf


    You probably have an uphill battle here on ET.

    It appears that the majority of Posters are seeking a mathematical
    or recognition pattern for their trading, thus permitting them to remain themselves.

    As we discussed on another thread, there are other pursuits in life where it is just not possible to seek shortcuts.
  6. Trading is like football. Take what the defense will give.
  7. wrbtrader


    It's actually more than that.

    Most traders don't believe one of the key variables to successful trading is themselves. Thus, they ignore or underestimate the importance of themselves as a key piece of the puzzle which is why they get "tunnel vision" about their trade methods.

    I also see an escalating situation where traders that realize they have a discipline problem via publicly stating such as a fact...they believe their "self help" solution is too fine tune their trade method. Simply, once again, they fall back into the trap it's about the trade method only under the facade they are working on their discipline problems.

    Further, just as much of a problem, many of those that show up to give advice about the discipline problems...their recommendation involves changing, tweaking or fine tuning the trade method. This pattern (pun intended) helps instill the belief that if we fix the trade method...we'll become discipline traders. It just doesn't work like that.

  8. Pinozi


    After a couple of months of bad performance I've had a look inside to see where I've made mistakes

    Can someone please point out some good self talk phrases to counteract those stated above


  9. P
    Self talk affirmations are like ice cubes on a hot summer day. They are good while they last. This is short term change. Changing belief is very different than disrupting and replacing thought temporarily. Trading has a way of cutting right though the wishful thinking. Developing the courage and compassion to transform the belief that actually does the trading is the key.

    Fundamentally developing compassion for yourself is at the core of changing self limiting beliefs. No trader I've known has gotten better for beating themselves up after mistakes. They can be taught to use compassion so that make correcting mistakes is not a statement of a person's worth, but only an assessment of their current level of competency. Many people find this reconstruction of their worth in their spiritual practices. Once worth is accepted, trading performance can be learned based on a open state of mind.

    Good luck
    Rande Howell
  10. Dead on money. Thank you Mark.
    Rande Howell
    #10     Mar 2, 2011