The Invisible Hand That Limits Your Trading

Discussion in 'Psychology' started by Rande Howell, Feb 3, 2011.

  1. By J. Rande Howell, MEd, LPC

    "There seems to be an invisible hand that is guiding my trading, and I don't seem to have much say-so in the matter," a trader laments to me. She continues, "I'm buying your book because I do not understand why I keep on doing the things that I do, when I know what I am supposed to do. But it is not what I'm supposed to do that I do. Rather it is what I'm NOT supposed to be doing that I do.

    I hold on to trades too long in both directions. I know what my rules say about my stops and my targets. But I'll be there one second, then my evil twin takes over my mind. And I do things that I know are not good trading. It's almost like I get possessed, and when I wake up from the trance, all I can do is kick myself for not following my plan.

    What's going on? Don't lecture me about discipline and putting my emotions down at the door of my trading room. I've heard all that, but this invisible hand seems to creep in and all the discipline I have in other areas of my life seems to vanish in the mist."

    The Elephant in the Living Room

    Have you ever experienced what this trader is describing? She knows how to trade. She has a deep background in finance and accounting. She doesn't experience debilitating fear in her trading. And she is a moderately successful trader. She makes money. But she recognizes that she is hitting an invisible glass ceiling that is stopping her from moving to the next level. And she can't see what she can't see. She suspects that there is an elephant in her living room, that if she only had the eyes to see, she would be able to see what is limiting her and her trading.

    Trading, History, Biology, and Mind

    Taking a step beyond quick fix, short term, solutions to self limiting patterns is the first step. Understanding emotion as far more than feelings is the head knowledge that you will need to cultivate. Fundamentally emotion is about the way the organism you are builds predictable responses to the uncertainty of adapting to the circumstances of life.

    The brain is what directs this process of adaptation and it is emotion driven. Feeling is merely the subjective experience of an emotion. It is like seeing an iceberg -- the vast majority of it is below the surface. Feeling is the tip of the iceberg. If you remain ignorant of the power of emotion, then you put yourself in the same situation that the Titanic found itself.

    It is the genesis and stability of neurally wired patterns of responding to environmental cues that is at the crux of understanding (and managing) emotion. In essence, your brain is a pattern-making machine that is mandated to avoid threat. And your brain cannot separate uncertainty, worry, and fear from one another. This is exactly what the trader quoted above is stuck in.

    Now, let's add one more element to our trader's dilemma of her invisible hand guiding her trading. She's right. She was born (actually her brain) into a soup of beliefs, biases, and perceptions (called her family circumstance) and her brain incorporated these "stories" into a narrative that became "her". This is the environment into which her brain adapted her. And it happened long before she could think or question the assumptions that organized the way she perceived her environment. This became her "invisible hand".

    In her world, she organized herself into a narrative that avoided uncertainty. It was what her family did and "what monkey see, monkey do". The assumptions became her beliefs. Until she got into trading, there was no reason to question these assumptions turned beliefs in her brain/mind. Life was pretty good.

    Her trading has forced her to bump up against her comfort zone (known as a perceptual map to the neuro-science minded). Now the internal guidance system that was so successful in producing adaptive survival is no longer functioning effectively in this new environment called trading where working with uncertainty is a required operational skill.

    Now her job is to de-construct the old money/risk narrative that she was born into and adapted to (her invisible hand). And she will need to construct a new narrative where the brain adapts to uncertainty as an element of her environment to be embraced. And mastered.

    Biology Meets Mind

    Our family histories get embedded into our belief systems in the organic substrate called your brain. Your job as a trader is to become the designer of the beliefs that drive your trading. Otherwise you will stay stuck in the self limiting beliefs that your brain adapted you to -- designed for a different environment and a different time. The Invisible Hand will remain a force that drives your trading until you develop the mindfulness and the skills to "re-develop" the narrative that you confuse with "your thoughts".

    Those thoughts are not yours. They own you. They are the histories of family narratives getting wired into your brain. They become your blinders. You see only what they allow you to see. Breaking out of this invisible prison opens you to see a new kind of freedom. A freedom to " become". A freedom to become the beliefs that drive peak performance trading.

    With this in mind, what were the stories and narratives about uncertainty, risk, worry, and fear that you were born into? How did they shape your world? And how are these long hidden narratives embedded in the neural pathways of your brain impacting your trading today?

    Rande Howell
  2. DanS


    Describes me to a "T". I can put a buy down on the chart, but when it comes to pushing the buy button, I wrestle with an 800 lb gorilla.
  3. olias


    Good stuff here, not just for trading, but for life.
  4. automate or oco orders. walk away.

  5. 100% agree.
  6. Eight


    Nonetheless, it is good to realize the backdrop of thinking that we are partly born with... the human genome project uncovered that fact that a lot of our genetic material we are born with is inherited with the purpose of helping us to adapt to a culture and an environment... we don't hear about that much because it's egg on the face of the collective "science" belief system. They always insisted that we were absolutely not at all, ever, in any way, at all, able to receive genetic material based on our parents experience... no way... so like every time before when real science did something it trashed all the conjectural pseudo science...

    The good news is that visualization is the tool that the creator gave us to overcome that programming. Visualize yourself being the trader that follows the plan... I'm visualizing myself being the trader that pulls the trigger.. I get caught up in endless research but today I realized that there is no algorythmic answer to what I do when I trade, I have to just get up in the morning and read the market, sometimes it's well written and sometimes it's not, but it is readable...
  7. Unless you are getting your trade entries by divine intervention, there is an algorithm in your brain that determines them. It is more correct to say that you cannot bring that algorithm into awareness. But interesting things happen when you try really hard.
  8. Roark


    Really? Every develop a system and have difficulty following it? Ever try to use someone else's system? Ever put a system into use only to see it's performance deteriorate and then agonize over whether the system should be abandoned? Those are psychological issues. Before someone puts in the time, effort and expense of developing a system that back tests profitably, it would helpful to know if they have they the psychological wherewithal to follow it in the first place.
    #10     Feb 3, 2011