The Eysenck Personality Inventory (EPI) measures two pervasive, independent dimensions of personality, Extraversion-Introversion and Neuroticism-Stability, which account for most of the variance in the personality domain. Each form contains 57 “Yes-No” items with no repetition of items. The inclusion of a falsification scale provides for the detection of response distortion. The traits measured are Extraversion-Introversion and Neuroticism. Continue reading
Day Trading Tip 1 – Focus on your being not on your doing
Many measure their trading success by the state of their trading bank. Their confidence and self-worth is correlated to the $$$ profits they make.
The thing is, this is how we have been conditioned by society. You get judged by the results that your environment can see, such as good grades at school, finishing top in your university, driving a nice car, living in a nice house, being dressed for success, all those are being considered as a measure of success.
Although profits are a typical measure of success in the trading industry (just look at the amount of traders showing off their $profits on LinkedIn), and undeniably important if you have to pay the rent from trading, it can ultimately destroy your trading career.
With that outcome focused mindset, as you lose money, you lose confidence, your self-worth becomes threatened, you start making irrational trades based on impulse and desperation, you lose more money in the attempt to recover your self-worth, and so the vicious cycle of self-sabotage has been set in motion.
Have you ever asked yourself why it is that even though we live in a world with great resources at our fingertips, traders continue to struggle? There is so much information freely available on the internet, anything a trader needs to know in order to succeed, and yet the statistics still show that over 90% of traders have no trading results to show for. When profits do appear, it is exhilarating, but never long lasting.
I tell you why: Because you can want trading success until you are blue in the face, you can attend all the seminars, read all the trading books, refine your trading strategies, write the most sophisticated trading plans, follow the best traders in the world, you can accumulate so much knowledge about trading that you deserve an honorary PHD, but until you get to the core of your BEING, that emotional experience, the real root cause of why you are not doing what you planned to do, until you are clear about your unconscious sabotaging behavioural patterns, until you acknowledge that this is running your trading and learn how to transform them, your dreams of being a successful trader are going to stay fairy tales.
Let’s be real here, anytime you want to get to a place that is better than where you currently are, there are blocks inside of you, otherwise you would already be there.
So, the real question here is how do you uncover and remove the hidden blocks to achieving better trading results?
If you stand any hope to succeed in the markets, you will need to change how you think about your trading.
In the euphoria of winning most traders quickly lose their discipline and overtrade, which results in a significant drawdown.
It is devastating experience to win big only to give it all back to the market.
Most traders know that there is something wrong, but they don’t know how to fix it.
We are only as strong as the weakest link in our performance. That’s whilst we should focus on our strengths we also need to learn how to manage our weaknesses.
One of my traders from the Prop Trader Training had the experience that after a run of profitable trades the point would come when he would let a loss run too long and wipe out all the profits from the winning run. “The biggest weakness that I am working through is how to apply the same process after a winning run.”
The answer to this is found in the concept of the Emotional Pendulum. (The Emotional Pendulum, and comes from the work of David Pellin, a Canadian psychotherapist from the 1960s, and Peter Fleming, who carries on Pellin’s work at the Pellin Institute in the UK.) http://www.pellin.org.uk/CTIntro/Paper1.pdf
Now, when it comes to the spectrum of emotional stability there are three extreme points on the scale: Low Negative, Neutral Centred and High Positive.
Swings of the Pendulum
David Pellin made the observation that, “the motion of emotion is like the swing of a pendulum.” A pendulum swings back and forth from high to low until it eventually rests in the centre, still and calm, until some outside event sets it off to swing across the whole spectrum once again.
Most traders tend to experience the whole spectrum from low negative to high positive but never get to rest in neutral centre. Unless they learn to manage those swings their trading results stay as inconsistent as the swings of the pendulum.
High positive relates to extreme levels of excitement, enthusiasm and happiness – a state commonly experienced after a winning run, and low negative relates to any feeling that resembles anger, sadness or even depression – a state commonly experienced after a string of losses.
When you are in a state of neutrally centered you are being fully present, focused and in a highly conscious state. That is the place from where you are able to make great trading decisions and therefore big profits consistently like clockwork.
The extent that our trading bank is going to be hurt by self-pity or smugness will depend on how far we swing on the pendulum. The further we swing to either extreme the more money we are prone to lose.
So, in the case of my prop trader, he had a great winning run, most probably started believing that he has finally made it, dreaming of the millions of dollars he will generate with trading, hearing the world cheering him on as he buys his wife the most beautiful diamonds and himself a hot Maserati. And as Donald Trump says, that is the moment when you take the eye off the ball, you fall in love with the numbers on your bank balance, or the % return on your statistics, and suddenly your analysis starts to get sloppy and you start getting lose on your risk management because preserving the nice numbers on your statistics suddenly becomes the focus instead of working with what the market has to offer and focusing on flawless execution.
Why is that so?
Do you want to improve your Trading Performance? Join us for the High Performance Trader – Mindset Mastery Group .. more details at www.highperformancetrading.com.au
The Impact of Highs and Lows
In her book ‘Molecules of Emotions’ Candice Perts explains that we have receptors in our brain – called opiate receptors, that create the signal for being high when taking drugs or drinking alcohol. And these are exactly the same receptors for our emotions. So, the receptors you have for feeling sad angry depressed happy excited or invincible are essentially the same receptors you use when you drink alcohol or take drugs.
What that means is that science is telling us that when you are experiencing an emotional state you are in fact intoxicated.
So when you are high as a kite, do you become more focused, concentrated and conscious or less? Less, right? Alcohol is a filtering system so typically you see things differently than the sober people around you. It is kind of looking at a chart in hindsight and wondering why on earth you took this trade. Even though at the time it looked so promising.
Now, just in case you don’t’ believe me: think about it, have you ever gotten completely drunk and done something stupid and then sobered up and gone – oh man, what did I do?
Or do you know anyone who was so excited that they blurred something out and then afterwards they are like oh no, I can’t believe I said that?
And on the flipside, has anyone ever been so angry they have done or said something totally inappropriate and then you ‘sober up’ get back to neutral and you go oh man what was I doing?
And the same occurs in trading: have you ever entered a trade on impulse and immediately thought to yourself: Oh no, what did I do that for? Stupid question, of course you did, we all have.
Swing to the Lows
The negative low area of the pendulum is the result of emotional depletion triggered by already evident low self-image or physical or physical depletion and exhaustion because having concentrated over a long period of time willpower gets eroded as well. The low is then usually intensified by subsequent trading losses and frustration.
In the negative low your emotions are turning inwards. Twisting and turning on each other, becoming convoluted, with the mental sabotage that you are alone with these emotions, with these problems and that solutions are not possible. Many stay stuck in the negative low focusing on the imperfectability of oneself, the impossibility of ever achieving ones dream and becoming a successful trader.
In the low, you can only be aware of yourself as a failure or a victim. In the low, your mind convinces us that this is the truth.
If your low is sufficiently deep, you can turn a genuine trading loss into a sincere belief that you have serious problems with self-sabotage, or that you are just not cut out to be a trader..
You need to have an awareness of the process that is happening. When you are low your thinking will be clouded and your decision making impaired. So it is important to find ways that lead back to neutral centred where you can operate with crystal clarity and laser like objectivity.
Swing to the Highs
After a string of successful trades the un-self-aware trader is swinging high compulsively, they often feel invincible and can hardly bear to be interrupted in their trading. This is often obvious to the outside observer but not to the trader himself. I call this state Super(wo)man syndrome.
The energy rush towards the compulsive high takes away your ability to be logical, calm and diligent. Your focus shifts back to wanting more of the good feeling, getting attached to the nice numbers on your trading stats or your bank balance and so you shift away from focusing on flawless execution of your trading system which might spoil the nice numbers. You start rushing, short cutting the process intoxicated by that feel good feeling of the last win.
Similarly, if you have a string of losses, you don’t like it and that leads to you not wanting to feel that unpleasant feeling and so you try to force your way out by taking second rate trading setups which in the end just leads to more losses and quickly you once again feel stuck in a vicious circle.
In both cases your focus shifts away from flawless execution of your trading system.
When you are being highly positive, then your brain will block out 50% of your reality to remain positive, excited and happy. Your objectivity is clouded, you only see great trade setups but the Super(wo)man filter doesn’t let through the warning signs that the great setup might fail because the focus has shifted from diligent execution to feeding the addiction for that feel good sensation.
And that is the reason why after a string of winners traders often get a really bad trade. Consequently after the exaltation of the high they skid to the opposite side of the spectrum, feeling sad and depressed.
Now the same thing happens again. The sadness filter is now filtering out all the positive things in your trading reality in order to maintain that perspective. You can’t remember past good trading results, you don’t see the progress you have made over the years and you feel you will never make it. All you can see is your dreams floating away and with every losing trade you pick you essentially become a losing trade magnet.
I mean, think about it, how do you pick trades when you are in a highly excited state? You are blinded by the promise of riches and good and you will ignore every possible warning sign that the trade is about to turn into a bad loss? Traders who are already progressed with their self-awareness or mindfulness work actually report that they have fleeting thoughts such as I should stop now or I don’t know it doesn’t feel right or similar thoughts but didn’t listen to them.
And then sure enough low and behold it all turns to crap.
Or have you ever seen a great trade setup and were so pessimistic and thought this will never work, so you don’t take it and then that was the trade the trade of the day? Anyone relate to that? Of course you do..
And then the next trade sets up and because you missed out the last time you jump in and low and behold the trade once again turns to crap. And now the vicious circle has begun you now stop following your strategy but try to force things and everything just gets worse and you start doubting yourself once again, if you will ever make it.
This all only happens when you are operating from either end of the emotional pendulum. Moving back into a neutral calm mind, perhaps you can now see that the market conditions have changed or that all you need to do is refocus on a flawless execution of your strategy, and that losses are just part of the business expense and that even the best traders have a bad day that it might be uncomfortable yet ordinary and part of any professional trader’s life.
Perhaps in the neutral centered state you can draw on the deep knowledge that you had great trades in the past and that the good times will come and go as the bad streaks come and go.
When you are in neutral centered, you have all of these amazing things happening to you. There is no more self-talk going on, there is just watching the charts and quiet observation, no frowning, no biting lips, no grinding teeth, just purpose, grace and ease.
Your true strength as a trader lies in your awareness of where you are on the scale of your emotional pendulum after each trade and then quickly readjust before taking the next trade. The good news is anyone can learn to avoid those extreme highs around which your trading accounts and egos get hurt.
Within the neutral centered-ness of calm lies your incredible ability to recuperate, adapt, to keep going in the fact of surprising change.
I promote mindful consciousness in trading, because the more mindful and conscious you become the faster you are able to move back to the neutral centred calm state and the more profits you will generate.
Now, who is up for making more money with trading? Of course, seems pretty obvious, it’s everyone, that’s why you are reading this.
Do you want to improve your Trading Performance? Join us for the High Performance Trader – Mindset Mastery Group .. more details at www.highperformancetrading.com.au
Happy New Year and let’s make 2019 all it, we and our trading, can be…
Many traders tell me how much they love trading and yet they are in so much pain about it.
They believe if they can get over of their painful emotions, then they can become disciplined and patient, they will be able to become consistently profitable.
But it is not the emotions that are destructive to your trading success. It is your ‘EMOTIONAL REACTIVITY’ that is causing self-sabotaging behavioural patterns.
What is emotional reactivity? Following is a checklist with some examples. Time to get real and check how it shows up in your life! If you display any of these patterns of emotional reactivity in your day to day life, there is a high likelihood it will spill over into your trading life. Trading really is just a mirror of life in general.
Okay, so here we go:
— Being ‘hooked’ by trading so that it is all that you think about (obsessive much? Addictive behaviour is not restricted to drinking a bottle of wine every night or guzzling a whole block of chocolate in one go – even if they say that you absorb less calories when eating a whole block :-p. Addictive behaviour can lead to overtrading and trying to ‘force’ trades)
— Wanting trading to be easy and perfect, resenting any challenges that come up (did you read too many fairy tales? Interesting enough many of my successful traders lean in and strive on the challenge of it rather than trying to avoid it)
— Feeling ‘triggered’ when things don’t go your way (control freak much? Starting to roll on the floor and stamp your feet like a little kid?)
— Feeling perpetually the victim and at the mercy of others / events (are you at the cause or at the effect of your life?)
— Feeling overwhelmed too often and out of proportion to the event (having an unexpected expense is an inconvenience.. it is not life threatening! Neither is a trading loss…)
— Blaming others (yes.. those mean twitter gurus who said you should go short when you knew the market is a long, and not to mention those pesky brokers.. lol)
— Justifying why things are the way they are (I just want my trading to be simple! yeah.. me too .. but trading is not simple.. the world of finance is complex with many pieces of the puzzle to it and I love the challenge of it!)
— Holding on to what is rather than looking for how to change (I can’t possibly look at other markets, even if they may be more suitable for my personality and skillset. Intermarket Analysis? Too complicated… yet so useful to improve your trading results)
— Being more worried about what people think than doing what needs to be done (If I take that loss then my wife will think I am wasting our money, and then … )
— Having to have the same things repeated to you, and be reminded of your responsibilities, and then resenting the reminders. If you are not responsible in other areas of your life, there is a high possibility you will not be responsible with your trading. (make a list of all the ‘messes’ in your life. A mess is like a lock on the gates to abundance, as in the back of your mind you will always be pre-occupied with it and so using up valuable brainpower) — Being dramatic, sulking, emotionally withdrawing (even though it gives a feeling of importance, the illusion of being in control and temporarily makes you feel better, you are doomed to missing out on the the trade that could have made all the losses back.. )
— Expecting others to be endlessly patient with you
— Being upset when someone stops trusting you, when you have not been trustworthy
— Assuming your emotions are more important than anyone else’s (no one understands me .. boohoo) — Discounting or being oblivious to how someone else may feel, esp when you let them down
— Avoiding dealing with the realities of life (safe vs risky problem – hedging a losing trade rather than closing it out in the hope not needing to take the loss, but somehow struggling your way out of it – rarely works, lol, I tried it.. )
Trading Success really is MASTERY of your mind, and your emotions (note: it is NOT the absence of emotions!). Stuff is happening all the time. There will always be a challenge. There will always be a problem. There will always be a setback. You will always stuff up in some area. If we’re emotionally reactive to all of this, trading success is, to say the least, elusive.
We must practice the art of EMOTIONAL MATURITY. Stuff WILL happen – be prepared for it. We CAN choose to deal with it constructively. With a reminder to ourselves that stuff was always going to happen, so don’t be so surprised /disappointed /shattered /dramatic.
Sulking. Anger. Drama. Blame. Giving up. Like somehow the world is going to suddenly stop and go: You’re right! Of course you’re the victim in this! So sorry! Of course you don’t have to grow. Or ask anything of yourself. Or be thoughtful. Or hear feedback. Or act with maturity and grace.
Just stay emotionally immature and reactive to everything and let the Universe magically make life easier for you (yes, you are special..), so you don’t ever get triggered and life stays full of unicorns and fairies and trading success somehow shines upon you without you needing to deal with the challenges we all have to conquer! Which means, from now on, the world will always agree with you, pander to your every emotional outburst, apologise swiftly and expect nothing back, never ask you to do what you said you would, and never ever expect you to be a grown up.
The key is not to expect the problems to go away. It’s to be the trader who handles whatever life throws at you, in the face of fear, in the face of disappointment, despite the unfairness of it. Jim Rohn already said this, he might have gotten it from the bible .. or life experience.. Because we can handle whatever comes along. There is always a way. Just most of the time the way leads outside of what we already know.
Practice mindfulness. Being present and aware of your habitual reactions. Ask yourself: How does this reaction serve? Is there a way to react that is a response? That is, it’s reflective, thoughtful, in proportion to the event, and shows I can handle this? I can improve from this? I can do better next time?
Seek out challenges that are good quality challenges. Lack of time, money, happy relationships are not good quality challenges.. they are what we call safe problems. If you want to be a successful trader, you have to seek out good quality challenges, how can I get more skilled? How can I improve my thinking? How can I become more strategic?
Ask yourself: How can I show up right now so that my future will look the way I designed it? That I show myself I have grown? That I am making progress? That I am moving towards being a successful trader?
Emotional Reactivity versus Emotional Maturity. Trading Success really is an inside job.
Let 2019 be new choices to welcome this into our lives and our minds and hearts so that we can become the trader we are aspiring to be.
PS: If you want to learn to Master your mind and your emotions, the Fierce 10 Trading Mindset Transformation Challenge can help.