The attitude you bring to a trading loss is the key to transforming your trading, according to trading psychologist, Rande Howell of TradersStateofMind.com.
How you handle mistakes (and losses) in trading, both emotionally and psychologically, reveals your capacity to grow as a trader. Do you seek to learn from the mistake or do you want to avoid making another mistake (which, by the way, is impossible)? When you make a mistake in your trading that leads to losses or loss of profit potential, how do you react? How do you typically engage the mistake? Do you explore the mistake as a way of learning or do you beat yourself up for making a mistake? What quality of conversation do you have with yourself about the mistake—what does the mistake represent to you as a trader and your performance in the act of trading? When most traders answer the above questions, they discover they work with the mistake in a way that ensures continued problems in their trading performance.
Are you emotionally swept away by the loss and do you berate yourself for making the mistake (the typical way a trader acts), or do you curiously and thoughtfully examine the breakdown in the emotional and mental process of your performance that led to the mistake, and then re-construct the process from a sense of suspended time for a higher level of performance (the path of peak performance mind training)?
Failing Your Way to Success
Most traders are so blinded by a mental attitude of “trading not to lose” or “not making a mistake” that they cannot learn from what the mistake can teach them about the very mind that they, as a trader, bring to the performance of trading. However, if you want to develop the mind that trades, then you need to make better mistakes. The attitude you bring to the mistake opens and closes the possibility that the mistake represents. This is what “making better mistakes” means.
The mistake that leads to loss is simply a breakdown in the flow of coordinated action in the domain of trading. It is not a reflection of who you are as a human being (no matter what your self-talk may tell you), but, rather, an indication of the current organization of the self (your psychology) that you have brought to the performance of trading. Bringing a “trading not to lose” mindset to the breakdown creates a "no-learn" opportunity. But bringing a “curious and thoughtful examination” mindset to the breakdown creates the opportunity of learning—changing the effectiveness of the way the brain and mind engage possibility. From this vantage point, mistakes help you to see where you need to re-engineer the mind that you bring to trading. Mistakes, in this interpretation, become an opportunity for learning.
Mistakes, failures in performance, are going to happen because trading is about managing probabilities rather than predicting the future. There is no certainty to be found in trading, yet, most traders bring a highly biased mind that seeks certainty into the management of their trading (this is the very mindset that has to be re-engineered for increased successful performance in trading). And every time the bias of certainty is challenged, the integrity of a once successful belief (now hardwired into a neuro-pattern) is called into question. Here, you will find resistance to change. The catch-22 here is that if you avoid dealing effectively with the internal conflict generated by the mistake, you stay stuck in the very self-limiting belief and pattern that you want to change.
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