The Glitch Who Stole the Mind That Trades

12/24/2012 6:00 am EST


Rande Howell

Founder and Owner, Trader's State of Mind

In trading, your trading account is in your face, forcing you to confront daily the mental conditioning that separates you from success, writes Rande Howell of

Sabotaging Your Best Efforts Without Understanding Why
There is both a biological underpinning to this common problem in trading and an untrained mind blinded by mindlessness that keeps getting sabotaged by an unseen self-limiting pattern. First, let's take a look at the biological bias that sets the trader up for having his trading mind ambushed.

Hidden Beliefs Taking Over the Performance of Trading
(Vignette adapted from a recent consult with a trader)

“This happens all too often to me—it’s a repeating pattern that I can’t see happening until it’s already too late. I don’t even see how I fall into this trap. And it is the missing puzzle piece that keeps me from becoming the trader I know I can be. It just seems to happen to me automatically and it occurs most often after I’ve had a few good trades and am feeling good about myself. At the start of the day, I’m prepared and have a positive attitude. I’m ready to trade; I’m ready to get it on. I know what I’m looking for—it’s well defined. I’m looking at my screens and waiting to jump on the kind of set-ups that are called for in my trading plan. I’m ready to trade.

I’ve got to be trading to make money, so I need to be trading—not sitting around. Time ticks by as I wait for acceptable set-ups, but I stay ready—poised to act. Often after initial success, it takes what seems like an eternity for another set-up to appear. I want to trade but nothing appears that’s workable. Time passes. I’m waiting, waiting, waiting for a set-up to appear so I can trade. Time keeps crawling by as I anticipate a set-up showing up—I’m ready to trade, I’m just waiting for it to happen so I can trade. Finally I see a set-up—I’m ready. I pull the trigger.

It’s only then that I realize that I’ve jumped into yet another trade that, in hindsight, was not a good set-up for me. I don’t understand why I keep on doing it. I know what my rules are and, if things are going well, I’m on it. But I’ve been doing this for years and it is what keeps me from getting to the next level in my trading. I don’t have a clue why it keeps happening.”

NEXT PAGE: Traps Awaiting the Trader |pagebreak|

The Glitch: The Brain of the Trader is Wired to Pursue, Not to Wait for the Trade
There is both a biological underpinning to this common problem in trading and an untrained mind blinded by mindlessness that keeps getting sabotaged by an unseen self-limiting pattern. First, let’s take a look at the biological bias that sets the trader up for having his trading mind ambushed.

A common trait that is burned into human DNA is to pursue prey. This adaptation was powerfully successful over eons of time with our ancestors so that it was folded into our genetic predisposition. This hardwired trait shows up in trading as “chasing the trade.” First, the hunter is poised for action and ready to act just like our trader in the vignette above. Once the hunter spots the potential prey, he (and the untrained trader’s mind) reactively becomes fixated on the prey and begins pursuing the potential prize.

Everything becomes focused on the readiness to chase down the object of fixation. Because his focus is so absorbed by the object of the hunt, the rest of the world around the hunter/trader disappears. The arousal caused by testosterone and the thrill of the hunt overwhelm the disciplined impartiality needed to assess market criterion effectively. In the world of trading, this is a set-up for sabotage. Ancient advantage, burned into DNA because of its success, has been turned into a liability in the new world of trading.

This is simply a biological bias that has to be anticipated and managed to maintain control of the mind that trades. By developing emotional regulation skills and awareness of the precursors in the hardwired pattern that leads to the fixation to chase the trade, the trader can learn to spot the arousal of this instinct. It does take work to change old deeply-habituated patterns burned into DNA that were once useful, but are not effective in the environment of trading. But this biological bias is usually not alone in creating problems in trading. The mind that the trader brings to trading also acts as a co-conspirator.

Our Notion of Work Sets the Trader Up for Sabotage
Going back to the vignette, notice that the trader wants to be trading, not standing around waiting. If he is not trading, he’s not making money, right? And there is an urgency to get into a trade (so you can be working) rather than to manage the mind that observes and assesses the quality of probability. What is being exposed here is a faulty assumption (turned unquestioned belief operating out of conscious awareness) that "working is doing"taking care of business. If the trader is not busy doing the business of trading, then he is not working.

NEXT PAGE: The Problem & How to Solve It |pagebreak|

This is the typical unexamined assumption that drives many traders' inability to trade effectively. Work is not about how much you get done. Work is about your capacity for the coordination of effective action. It is not about being busy, accomplishing a bunch of stuff, or taking action when it is not warranted. The work of trading is about coordinating and effectively assessing the elements necessary to produce high probability trades. It is not, by itself, about the act of taking a trade.

This understanding of work has as much to do with waiting purposefully and patiently for conditions to set up as it does with pulling the trigger so you can get into a trade and manage it. This is the work of trading. This is called waiting for the markets to show you what it will give you— rather than attempting to take from the markets.

In this notion of work, often not trading is actually doing the work of trading. This requires a seismic shift in the way many traders understand work. The old notion of “I must work hard for my money or to be successful” simply does not bring success in trading. In successful trading, bringing an effective mindset to the performance of trading includes a patient, observing mind. There is no urgency to act before conditions are met.

Notice how the biological bias burned into the trader’s very DNA to chase the trade combines with a faulty cultural (turned personal) belief that to be good in trading, you must work hardrather than effectively. It is this “perfect storm,” where an ineffective belief about what constitutes work becomes fused in the trader’s neuro-circuitry with a biological predisposition to chase prey that sabotages the mind that the trader brings to the act of trading.

How Do You Solve This Problem?
First you notice the pattern. The brain creates programs that, once built, run automatically and out of working awareness. That is the job of a brain that we inherited from our ancestors. These programs are rooted in pattern-recognition and reactive response to the fear of missing out (in this case jumping into unwarranted trades). You have to observe the problem pattern before you can begin to change it.

If you are just beginning to investigate mindfulness in your trading (learning to observe the pattern), start by observing your body (i.e. your breathing, your body tension, and your heart rate). That will eventually lead you to the trading mind where self-limiting beliefs are given voice. You will clearly hear these “voices” when you berate yourself after a loss. All these programs and self-limiting patterns created by the brain are emotional in nature.

NEXT PAGE: Rewire Your Mind for Trading Success |pagebreak|

And because emotions are biological in nature, they show up in the body and can be observed as physical phenomena. Fear of missing out will show up in the body as accelerating pulse, faster shallow breathing or holding the breath, and the build-up of tension in the body. This is the arousal of the emotion, and this is when the emotion can be interrupted and regulated before it hijacks the trading mind.

When the emotion is calmed down, you can begin to approach the mind (your beliefs about your capacity to manage the uncertainty that you bring to trading). It is in observing the mind that you discover what beliefs actually are driving your trading. If they are effective beliefs for the performance of trading (the management of uncertainty), you will see your trading account grow. If they are ineffective beliefs, then you will see your trading account stagnate or shrink.

It is here that the trader will find it necessary to commit to self-development of the mind that trades. You discover that no one comes to trading with a mind ready-built for success in trading. This is a myth. Instead it has to be developed with the same rigor that you use to develop a sound methodology. What you do discover, though, is that in the same way that the brain has built programs for avoiding the fear of uncertainty found in trading, it also has programs burned into DNA (and accessible) that provide the discipline, courage, patience, and impartiality needed to build, block by block, a mind capable of managing uncertainty, risk, and probability.

The programs are there. Your contribution to your trading system is to develop the mind that runs your methodology and your platform. It starts with simple awareness of problem patterns in your trading, learning emotional regulation as a skill, and then developing applied Mindfulness so that you gain access to the empowered programs that lead to a mind re-engineered for the rigors of trading.

And what you discover is that trading forces the issue. In many endeavors in life where a trading account does not measure the effectiveness of the beliefs you bring to the management of uncertainty, you can get away with fooling yourself for long periods of time. In trading, your trading account is in your face, bringing into stark relief what separates you from success. And your job, as a designer of mind, is to re-organize the existing programs that your brain either inherited or created into a mind built for the management of uncertainty and probability.

Who would have guessed that trading was the ultimate avenue to personal development?

Rande Howell can be found at

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