Mental Tips of Trading

4 de out. de 2020

Introduction

- To lower stress levels, trade less and get away from watching every single price chance. Day traders could trade only the open and closing hour, swing traders could just take opening and closing signals. You could go from every tick to just checking in every hour or so if you have options or hard stops in. Most of the days, trading is random noise, and randomness will cause stress. Focus on your timeframe, and only the quotes that really matter when they matter.

How to not be stressed while trading?

- Only trade when the odds are in your favor. It is much less stressful trading this way.

- Do not blame yourself for losses if you followed all your rules. The market giveth and the market taketh, just keep taking your entries and exits.

- If you don't know what to do, DO NOTHING.

- Do not listen to any unsolicited advice about the trade you are in. Follow your own plan and shield yourself from distraction.

- Know yourself as a trader, and only take your kind of trades. Take trades that will leave no regrets because they were good trades, regardless of the outcome.

- Believe in your ability to follow your trading plan. You must have faith in yourself to lower your stress level.

- Keep your EGO our of your trading, run it like a business, with the profits and losses as your focus and not your ego.

Coherence

- Your brain and heart works the best when there is synchronization between all systems, this is called 'coherence'. Researchers throughout the '90s established that with every beat of the heart, intricate messages are being sent to the entire body.
- As people experience emotional reactions like frustration, irritation, anxiety, or anger, heart rhythms become chaotic, which interferes with communication between the heart and the brain.
- If you are not in tune with yourself, you can cause DORMANT fears of failure to awaken, and you will undoubtedly miss good opportunities through making IRRATIONAL trading decisions.

Emotional Intelligence in Trading

- The Emotional Quotient (emotional intelligence) is our ability to recognize and assess our own emotions, to manage these emotions in order to achieve our purposes.
- EQ is also the ability to discriminate between different emotions of the people and label them correctly, by using the emotional information to guide thoughts and behavior. Here
How does this apply to trading?

- Emotional intelligence makes a great part of a trader's performance. It has proven that the human brain has the power to increase EQ by effort (trying, being persistent, following rules, backtesting strategies) and education (studying, performing research).

- Self-awareness: Every trader should be aware of his/her qualities, strengths and weaknesses so then he/she could manage better his emotions and take right decisions when trading.

- Motivation: Very well motivated traders are more challenged and are more abled to take right decisions in the market.

- Self-control: Controlling emotions is a crucial element of the trading process. It is important for a trader to regulate his emotions by targeting them to a proper and emotionally balanced activity.

- Being able to monitor our own emotions is perhaps the greatest skill we can have. Traders who can handle their negative emotions are the most successful ones.

How to stop being impulsive and over-trade

- Did you know that there is an actual ANATOMY to 'Impulsive Emotional Hijacking'.

Wang was prepared. After careful observation and charting, he planned his trade - and knew what he was looking to do. Now he is going to trade his plan.

He brought his charts up and declared, "I'm going to make money today.", he said it with the confidence of his winning mindset as he glanced at the P/L of his trading account.

Just sitting there watching the pre-market activity, Wang could feel the excitement building :vince: . So much opportunity, and it looked promising. Wang was ready to take advantage of it, this time he was going to build his account up -- not blow it up.

As the market opened, he sees that TSLA FB SPY just taking off like a rocket. "Man, that was sweet. I could have rode that one!" He muttered to himself as his excitement grew. He IMAGINED what the money would look like in his trading account. It felt good, then he saw another potential trade. "There was real opportunity this morning." he thought.

Wang sits on the sideline while others were taking advantage of the action, and that got his competitive JUICES flowing. Then another one came up, not willing to let another one get away from him, he jumped on this one. Almost immediately, it took off.

"YEESSSSIRRRRRR"

Then suddenly it turned against him, heading for his stop. He caught his P/L in the corner of his eye taking a nose dive. WANG felt a surge of energy and resolve flow through him, "It'll come back. I'll give it some more room, I can feel it." So he moved his stop to let this one play out. It crashed right through and stopped him out.

Now, after this loss... He wanted to get even, so he quickly found another setup that looked good to him and jumped in ready to win and vindicate himself. That trade turned against him almost immediately and stopped him out, sounds familiar?

Over-trading, or impulsive trading (to be more accurate), is a common problem. It blows up trading accounts too many times to be counted.

It is common 'wisdom' that a trader needs to plan his/her trade and then trade his/her plan. But just like WANG in the example, traders end up jumping into trades that they have no business being in.

They know what to do... They just cannot do it in the heat of the trade. It's perplexing.
WangYesterday at 7:56 PM
Notice, initially, WANG starts with the best of intentions. He does his homework, studies his charts, and planned his trade with the intention of trading his plan. We know that he did not do that in the heat of the trade, but we do know what he started out with a credible plan. Then something happened, but what?

He started out by ATTUNING to the market so that he had a feel for it. Then he took the first step into his personal abyss - He declared "I'M GOING TO MAKE MONEY TODAY." This is an affirmation and visualization that many traders make as they prepare for their day and it is a mindset that they keep engaging in throughout the day. Their minds are focused on making money today, you can hear the urgency - TODAY.

The problem with this line of thinking is that you DO NOT control whether you win or lose in trading. If you keep pushing that you are going to win, when you have ABSOLUTELY NO CONTROL over your declaration, what do you think is going to happen? Your survival brain eventually REBELS against you.

Let me take you down the rabbit hole again -->

WANG is an alpha personality, he believes that his will should prevail and that he can make winning happen.

He came by that attitude honestly as he was a man who always strived for success, and now he has focused that energy on trading. In his other approach to life prior to trading, he knew how to win, to make things happen, and (especially) not to lose. It served him well, until now.

WANG's identity is built around winning - not managing probability. His determined and forceful attitude molded his personality. The problem is that this mindset, forged by winning repeatedly, did not prepare him for trading environment where randomness of the markets prevails.

The toughest part, though, was losing. WANG hated to lose, and that trait manifested when he revenge traded. His grit simply would not let him lose, he would attack even harder and determined to get his losses back no matter what.

What I am asking YOU to see is the short fuse on the alpha's winning mindset. It happened so fast and the hijackings was so natural to him that he never noticed it - until after the damage was done. Yep, he done blew up his account. :cryroll:

How do you fix this mentality in trading?

It comes down to self-mastery, where winning becomes focused instead solely on landing on the right side of the probability and losing only means that you have landed on the wrong side probability.

Are you ready? --->

- While trading, there is no thrill of winning, nor agony of defeat. It was only probability - either way. What matters is the mind you bring into the moment of performance. This is the game changer, it is the psychological edge where you are no longer PROVING yourself.

- You are only performing, that is the mind that gives you the edge of what's possible. A new kind of mentality has to rise from the impulsive blunders of the past. This one is rooted in PATIENCE.

- Instead of stalking opportunity, the new WANG waits in ambush for the opportunity to COME TO HIM. Like I always say, be a sniper and not a machinegunner.

Trading is about embracing uncertainty, while the brain you brought to trading is wired for certainty, prediction, and control.

Rewiring your brain begins with calming the emotions that coordinate action/behavior between the trader and the environments of the market.

"I was doing so good, my mind was in the zone and it felt like a state of flow. I made $1200 in the morning and stopped for the day, just like my trading rules dictate. Couldn't have been happier. Wow, this was really working!"

The very next morning ---> "I'm in a good mood and ready for the day, then I turned around and gave all my profits back - and then some. It's baffling, I thought I had my head together but before I knew it - I got stuck into a vortex that sucked capital right out of my wallet. Why does this keep happening?

It's a common problem.

- Most "students" of trading seek consistent profitability on a regular basis. You get some momentum going and begin to see your trading gel. Your confidence begins to grow, showing that you can, indeed, make consistent money by trading. Then it just blows up right in your face, not only do you lose the gain you made - you lost some more. Often a whole lot more, one minute you have a growing confidence that you can do this trading thing. The next minute, that confidence burns down and frustration grows from the ashes.

So, what's behind the self-sabotage?

- Winning makes you feel good, and you want to win - to make money. When the trader in the example "wins" $1200 in a single trade, it made him feel good. Why? Because winning triggers a hormone called 'dopamine' (at the center of the reward chemistry of the human brain), and that is the problem.

- The euphoria of "feeling good" is an emotional state that causes thinking to become skewed into believing that the good times are going to roll on forever and that he/she (trader) has the power to control the outcome of the trade. However, winning (in this trader's understanding) produces this sense of power that is dangerous to the management of uncertainty.

- The emotion of euphoria that appeared when the trader won also warped the kind of thinking and analysis that he/she was capable of producing as a trader.

- The winning trade led not to power, rather, led to euphoria --> over-confidence --> then caused the trader to believe he was making the winning happen.

- Factors that give rise to an effective trading mind are: Discipline ; risk management ; courage ; self-soothing ; and impartiality. Feeling GOOD has ABSOLUTELY NO PART in a profitable trader's mind. First thing to accept as a trader is that "feeling good" is not desirable as a trading emotion.

- You have to be able to notice if and when "feeling good" has started contaminating your trading mind, and that is way easier said than done.

Many traders believe that if they could get past their fear of loss, they would not have problems in trading.

But you would then only be able to deal with losses, you need to learn how to deal with winning and the over-confidence that can easily develop when a trader starts winning. You have to learn how to deal with the euphoria associated with winning. It's just the evolution of the trader beginning to adapt to the demands of successful trading.

Most impulsive trading is primarily rooted in the emotions of LUST, rather than 'greed'. Many traders experience the awakening of 'lust' (wanting more, more, and more) after winning and pocketing in money.

Greed is about wanting more than your reasonable share, so there is a balance between lust's "wanting more, more, and more" and greed's wanting more than your reasonable share, which plays into the phenomena of "giving it all back and more".

The potential of a successful trader's mind is in the balance and mastering the mind.

You can be the designer of the mind you bring to the engagement of uncertainty and risk, rather than its hostage.

No matter what you have been told, the brain/mind that you brought to trading CANNOT bring you success in trading. In fact, it will lock you into failure.

Rebuild the brain/mind against the WILL of your survival brain, because it is built for SHORT TERM SURVIVAL and gives you the signal that you need to be in control which you cannot due to market's uncertainty. Your survival brain is freaked out by the uncertainty, risk, and speed of day trading. You experience this as fear or aggression in your trading that takes over rational thinking in moments of stress. This will not change with experience or trying harder or trying to exert control. -- Your brain has to be RE-TRAINED.

If you can get your brain unstuck, your emotional part of the brain can be developed to engage uncertainty, risk, and the speed from a patient and disciplined response rather than the reactive response that is common among traders.

'Emotional Regulation' and 'Mindfulness' are the essential skills needed in order to adapt your brain/mind for performance in trading.

When trading, focus on what you can control. Let your MIND manage your performance.

We all understand that losses are hard. But the year is young, and there are lots of opportunities ahead to make it all back. The only thing is that the opportunities will ONLY appear to those that are PREPARED and able to MAINTAIN a sober mind.

Train yourself to approach trading in a way that's sustainable as opposed to letting it be something that consistently plays with your emotions and wears you down.

Meaning...

'Risk management and 'mindset management'.

It is crucial that you understand the market is NOT A CASH COW you get to milk whenever you want. The market is its own beast, remember that.

There comes a moment when a "struggling" trader has to acknowledge that what they are doing is not working. Your trading performance is not going to change until this realization humbles you to the core.

You have no control over whether you win or lose - but most traders are consumed by winning and losing. They are possessed by something that they can never control.

What you can learn, though, is to control the mind that you bring into trading performance. Let go of the illusion of 'control over outcome' and embrace building the mentality that you need to be managing uncertainty.