The “Group-Think” of Traders that Blinds Them to What Really Matters
Have you ever listened to groups of traders talking about trading? If you have, you’d think (particularly to yourself) that everybody was hitting home runs and driving in runs. But that’s not the reality. The reality is that they all are covertly participating in a form of group-think called looking good to others.
Have you ever noticed that no one talks about the real task of producing sustainable, consistent income from their trading? Instead, they talk shop in a vacuum refusing to address what they are ultimately seeking. The one thing that is most important to the financial health and long term survival of a trader, they do not talk about. Their eye is not on the ball – their eye is being distracted by talking about the minutia of trading, saving face, and the self-deception of looking-good.
Meanwhile, another year goes by – and it’s January of another year already. Time is ticking by (do you hear it in your internal clock), chipping away at your capital (sometimes chomping) and your timeline (just how much time can you fritter away before you feel the financial noose tightening?). And, right there, hidden in plain sight, is the answer they you avoid acknowledging. This is the place where the vast majority of traders stay stuck – being blind to their blindness. And the cost of this blindness is their trading success.
Their trading performance keep giving the struggling traders feedback about their performances in the form of drawdowns from their trading accounts, underscoring the real problem they are avoiding in their trading — them. Yet, despite all the evidence, the “wannabe” traders refuse to look within themselves for the source of their performance problems. Instead, they focus on solutions outside of the psychology of performance. That’s not nearly as uncomfortable as acknowledging there is a chink in their armor that allows them to maintain their looking-good even while their trading capital erodes or stays stagnant. And the clock keeps ticking as the trader maintains their self-deception.
Meanwhile, they stay where it is safe – they talk around trading as if they (the one who is actually doing the trading) were not a constituent part of their trading. They talk the details of trading and, listening to them, a by-stander might be led to believe that everybody is making money. But what you’ve got is a bunch of really good Monday-morning armchair quarterbacks talking about the game from a spectator’s vantage point rather than from actual performance.
Waking Up to the Problem and to the Solution
The real question for the life-blood of an evolving trader, “Are you making consistent money?”, is not asked. And, if you are not making consistent money, another question begs to be asked, “How do you diagnose the problem and fix it?”. Once a trader has learned technically how to do his/her business, these are questions that take you to the core of the issue.
There is really no risk in the moment of performance to a spectator’s game face – only his looking-good in the fantasy league of fellow retail traders. What you will notice is that traders talk the game of trading, but not their performance in the game of trading. It is so much more self-effacing to talk about the game of trading (as if they were fans of the game, rather than participants), rather than to evaluate their performance as a function of their competence as a trader.
This discomfort of evaluating personal performance is so ingrained into traders’ thinking that they will avoid dealing with it as long as the capital they bring to trading will allow it – or until they have felt enough prolonged pain and discomfort that they come to the conclusion that they are the problem in their trading. (And they are also the solution to their trading performances.)
For most traders to wake up to this pivotal moment, a tremendous amount of time and money may have been squandered needlessly. So much short-term energy was focused on saving face by looking -good that the long-term development of the mind that can embrace and manage ambiguity without a sense of dread of being wrong was never embraced.
And this is what is required to become a consistently successful trader. Once this is recognized at a core level, it seems simple, until you realize that your biology and your psychological underpinning conspire against the development of this kind of mind. Your biology and the psychology that arises out of your brain’s survival adaptation to its environment is biased toward the self-preservation of the status quo, rather than developing a higher functioning human being.
What Got You Stuck in Performance Limbo in the First Place
The power of this primordial drive for self-preservation needs to be understood in a different context from a civilized conception of man’s recent history. The brain builds a self that is adapted to survive in a particular environment. It doesn’t care if that self thrives in that environment or not. It cares that the self (the bio-cognitive system that you have been organized into) survives. To the ancient brain that self needs to survive until sexual maturity, prevailing in your environment, and perpetuating the species through your survival success.
All successful strategies for dealing with the challenges of survival are hardwired into neural-circuitry as they are learned. Once wired they become an automatic response in the organism’s bio-cognitive repertoire. This means that successful adaptations to survival situations become a reactive dance between the environment and the self.
This is called the stress response. And this adaptive response mechanism was essential to our ancestors where danger lurked constantly in their environment. That danger was biological and life threatening. And the stress response, being reactive in nature, allowed our ancestors to have a better chance at surviving in an environment loaded with saber-toothed tigers and other predators. The problem is that this biological system of stress responses was built for another time and another environment than the world that the trader now lives in.
Unfortunately for the trader, the ancient brain (the emotional brain where all this stuff is wired), cannot distinguish between a biological threat and the psychological discomfort of uncertainty found in trading. And here is the kicker: When under stress, the brain is going to revert back to old familiar patterns learned long ago for the avoidance of pain. Remember, the emotional brain cannot tell the difference between biological threat (pain) and the psychological discomfort found in the management of uncertainty. The moment that the emotional brain perceives uncertainty (stress or the challenges of living life), it falls back to old familiar reactive patterns that have produced survival success in the brain’s formative period.
This is what the trader perceives as falling apart in the moment of emotional uncertainty. And an emotional hijacking is triggered instinctively long before the thinking mind can begin to manage the uncertainty of a critical moment, unless the trader re-trains the body and mind to respond differently.
The Psychology of the Trader is Railroaded by Primitive Emotional Belief
This is where the bio-cognitive system that “you” are (responding instinctively to stress) and the deeply held beliefs about your capacity to manage uncertainty (that give rise to your trading psychology) conspire against you.
The Emotional Brain makes a decision and the Thinking Brain produces an explanation to support that decision, no matter how irrational. Your Emotional Brain on stress (managing the uncertainty in a moment of ambiguity in trading) reverts back to primitive stress responses learned long ago. And then, your Thinking Brain (rooted in beliefs learned in your family of origin, culture, and circumstance) demonstrates those beliefs under the stress of the moment.
If you are a human being that trades who tries to save face by “looking good” to the outside world, you are operating from a belief system rooted in a sense of inadequacy, not mattering, unworthiness, and/or powerlessness. And as long as you avoid engaging those beliefs head on, your Emotional Brain will continue to hijack your performance mind in the clutch. It will instinctually avoid the danger of not being able to survive in the environment in which it lives. Short term, this strategy works because it avoids the threat – and that is all the Emotional Brain is interested in. Long term, this biologically induced strategy keeps you, the trader, locked in the limbo world of perpetual mediocrity.
Toward a New Construction of the Self
When a trader learns that self-honesty is the most powerful tool he/she can possess, then the game of performance can change. There is no shame in being a fallible human being. It is our nature. It is also our nature to learn from mistakes. It is this openness to making and learning from mistakes that must be cultivated. Attempting to avoid mistakes simply keeps us stuck in old self-limiting patterns.
These patterns were successful solutions when certainty of survival was the driving force. But now, in the brave new world of trading, the trader has to step out of the old comfort zone that has become his prison. And now it is time to embrace self-honesty as a tool and reconstruct the mind that trades. It is your choice – stay stuck in old self-limiting patterns or intentionally and consciously grow new ones, adapted for the world of uncertainty found in trading.
To learn more from Rande, be sure to check out some of his other articles at TradersStateofMind.com.