Managing the Mind That Trades: Micro Management of a Trader’s Psychology

And if you do bring an intentional mind to start your trading day, what happens to it once you begin your trading day? What is your plan to prepare the mind so that you maintain excellence of execution? Preparing the mind for the trade day is not a sprint where there is initially concentrated effort for a short duration. Rather, it is a marathon where the runner has to take stock of his faculties at various points in the race and manage them for the duration of a long race.

As much as traders hear about how important emotional and mental attitude is in the performance of trading, very few traders actually manage the mind that trades as they move through the process of a trade. In the Traders State of Mind training programs I teach, a considerable amount of energy and training goes into preparing the mind for the trading day BEFORE the day starts. This becomes the foundation from which the trader learns to manage the mind WHILE he is in the process of trading.

In order to achieve a calm, disciplined impartial mind from which to trade (the Traders State of Mind), a trader must be vigilant. This aspect of the management of the mind is focused on getting the brain and the mind ready to trade. Typically, preparation for the trading day begins the night before. And preparing the mind continues when the trader wakes up and before he gets out of bed.

Then, always, a period of time is devoted to mental preparation and rehearsal that includes a prayer/meditation/centering period where the trader tunes his mind into the peak performance organization of self that is suitable for trading. It is here that the trader can volitionally construct a mind rooted in calm, disciplined impartiality.

With his mind now calm and ready for trading, the trader starts his day. The earlier preparation readies the trader for the trading day so that he/she is fit to trade from a state of mind grounded in calm, disciplined authority. However, this is not enough. This calm, disciplined authority has to be maintained through the cycle of a trade. Now, let’s take a look at this cycle.

Psychology and Process Conjoin

All that preparation is washed away within a short period of time if the mind is not trained for the process of the trade. What I have found is that the early preparation stage of mental readiness is good for about 30 seconds to 30 minutes. This is where a particular psychology of performance needs to be integrated into your actual trade plan.

Your trade plan and your psychological plan are not separate. Your mind is an integral part of the trading system. It is what drives your platform and methodology. So this driver has to be trained to drive his system proficiently.

The following process represents critical stages while trading where you need to be psychologically prepared (trained) to manage the circumstance of the moment.

Watching For Set-ups

Many traders become immediately blinded by an insidious bias while in this stage. With an urgency to act, they approach their charts seeking set-ups. This very urgency to act contaminates the mind that is supposed to be patiently waiting for set-ups. Instead, believing that they have to be “doing something” to be trading, the skill of patience (necessary to wait for trades to come to them) is vaporized from the mindset in a flash and replaced with an urgency to trade. And, suddenly they are chasing trades that are dubious decisions at best.

This bias gets them into trouble because it SETS THEM UP to take trades not in their trade plans or has higher risk to reward parameters than their trade plan dictates. Many a trader has done a good job of preparing the mind for the trade day, only to sabotage themselves at the beginning of the trading cycle due to this bias.

Therefore, this point is critical to managing the psychology of the trading mind. Your job is to patiently wait for set-ups to come to you. Your job is not to make things happen.

A Trade Warms Up

Have you ever noticed what happens in your mind when you start seeing all the confirmation coming in as you watch a possible trade set up? The warmer the trade gets, the more an untrained performance psychology is tested or seduced. This is a moment to take pause and regulate your psychology so that, in your excitement, you do not get in early.

Or, perhaps, in your anticipation (untrained performance mind) you keep seeking more and more confirmation until the trade potentiality is over. Is the mind that watches the set up calm, patient, and disciplined? If not, you need to train yourself to be.

Trade Entry

As you go to pull the trigger, what is your mental composition? Are you pulling at the bit to jump in (euphoria) or is your trigger finger paralyzed and incapable of clicking the mouse (hesitation)? This is a moment for which you must prepare. It is not a moment that is pushed aside until it cannot be ignored. All the “man-up”ing you can muster at this point is a dangerous exercise in futility if you have not developed the mind that is prepared for this moment.

Order Confirmation

When they hear that “cha-ching” of an order being filled, something dramatic happens in the mind of many a trader. They are now committed to the trade and there is no way out of it, except through it. Risk is real now and you could lose your money. This is where many traders start a downward spiral in their ability to manage a trade effectively. Their mind has not been organized to bring the proper elements together for trade management.

Traders need to take a pause here and recollect themselves. They have now moved from looking for opportunities to exploit (offensive coordinator) to defending turf (defensive coordinator). It is at this moment that it is critical for the trader to reassert his performance psychology, or it is going to be a long ride down.

In the Red

There is nothing more unnerving for the evolving trader than to watch a trade in flux. The trade is bouncing around and spending a good bit of time in the red. You can see the red indicator light and can feel the fear and excitement. The mind starts really decompensating and the resolve to adherence to the trading plan is taking a beating.

Preparing for this situation should be part of every trader’s practice. The trader must learn to regulate it, or the trader’s performance mind moves from focusing on execution to being fixated on losing capital. The trader’s job is to maintain the mind that is focused on the performance of execution. Yet, an emotional hijacking is underway.

This is why this moment in trading needs to be anticipated and trained for. Otherwise, it keeps you from becoming the trader you could be.

Taken Hostage by Marginal Profits

This is one of the biggest moments that separates a scratch trader from a consistently profitable trader. If the trader has not managed the mind that manages the trade before this moment, there is a powerful urgency for him to take the profit early from the trade, while the trade is still profitable. Then when he cashes out and feels the temporary emotional relief, he watches the trades move to his targets – just like his trade plan outlined.

The problem is that the trader’s emotional state has not been managed somewhere along the progression from trade entry, to being in the red while in the flux, to the moment of profitability. Any of these moments can become a signal that triggers the need for practicing emotional state management.

Maintaining these critical trade management moments, to the trained mind, are planned for and practiced. The key emphasis here is training. The trader is taking the mind he prepared before trading began and reasserting it – anticipating these moments so that he is prepared for the stressful conditions of trade management.

Exiting a Trade – Taking a Loss

During the process that is being laid out here, the emphasis is on management of the mind that executes the trade – and not on whether you are winning or losing. If you manage the mind that trades so that you execute your trade plan from a peak performance state of mind, your methodology will take care of the winners and losers. Your job is to manage the mind that trades.

The questions to ask when taking a loss are: (1) Was it a method mistake? (2) Was it a psychological mistake? Or (3) was it simply being on the wrong side of probability? If it is a method or psychological mistake, then you learn from the mistake (which is how the brain learns) rather than dwelling on the loss and deepening your fear of losing. If you don’t learn from this, you bring this fear of loss into your next trade. And that contaminates the mind that trades.

Exiting a Trade – Winning

One of the most dangerous things that a trader can do is to get excited by a win while he is still trading. (After your trade day is over is the time to celebrate the win.) While trading, the thinking mind is greatly influenced by the emotional state that you bring to the act of trading – particularly to the evaluation of set ups. When you feel good, you are bringing a mind fed by euphoria into the evaluation of set ups. And euphoria will cause you to believe with certainty that the good times are going to roll and then you no longer can evaluate your trading risk effectively.

When you win in trading, the calm, disciplined impartiality you worked to achieve before you started trading is maintained by regulating your emotions and mind. Until the calm, disciplined impartiality is re-established, you are not fit to trade with a mind designed for trading success.

Reviewing Your Trades

Particular emphasis and attention needs to be placed on the mind with which you review your trade day. Are you beating yourself up for the mistakes you made or the lost opportunities you now see in your charts and performance? Or are you acting as a kind, wise teacher to yourself? The latter creates an emotional space for learning to occur while the former creates an emotional vortex that keeps emotional reactivity at the forefront and compromises the capacity for learning

Toward a Peak Performance State of Mind

This is the work of the inner game of trading. Once you establish a process that brings forward into your working mind a peak performance state for trading (calm, disciplined impartiality), then you can begin to practice it in these specific moments in the trading cycle.

The mind you brought to trading is simply not going to be the mind that is going to produce success in trading. The whole notion of winning has to change. Success in trading is not about winning (or losing for that matter). It is about the psychology you bring to execution.

It is about the mind that you bring to the performance of trading, so that you execute the trade with excellence. There is no “need to be right” about the trade, only its execution. If you do this, your methodology will take care of the winners and losers – and the money in your trading account.

To learn more from Rande, be sure to check out some of his other articles at