Moving Beyond Fear-Based Trading: Mastering Your Emotions and the Inner Game

If you accept the assumption that your trading performance is rooted in your deepest beliefs about the self, you then also accept full responsibility for the beliefs you hold that limit the success of your trading. This is where you recognize that you trade your beliefs. Most traders trade from self limiting beliefs that erode their trading account and their financial dreams.

It is not your fault that you are born into and adapted to these beliefs, but it is your responsibility to change and develop core beliefs about the self that drive a higher level of trade performance. These self limiting beliefs cannot be changed by superficial means. Unfortunately, because survival is based on fear and avoidance, our biology, our histories, and the formation of our sense of self conspire against the accidental formation of belief systems that trade effectively. Fear has to be mastered. This is pivotal to the development of the potential trader in you.

How do you actually master the fear and self doubt that are embedded into your deepest beliefs and, therefore, prevent effective trading? It starts with acknowledging that you have a problem with fear contaminating your trading mind. And you also must come to an understanding that, until you learn to manage your fear, your trading will not improve. It is at this moment that learning how to deal with fear and transcending it becomes possible.

It also requires a holistic approach. There are a number of different aspects to affect a long term change of beliefs, but rarely do you see how all the pieces of the puzzle fit together. When coordinated in a systematic way, you can build a set of tools and skills that transcend each singular skill. Let’s look at them.

Stage One – Breathing: Managing the Fear Response to Threat

In trading, fear arises when you experience threat. And fear powerfully motivates you to avoid discomfort. You will be triggered to run, hide, freeze, or submit in response to the threat (your trading). As you can imagine, this presents a serious problem for the trader’s state of mind. Suddenly the trader is possessed by fear and everything is downhill after that. Without the development of specific skills to manage the triggering of fear, the impulse of fear often sweeps the mind away in a cloud of self doubt and reprisal. This is the first step that has to be mastered – emotional regulation. Without this skill acquisition, getting to the deeper psychological re-organization of the core beliefs of your inner trader remains only a remote possibility. Understanding emotions, and how to manage them, becomes a foundational skill to the developing trader.

All emotions, including fear, have a biological signature that includes the very breath you take. Fear, as an emotion, is not to be confused with a feeling. A feeling is the subjective experience of the emotion. An emotion is biological in nature – it overwhelms our psychology. Because it is biological, it requires a certain kind of breathing to support and maintain the emotional state. Check this out the next time you are trading, in particular the specific times in your trading day that you experience fear. For instance, this could be just turning your computer on, evaluating set –ups, entering and managing a trade, or exiting a trade. Without this breathing style, the fear cannot be maintained.

This is the key to initial emotional state management. Learning to observe your breathing and to interrupt fear-based breathing and replacing it with diaphragmatic breathing is the first stage to emotional state management. Because your breathing has become a deeply embedded pattern, learning to breathe in such a way that produces a calm state of mind has to be re-learned specifically for the rigors of trading. It is the very first foundational skill that must be taught in preparation for emotional mastery.

Breathing is a tool, a band aid; it is not the change agent. But it is an essential tool to be used to re-develop the trader.

Stage Two – SafePlace: Taking Fear Off-line in the Mind

Once you have learned to physically manage the arousal of fear in the body, fear as a state of mind can be addressed. Instead of a calm, relaxed mind, most traders experience highly agitated states of mind. These must be interrupted and changed before the mind can be worked with. Otherwise you will stay stuck with an unruly mind that cannot be managed.

This is where visualization techniques can be of immense value (again, not solely). It is by linking calm, peaceful memories to emotion that the trader can train the mind to experience a sense of safety and calm – rather than the chaos of an untrained mind. This is a higher order of emotional state management. Now you have calmed the arousal of fear in the body so that you can manage the mental aspects of emotional states.

In the Ignite Your Spark Training for Traders, this mind-calming skill is called SafePlace. A calm mind, like breathing to produce a relaxed body, is not “the answer”. It is simply one piece of the puzzle that locks in another skill that will be necessary in order to get to the deeper psychology of your beliefs. Without self-soothing, calming the mind down so that it can be worked with is difficult. With it, a new skill becomes possible. This skill is Mindfulness.

Stage Three – Mindfulness: You and Your Thoughts Are Not the Same

With a calm mind, you can begin to slow down your thoughts so that you can hear them. Instead of avoiding your discomforts (so common in trading), you can become witness to them. No longer are they representations of who you are – instead, they become an internal dialog to be observed. The internal dialogue is not “you” – it is simply thoughts in your mind. You have given them power. Becoming witness to your thoughts is called mindfulness. As this skill is developed, there is a separation between the thought and the observer of the thought that is central to the development of mindfulness. You recognize that you and your thoughts are not the same.

This is a critical moment in your development. Mindfulness is the door that opens to a whole new world of understanding your mind and your identity as one potential organization of the self.

Stage Four – The Internal Dialogue: Your Mindless Identity

Mindfulness is a powerful tool. It allows you to become the observer of your thoughts rather than to stay in the self limiting beliefs perpetuated by the historical internal dialog that masquerades as thoughts in the mind. This internal dialogue is the voice of your self limiting beliefs. It is the “You can’t win”, “You’ll never make it”, “You’re not good enough”, and the “You’re going to lose” that fills your self doubt and fear-based trading. This aspect of the internal dialog in the Ignite Your Spark Training program for Traders is called the Inner Critic. It is not “you”; it is simply an element in your mind that has taken over your trading mind.

The other component that you, as an evolving trader, need to become aware of is the voice of your fear. This scared, child-like part of the self reactively dances with your inner critic. This is experienced is hesitating to pull the trigger, fearfulness while in a trade, or feeling dejected after a bad trade.

The development of mindfulness as a skill allows you to separate your sense of identity from the historical conversations that dominate the internal dialog. Once your identity is no longer fused with the internal dialog by fear, much more powerful elements of the self become available in your awareness. This is when the re-organization of the inner trader becomes possible.

Stage Five – Freed From Fear, the Mind as a Committee is Re-organized

Freed from fear, you are capable of developing your potential for peak performance trading. You are able to develop inner resources that have always been there, but are now available to your awareness. Now you are able to bring forth the inner resources of discipline, patience, courage, and impartiality. In Jungian archetypal language, the Ruler (discipline), the Caregiver (patience and compassion), the Warrior (courage), and the Sage (impartiality) can be brought into your awareness.

They are brought out of your mindlessness into the light of your awakening awareness. By developing these inherent potentialities within you, you change the composition of your internal dialog. It becomes richer, more nuanced. And your mind becomes like a committee – far more than the self limiting internal dialogue. The committee now includes the discipline, patience, courage, and impartiality to trade from a peak performance state of mind.

This is the transformation that the trader is seeking. There will always be an internal struggle going on within the trader’s mind. But you do not have to face it in fear. By developing the inner trader through these five stages, the trader can master his emotions and the inner game – particularly now that he knows one is going on in his mind.

Equipping Yourself for the Internal Struggle in Your Mind

Self limiting beliefs do not simply give up and go away. They are tenacious. As you develop your mind’s trading committee, there will be continuing conflict. The difference is that now you have the tools and skills to confront your self doubt, fear, grandiosity, and impulsiveness and master it. It is the development of this awareness through mindfulness that opens the possibility of transformation.

In much the same way that 95% of diets to lose weight do not work long term because they do not address the root causes of weight gain, so too most traders continue to lose money. It is in recognizing that a surface change in your trader’s psychology does not work long term that the door to deeper psychological change opens up. To change self limiting beliefs, a holistic, integrated approach is needed…one that integrates how body, mind, and spirit work cohesively together. Leaving one part out takes away a part of the puzzle that is required to build a unified method for developing a trader’s state of mind. Putting them together produces a methodology that gives you the edge in re-organizing your psychology into a peak performance state of mind.

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