The Secret to Harnessing Emotions for Peak Performance Trading

“You can deny reality, but you cannot deny the consequences of denying reality.”  Ayn Rand

“If I could just keep my emotions under control, I’d be in a much better place than I am now.  It just seems like it happens over and over again.  Success is just around the corner – I can smell it – but I just lose it at the wrong times in my trading.  I’ve read all the books and tried different ways of controlling my emotions, and they help for a while (at least they make me feel in control), then it’s back to getting rattled in the heat of trading.  I don’t know what else to do, and I don’t want to give up. I’d be achieving my dreams if I could only get past this problem.”  [A recent email from a struggling trader.]

As smart as they can be in their knowledge of trading, traders remain vastly unenlightened concerning the power and role of their emotions in trading. This misunderstanding costs them the very edge they attempt to develop using the knowledge-based tools they acquired for trading.  Knowledge-based traders continue, almost hypnotically, to fail to account for the impact that emotions have on performance, even when their trading account suffers.  Then they remain in a fog about why they are inconsistent in their trading and seek to push their emotions further away from their trading.  The cost of this continued blindness is plainly reflected in their P/L statements – but they deny it.  It would seem that a reasonable trader would listen to the logic of his trading account – but they do not.  The need to control is so great that it blinds them to what is staring them in the face – if they only had eyes to see it.

The biggest mistake that most traders make is to assume that emotions can be controlled by willpower (i.e. strong psychology = no emotion) or by being more rational (the illusion of control).  All that is needed, in this line of reasoning, is too employ the right technique and the emotion will be controlled and the mind, freed of the emotion, can go back to impartial trading. 

Trading libraries are littered with these “quick fix” or mind-control solutions to emotional state management theories that sound good, but whose success cannot be duplicated in practice. Despite trading account feedback to the contrary, traders continue with their tunnel vision and cling to the idea that emotions can be controlled from the outside, without internal change.  For the struggling trader, this is the difference between trying to control their emotions and harnessing those emotions for effective action.

Why do traders stay stuck here?

Emotions Are Biological Action Potentials Ready to Compel Your Mind to Perform

Emotions are deeply misunderstood.  Emotions do not happen in (nor are they located in) "the mind”.  Emotions are biological and they create chemistry and action in the body based on response to associated environmental cues.  As the body and brain are revved up for action, the mind is hijacked and overrun by the prevailing emotion.  The awareness and management of these Action Potential States are crucial to managing the mind that manages your trading. 

Until a trader understands that emotions are not optional and cannot be forced into compliance by willpower, he is at the mercy of emotional unraveling in critical moments in trading.  But because men in general (testosterone-based life forms) are taught culturally to distance themselves from the feeling states of emotions except being angry and being "rational", they are at a distinct disadvantage in maintaining a stable mindset in attempting to manage risk that they cannot control. (The experience causes a sense of vulnerability – more about that a little later.)

Further, since they were never educated about how to use any emotions other than anger and logic, they never learned how to effectively work with anxiety or fear-based emotions that are commonly associated with uncertainty management.  Culturally they learn how to push the emotion away (compartmentalize) behind a stiff-upper lip or false sense of courageous control.  No matter how successful in other domains, this method of controlling emotions does not work in the trading environment. For better or for worse, outcomes in trading cannot be controlled – so many of the ways men learned how to deal with their emotions over the years backfire on them in the trading arena. 

Recognizing and turning toward your emotional nature, rather than turning away from it, is the first step toward emotional intelligence and emotional control in managing the uncertainty of trading.  It is the early recognition of the emotion that is important.  This can be learned.  And in my own work with traders, I teach them to observe their bodies for signs of the emotion BEFORE it becomes a feeling state.  Anxiety, fear, euphoria, and anger all have biological signs of their presence before the emotion hijacks the traders mind. 

In the arousal of an emotion, your body is revving up for action.  Both your breathing style and tension in the body will couple together to accelerate the readiness of the emotion for action.  Fear, anxiety, and anger will have shallow, rapid breathing to stoke the body’s build-up and muscle tension increases as imminent action comes to a head.  This is what happens BEFORE the feeling state of the emotion.  And this is where the emotion can be managed, if it is recognized. Because traders rarely notice the arousal symptoms of the emotion until it is too late, they rarely see the emotional hijacking until it is already in progress – which is too late to stop it.

But why do people in general, traders in particular (and male traders specifically) resist getting to know themselves better emotionally?  There would be much less drama and more consistent trading if they did.  But what stops them?

Owning Up to Vulnerability Triggers a Hidden Shame of Failure

Vulnerability is the feeling experience of uncertainty as an emotion.  Most people, traders included, have learned to control the FEELING of vulnerability by trying to control outcome or by being right.  If that control breaks down, people (men in particular) learn that there is something wrong with them.   This generates shame.  And they do not want to risk that.  (Notice the association between vulnerability, risk, and shame here.) 

The problem with trading, versus other professions, is that risk cannot be sugar-coated either by control over outcome thinking or perfectionism.  And because vulnerability, risk, and shame have become associated in the brain/mind, shame in the form of “never enough”, “never good enough”, and "never deserving enough" is triggered when uncertainty (and its accompanying vulnerability) is exposed by risk.  Can you see how trading, where risk and uncertainty are front and center, creates a perfect storm that forces a trader to deal with his or her “stuff” or suffer the consequences of denying his or her vulnerability to risk? 

Shame is a tragically misunderstood emotion.  People, in their mindlessness,  avoid it like the plague – for good reasons.  When unhealthy forms of shame are provoked (and right now that’s probably all you know), the sense of Self (your sense of competence in the world) becomes disorganized, causing you to believe that you are powerless to prevail or survive in your environment.   The need for an organization of the Self that can survive in its environment is of paramount importance.  This is the prime mandate of the survival brain.

So what does a self-preserving brain/mind do?  It pushes the effects of shame out of active awareness so that you do not feel the vulnerability of shame – if at all possible.  You will have experienced this phenomena every time your beat yourself up for making a mistake – when you hesitate on a good set up because you could lose, or when you get out of a trade early only to see it take off to your target because you feared that the little profit you did have could be taken away. 

You also experience this vulnerability to being  labeled "wrong" when your revenge trade.  Your fear of inadequacy is being exposed and it drives you to anger to get back your losses – or when you chase trades that, (in your right mind) you would never have gotten into in the first place.  These are all caused first by attempting to avoid vulnerability.  Then when the vulnerability is unavoidable – as is often the case in trading – you, the trader, become unraveled and fall apart.  That is how revenge trading happens.

What is being exposed in one of these atomic explosions?  A belief structure that you have come to hold as true whether there is evidence that supports the character assassinations of unhealthy shame or not.   And what are these beliefs that lay at the root of your vulnerability?  First, understand this, these are INHERITED beliefs – they are not INHERENT beliefs.  They are only assumptions, turned into performance beliefs that take on the power of truth.

  1. A sense of inadequacy.
  2. A sense of not mattering,
  3. A sense of not being deserving.
  4. A sense of being powerless.

This is the toxic, or unhealthy, side of shame.  No wonder you try to avoid feeling these beliefs by disconnecting from vulnerability!  (What if other people found out the “truth” about you.)   As an emotion, shame is neither bad nor good.  Shame, in particular, is an emotion that promotes attachment between individuals, teams, clans, tribes, and nations.  When shame(as distinguished from toxic shame) is triggered, it is signaling that the current organization of the self is not working toward the good of the whole and that you need to re-organize yourself for better total functioning. 

Toxic shamesays something completely different.  It says that you have a character flaw.  It does not open the possibility of re-organizing the self for higher functioning.  Heathy shame does.

Facing Your Vulnerability from Courage and Better Understanding

Shame is a tool for reconstruction in the hands of a skillful trader.  It is the disorganization of the Self that makes the work of using shame so difficult. (That’s all the vulnerability exposed when facing risk.)  The body is designed to avoid shame because it creates a biological sense of vulnerability to perceived threat.  Then the problem is compounded by the psychology of avoiding threat.  This creates deep psychological discomfort.

Two qualities define the trader who can use shame to reorganize the self for higher functioning  (defined in trading as being consistently profitable.)  Those qualities are courage and humbleness.  Courage is necessary because change requires heavy emotional lifting.  There are no tricks to long-term changes in performances.  You really have to do the work of change and most of us don’t want to see what we need to see. 

The second quality is humbleness.  Humbleness is not meekness.  Humbleness is the quality of being open to learning from our mistakes.  It takes courage and strength of character to practice humbleness.  In trading, you are going to be wrong a lot and you are going to make mistakes.  There is no hiding from them.  Our avoidance of our vulnerability simply prolongs the pain of not learning from your mistakes.  The courageous humble trader can dare to lay him- or herself on the line.  That daring to risk, knowing outcome is not controllable by power or by perfectionism, puts the humble trader into play. 

Focusing on avoiding vulnerability every time you risk is simply not possible in trading.   It is part of the game you are learning to master.  But to do that, you will have to master yourself.   Self-mastery begins with turning toward your sense of vulnerability and learning to accept the risks of being wrong.  At the heart of change is recognizing that you have always been enough, regardless of outcome.  And  recognizing that you are not risking the Self in trading – you are only risking capital.  Stepping into the light of awareness, you also come to recognize that there are some self-limiting beliefs that need to be exposed and reconstructed.  No longer feeling vulnerable to your fears gives you the edge you have been seeking.  It is yours to learn and trading becomes your teacher.

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