Unearthing the Hidden Beliefs that Keep Your Trading Prisoner

Ken had come a long way. Emotional hijackings no longer ambushed him. He could catch them long before they would blow him up in the heat of the moment. At first, he thought he had finally discovered the secret that would take him to the next level in his trading. But there was something missing. He still experienced dread of a grandiosity that would creep into his trading and, like a slow fuse, blow-up his trading mind.

Working with emotions effectively is not an option for successful trading. When developing your Emotional Intelligence for peak performance trading, Emotional Regulation is an inevitable by-product. But it, by itself, is never enough to change self-sabotaging behaviors into an empowered mindset for trading, just as our friend Ken is discovering.

In the first 2 articles of this 3 part series, we explored how Ken developed the emotional intelligence to understand emotional arousal and learned to regulate it before the emotion consumed his trading mind. To do this, he learned what to look for BEFORE the emotion overwhelmed him. Then he learned how to disrupt the negative emotion before it did damage to his trading account. I encourage you to go back and read these prior articles so that you can transition to this article about the ultimate difference-maker in Ken’s trading.

Peeling Back the Layers

There are 3 levels of awareness that we are bringing to this study of Ken’s trading. The first layer is simply the physiology of the emotion as it ramped up for action. Ken became aware that an entire biological process was involved – it did not happen out of thin air. As he developed his capacity to be mindful of his body and its precursors of emotional arousal and feeling, he became much more attuned to the ebb and flow of emotion during his trading day.

Out of this new found awareness, new skills arose that allowed him to interrupt and then regulate the intensity of the emotion – the second layer of his emerging emotional intelligence that became operational in the heat of his trading cycle. He developed observational skills which advanced him to a new level of management of his emotions. Note that the management of emotion does not mean the willful control of emotion. You must work with emotions like an electrician works with electricity – with an enormous level of respect. The electrician does not make the electricity do anything, but he does manage how the electricity is applied in a given circumstance.

This Emotional Regulation process, and the skill with which he applies it, has given Ken considerable influence over the arousal, feeling, and motivation components of the emotional triggering. By managing these elements of the emotion, Ken is able to keep his composure. However there is another layer to the emotion that Emotional Regulation does not touch – meaning.

Meaning, Belief, and the Eye of the Beholder

During the formative growth of your brain, a process of imprinting lays down neural circuits that constitute the basic beliefs you have about life. These basic beliefs structure the meaning that you bring to the circumstance of life. The most basic ones are about mattering, worth, adequacy, and your sense of power in the world. Most of these beliefs come from the culture, community, family, and circumstance of your life. Your notions of adequacy and power become rooted into the enormously complex way you learned to respond to the challenges of life. The way you respond to the challenges of life are grounded into your emotional nature as the meaning component of an emotion.

Most of us, through cultural, social, and family learning, come to hold certain beliefs about our capacity to manage the uncertain challenges of life (i.e. whether or not we will be able to prevail ). It is these beliefs that show up in trading when you are attempting to manage the uncertainty, the ambiguity, and confusion found in trading. Unfortunately for the trader in you, the brain was wired for seeking certainty and avoiding uncertainty (fear-based thinking) because our biology is biased toward that end. And our socialization adapts us to avoid risk because we might make a mistake and fail in a particular attempt.

And in trading, this is certainly going to happen. Because trading is a probability-based venture where large numbers have to be put up to see a true trend and your brain/mind is biased to not lose even a single time, your beliefs (both from biological bias and adaptive social pressures) are usually not suited for trading. In your family, in your culture, in your schools, and in your careers – you are told to “not make mistakes”. And if you come out of (in particular) an engineering, medical, accounting, or airline employment background, the pressure to not make a mistake is compounded.

The hidden beliefs that you are looking for are the ones that you hold about your capacity to manage uncertainty and what making mistakes means to you (really). It is these beliefs that bedevil traders as they attempt to become successful traders. Let’s take a look at Ken as an example.

The Dilemma: You Cannot Learn if You Do Not Make Mistakes, But Are Shamed if You Do

Ken grew up in a military family where making a mistakes meant that you were about to be yelled at, shamed, and emotionally isolated. Ken’s developing brain, in adapting to this environment, did everything possible to avoid making mistakes. And even when he was an adult, making mistakes produced a visceral sense of dread and shame.

And Ken learned to “not make mistakes” in everything that he did. This strategy worked well in his career until started trading. And then the mind that he brought to trading that was scared of making mistakes began showing up in his trading performances – where losing is simply part of the game. This belief that he must never make a mistake, so forcefully embedded into his habitual nature, became his undoing. An avoidant/adaptive response to circumstance became a belief about his adequacy, his worth, and his power and this was compounded by his biologically inherited bias to avoid the risk of making a mistake. A perfect storm was the result.

His belief about his capacity to manage uncertainty became woven into the emotion of fear. Uncertainty and fear were fused together. So now, when Ken encountered uncertainty (at entry points and managing the trade), fear (with its arousal, feeling, and motivation) exploded because the belief he held from his formative period was that he could not make a mistake – or he would be shown to be inadequate.

The feelings associated with inadequacy were to be avoided at all costs. So, no matter how much Ken knew, he still did not believe that he could master uncertainty because he made mistakes. Until this problem was solved, Ken (like many other traders) would never become a successful trader.

Beyond Attachment Disruptions: Imprinting a Self-Limiting History

Ken, like many traders, experienced significant attachment disruptions that his brain organized him to avoid during his formative period. The sting of making mistakes (inadequacy) and the sense of being overwhelmed by an overly critical parent colored the lens of perception that Ken brought to trading. And in trading, he could no longer avoid dealing with this once-successful strategy that no longer served him.

For Ken, learning to forgive and let go of the past was the major piece of work that stood between his current performance and the later performance he achieved. He had to come to recognize that his father did love him, though he did not know HOW TO LOVE Ken effectively. The sins of Ken’s and his father’s forefathers came to bear fruit in Ken’s trading mind. As a result of his trader psychology training, his hyper-vigilance about making mistakes was transformed into an acceptance of learning through mistakes. This is a common psychological reorganization that many traders need to master as they evolve as traders.

But how about other traders who do not have such strained attachment relationships like Ken? How is it that they also have problems in their trading? One of the biggest problems found in trading is scarcity thinking. And it particularly shows up as a trader takes profits too early or engages in self-sabotage. In these cases the brain has developed in a family or community history of powerlessness. Each individual’s history is unique, but an example will point out the power of a history upon the efficacy that a trader brings to the table.

Roger grew up on a farm in Western Australia. At best the land was marginal for farming. The family persists for generations, barely eking out a subsistence living. Everything has to be nearly perfect for them to make a profit. But the weather often does not cooperate. They experience droughts regularly and their crops fail. There is barely enough money to pay their loans and they are often at the edge of foreclosure. And there is never enough for them to buy anything for themselves.

They live in circumstances where they come to believe that bad things are going to happen right around the corner. They have seen it happen so many times that they “know” it is inevitable. No matter how good things may look right now, they “know” that it is only a matter of time before it is taken away from them.

This is a loving family. And it is also a breeding ground for scarcity thinking. When you are raised in circumstance and histories like these, it is only natural that you will fall into the perceptual map of seeing the dark side of probability. Often this mindset is brought into your trading and, as long as this acquired historical mindset is not recalibrated into a more empowered understanding of probability, bad things are going to continue to happen.

Changing the Beliefs Embedded in Emotions

In both the scenarios described above (both from my clients), what I hope you have seen is that the process of reorganizing the Self into a higher functioning trader begins with applied Emotional Intelligence. Understanding how emotions operate is crucial. As the trader begins to regulate them, they begin to drill down deeper into their beliefs about their capacity to manage uncertainty. It is this that has to be transformed for the trader to move from struggling to competence in his/her execution of trading.

Beliefs are the lens through which the trader sees the markets. And the hardest part about change is your resistance to change. The skills outlined here show you how to stay the course as you approach the self-limiting beliefs that require change. Then the powerful question arises: Who do I need to become so that the trader I envision can become real?

The traders who become successful recognize that they have to stop fighting change. Instead, they become the change.

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

This website is for educational purposes only. Futures, options, and spot currency trading have large potential risk and traders should be well-educated before putting real money at risk. You must be aware of the risks and willing to accept them in order to invest in all markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to buy/sell a futures contract or currency.