It's A Heart-Mind Game... Are You Ready?

Okay Ha-Pattern,

I'm getting to the discussion of the carrot on a stick. Good info via the links by the way. The first one goes over some interesting points about money and wealth. A good read.

Carrot and stick approach. I always saw the stick as being used to dangle the carrot just outside the reach of the person, not as possible punishment. Hmm... Is that how you see it?

"Carrot and stick If you use a carrot-and-stick approach, you use the promise of reward and the threat of punishment to make somebody work harder."

Wiki sees it the way you do as well...

I see the promise of the reward as the motivation for the person to keep putting effort and resources behind the pursuit. This is why I think traders endure the "pain" of going after the reward: failing and getting up again. The reward is just something they really want.

Thoughts?

FX4

Ha-Pattern,

Will be getting back to you on the punishment part of your post .

FX4

Hi Traders,

Been trying to free up some trading time. Made good progress. Just a little bit more GW, and I should be ready to rack up some pips.

@ Ha-Pattern...reply still to come.

Take care,

FX4

Hi again Ha-Pattern,

Sorry for the delay in getting back...just been very hectic.

Be lucky...leverage....Bill Gates (per your link)?

Most common wage-earners are not willing to take the risks associated with success in trading. The people who come on forums like these are exceptions, mho.

Traders are always evaluating...the punishment (risk) vs. the reward. Who's dangling the carrot?

that it's the intrinsic worth of an idea vs. the key notion of a possible competing idea, that creates a limit and stop respectively, instead of an absolute build or protection of capital.

You make a good point here about "competing idea". That's another thing traders deal with: one idea against another...and some of the competing ideas the market presents at times look "right" only to end up going the other way...carrot on a stick?

Only if I get my method reasonable enough that I can support it with emotions on the fly, then it's okay.

Good that you know what you need

Rational emotive...yup.

Take care,

FX4

Emotions, Decisions and Discipline

An informative article by Steve Ward.


Man v Machine

In 2006 I had a very interesting meeting with a Professor of Finance at a university in London where they were launching a Masters Degree in Financial Trading. We had a good discussion about the world of trading and he was very much a believer that the future of trading was automation and saw a terminator style rise of the machines occurring over the next few years. He told me that their masters program was all based around automated trading and also suggested that I might like to possibly consider a new career as, within the next few years, there would be very few human traders left for me to work with.

During the course of 2006 I worked with a lot of traders in 1-to-1 coaching and workshops, and one repeating request that I encountered was ‘can you help me to trade without emotion – I have a great trading strategy and I know that without emotions getting in my way I could double, triple or even quadruple or more my returns.’
Is this the same for you? Would you also like to be able to trade without emotion?

Professor Sam Wang, a neuroscientist at Princeton, states in contrast to the above that emotion is critical to the decision making process and that cognition and emotion are intertwined. Emotions help us to focus on what is critical, to shape our behaviour and to action our decisions. The key, however, is to harness the right emotions, and to recognise that emotions towards an extreme – let’s say fear, high anxiety or stress, anger, frustration, extreme happiness or overconfidence - are the ones that are detrimental to decision making and trading performance and, indeed, his advice is to avoid making a decision at an emotional extreme wherever possible. Professor Wang also very interestingly suggests that a weakness of automated trading systems is their lack of emotion – and that there are programmers who are trying to program emotion into these systems to improve them; this is called affective programming.

So the latest neuroscience findings seem to indicate that emotions are key to decision making and that the aim is to identify and then harness the right emotions, whilst being aware of any movement towards emotions at an extreme. This is of course in reality what my coaching clients had really meant in their requests – trading without emotion for them really meant trading without negative emotions such as fear, anxiety, stress, frustration, overconfidence and excitement.

Harnessing the Right Emotions

In my days of working in sports psychology I helped athletes to harness the right emotions by identifying their IPS – ‘Ideal Performance States’ and provided them with techniques to enter these states, and to recognise when they were out of such states and recover if needed. In trading I use the phrase ‘Ideal Trading States’ – ITS. This is that set of harnessed emotions that help you to make your best trading decisions, to be disciplined and achieve your best performances.

Take a moment now to reflect on times when you have been at your best in your trading. How did you feel? What mental, emotional and physical states did you experience?

As Jim Loehr in ‘Stress For Success’ tells us ‘performance is state dependent’, and this is best summarised in trading terms by Brett Steenbarger who reminds us that ‘our best trading behaviours coexist with our best trading emotions and that our worst trading behaviours coexist with our worst trading emotions’.

Take a moment to think about your ITS – what positive trading behaviours do you experience in these states?
Now take a moment to think about the emotions that you know interfere with your trading performance. What behaviours exist alongside these states?

Developing Emotional Awareness

Armed now with some understanding of emotions and their effect on your trading performance, the first key skill to develop better emotional management is emotional awareness. How are you feeling right now? Can you name that feeling? Naming the emotion you are feeling is actually a key skill in what is called emotional literacy and is cited by neuroscientists as being a fundamental part of managing emotion.

How did you know that was how you were feeling?

What was is your thinking like in that emotional state?

How does it feel physiologically?

Muscle tension?

Heart rate?

Breathing?

Body language?

Energy levels?

Are there impulses or instincts for action (or inaction) that go along with it?

How much intensity or energy is there behind the emotion?

Do you perceive it as being positive or negative?

These are all key questions to ask to help you to understand how you are feeling right now and can be put into a really simple and effective technique called ‘Checking In’.

Quite simply you rate yourself on a 1-10 scale where 10 is your Ideal Trading State and 1 is the other end of the scale – basically get me away from the trading screens NOW! Throughout the day, or before or after key events – a data release, a win, a loss, the open – assess where you feel you are on the scale. Get a feel for the numbers that represent your peak zone, caution zone and no-trade zone.

Recognising that trading decision making and performance is state dependent and managing yourself and your risk taking accordingly can have a big effect on your returns. Just having this awareness is a significant step forward in emotional state management and is one that is quick and easy to use. As a reminder to ‘Check In’ you could have a post-it note or similar on your desk/screen, or set an alarm on your PC/phone.

Beyond understanding and awareness comes managing or regulating, and it is good to have some simple techniques and strategies that you can use to regulate your emotional state. Fundamentally, the two best ways of moment to moment emotional regulation are through managing your thinking – what you think affects how you feel – and by managing your physiology.

Recognising the impact of thoughts on emotions and behaviour is a key principle of cognitive behavioural coaching and developing awareness of your thoughts and how they are impacting how you are feeling and behaving is a good part of the checking in process.

How is what I am thinking now affecting how I feel?

If I get a specific feeling to an event, what am I thinking that creates that feeling?

What would be a more useful thought to have?

You can actively manage your thinking by developing this kind of thought awareness, perhaps combined with keeping a cognitive (thinking) journal that can be very useful for tracking your thinking patterns (both useful and limiting) and then also be able to choose more performance enhancing thoughts in real time.

I am also a big fan of physiological techniques for managing emotions, the reason being if you have a particular mood or emotion then it can be difficult to access quality thoughts whilst in that state, but by changing your physiology and driving your emotions from that perspective, as you change state your thoughts and behaviours will also evolve towards more performance enhancing ones.

To finish off this article, here is a quick physiologically based centering technique that you can use that is great for preparing to trade, managing your emotions at tricky times such as when you start to get the urge to cut a profit or run a loss without strategic reason, when you sense an emotion like anxiety or stress arising and you want to counteract it, or at any time when you just want to get centred, balanced and composed to harness positive emotion and drive positive trading behaviour.

It is a 15 second breathing technique taken from ‘10 Minute Toughness’ by Jason Selk and it goes like this.

Step 1 – take a big deep in-breath lasting 6 seconds, filling up from your diaphragm (belly) and then filling your lungs from the bottom-up

Step 2 – hold the breath for 2 seconds and let the oxygen flood your body and brain

Step 3 – breathe out slowly for 7 seconds – this is the body’s natural relaxation response and is very powerful; it can be useful to say a word like ‘relax’ or ‘calm’ to yourself as you breathe out to help create an anchor/trigger so that in the future after lots of practise you can simply say your word and get the associated feelings of relaxation with it

In a Nutshell

Trading performance is state dependent; how you feel affects your decision making and discipline. The goal is not to trade without emotion, but to harness the right emotions – your ideal trading states (ITS). The first step is to identify your ITS, then to increase your emotional awareness (Check-In) and then to develop your ability to manage your emotional states through managing your thinking and your physiology.

Steve may be contacted at this website.

Thank you for your posts , every day i check your thread for new lessons

Hi Tetis,

Glad you are finding some posts that have info to help you in the Heart-Mind Game. Planning to keep posting...in between trading when something hits me or I come across something that might help traders.

FX4

Subby decided to take the month off to get some things out the way and get himself ready for the challenge. He thinks he's ready now. He also believes this could be his big break. June is it!

FX4

First saw some articles by Jade Gate on a thread on FF. Part 3 of the article Top Ten Tips for Forex Success covers the trader and the temperament needed. Parts 1 and 2 are also great.

Enjoy,

FX4

Another key article on Trading Psychology by Jeffrey Kennedy...Five Fatal Flaws of Trading.

FX4

Hi Mr. Alum,

Started a thread on Risk/Money/Trade Management...lots to discuss there for sure.

Newbies no Nothing about Trade risk management

So...your request has been granted .

Take care,

FX4

A word to the wise:

If you really want to make money trading, don't worry about "making the money"; focus on trading well. Watch the charts not your P/L. If you trade well, the money will be in your account: no ifs, ands or buts...

No fear; no greed; no ego.

Take care,

FX4

Here's a great quote a successful trader sent to me:

“If you listen to financial TV, or read most market columnists, you’d think that investing is some kind of sport, or a war, or a struggle for survival in a hostile wilderness. But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”

- Jason Zweig


Good trading wisdom for sure, but for me, there is a fight going on...that zero-sum "game" you know...


FX4

And another great quote:


“My strategy works well because it’s my strategy. I know the strengths and, more importantly, the weaknesses of what it is I do. It also works well because I allow it to work and stick with it even when it runs into difficult times. Nothing works well if you keep changing your approach. To be a master you must be a specialist, not a jack of all trades.”
- Mark Minervini


Thanks Wave...

FX4

Subby's Trading Report since the meeting in April with DoingWell and NeverAgain.

Some of you might remember that Subby was given an assignment to trade a 10K Demo (that was linked to a 10K Live account, but Subby didn't know it) using DoingWell's system. That was to start on May 1st. He got some things out of the way, did some trades to feel comfortable in the saddle so-to-speak then began in June.

Lots of emotions going on. He sent an email to NeverAgain that he's done for June and would like to meet tomorrow to discuss it. Below is his equity
balance curve.

FX4

Subby arrived at NeverAgain's office. He's meeting with him now...


NeverAgain: So good to see you Subby...been a while.

Subby: Sure has. Good to see you too.

NeverAgain: So how has it been the past two months?

Subby: Has it been that long? Hmm...guess it has. Overall I'd say it was good...even better. I found myself having to make adjustments to me.

NeverAgain: What kind of adjustments? Why do you think they were necessary?

Subby: Well since our last dinner with DoingWell and yourself, I think I installed some emotions behind the new assignment. Either I installed them or they just surfaced LOL. Anyway, I had what I'd call some performance-related hang-ups or something...they just seemed to get in the way and hindered my flow starting out.

NeverAgain: I see. Glad you were able to identify that as an issue and take steps to remedy how they affected you. You account shows you closed in plus territory: $256.33. Congrats! Could you imagine what traders much go through when they start trading other people's money? (He still doesn't know he's trading a live account linked to his demo as part of the process).

Subby: Thanks. I'm glad I did too. At least I feel more in control of my propensity to take these bigger than wanted drawdowns.

NeverAgain: Great! Did that tool help? When it alerted you that you had reached your set drawdown percentage, did it help you to regain control?

Subby: I'd say overall yes, though at times I fought against doing what I knew I should. That's why I guess I'm glad I came out with more than the starting balance.

NeverAgain: I am too. (Looking at his detailed report) I see you had an even higher equity balance at one point, so you're still in drawdown territory. Not trying to steal your thunder, just mentioning it as an fyi...

Subby: Sure. Not a problem.

NeverAgain: Now let's look a little closer at what was going on with you here shall we? I could see between trades 17 and 32 you had a challenge...maybe that's when those emotions surfaced...then you fought back and they seemed to crop up again. Then you took some time off...wise move.

Subby: Yeah. Thought it was best. During that time I just traded really small positions to feel my way back. Then around trade 276 things started going really well, then...

NeverAgain: Something happened around trade 337.

Subby: I was going okay then I guess I got too comfy or confident. I did not do my due diligence, saw something and jumped in...impulse trading: one of my no-nos. So what happened was this...when I saw that I was wrong, I didn't want to take the loss. Finally caught myself. Anyway, it was really a war within me...my ego or something.

NeverAgain: I'll tell you Subby, everything shows in the chart even the trader. I'd say you did okay and came out the better for it...still a little way to go though. How do you feel now?

Subby: Like I've grown...matured a bit. I am learning that there is nothing wrong with being wrong: it's how you handle it. Also, I find I am more attentive to the movements of the price. It feels like I'm breathing with it...like those waves you had me watch a while back. When I impulse trade, all of that flow and rhythm goes out of the window and I find myself fighting...like a drowning man instead of a professional swimmer or surfer.

NeverAgain: Very well put and for that, here's a cheque. (smiling)

Subby: Money? Really? And I thought I was still in training.

NeverAgain: You are and that's part of it: getting paid. So Subby, give it another go next month and we'll meet again, maybe even have dinner with DoingWell. Try to keep those drawdowns even smaller and let those profits run will 'ya. DoingWell's system has been tested. Work it.

Subby: Will do. If we do dinner it's on me.

NeverAgain: No probs. Hope I'll be able to give you a much bigger cheque then.


So Subby's off to do it again. Hope some traders can identify with his struggle and progress.

FX4

There's alot of wisdom in this quote...a whole lot.

"Everyone gets what they want out of the market."
Ed Seykota

Have to chew on that one myself. Thanks Ed. It stirs the question: Is what the trader telling themselves that they want, really the same as what they actually do want? Self-deception is no easy game to win.

Brings to mind another question: If a trader really wants to win, why do they keep doing things to sabotage their success?

Wow...heart-mind issues to address for sure.

FX4

A good way to keep from trading what's in your head instead of what you're seeing is to ask yourself the question: "What is this chart telling me now?" Say it out loud if you have to. It might help to re-direct the focus of the thought that gets you doing your own thing and not following Mr. Chart.

FX4

Just read an excellent post here that reminded me of your Subby - NeverAgain conversations.


On the last post --
Often, what's in your head is louder than anything you can think of. It creates a relative nature, as if rules aren't that important and your priorities ... well, there are none, and you give into the chaos that the market can be, without pushing through the murk and into the light.

Hi Ha-,

Sorry for the late reply...been very busy lately.

That was a great post to read...thanks for the link. Sometimes too much information and education can make things problematic for wannabe traders.

Yes, often what's in the head speaks louder than we need it to. Must find that balance and stay there (in the zone) 'cause we still need that gray matter to function too .

FX4