Exposing the Trading Mind

Jan 17, 2024

Have you ever found yourself reflecting on your trades, wondering, "What was I thinking?" or questioning where your mind went during the heat of a trade? It's a common conundrum for traders, and the missing link between trading knowledge and profitability lies in understanding the complexities of the trading mind.

"The natural born Trader is a Myth."

In the aftermath of a trading day, as you review your trades, you may notice that the mind you bring to this analysis vastly differs from the one you had while trading. This discrepancy is the key to unlocking the potentiality of trading's financial possibilities. But why does this disparity exist? Isn't there just one mind, and where could it possibly go?

The problem of the missing mind holds the secret to trading success. To bridge the gap between knowledge and consistent profitability, one must learn to "see" in a new way, becoming mindful of emotions and avoiding mindlessness in the face of uncertainty. Interestingly, prior knowledge of success in other fields may set the stage for failure in trading, as the mind required for trading goes beyond those needed to excel in business, sports, etc.

So, where does the trading mind go during the heat of the trade? It retreats from the calm and curious state present during a trading review to a state influenced by the potential cost of uncertainty. The brain and psychology collectively inhabit the Present Moment during a calm review, making probability thinking seem easy to manage. However, when risk is on during real-time trading, the mind is emotionally thrown out of this state, living in the future or the past. 

Uncertainty triggers anxiety in the brain, a biological response linked to ancestral fears of threat. This hyper-vigilance towards potential dangers leads to self-doubt and poor decision-making under pressure. The untrained brain/mind, exposed to the risk of uncertainty in trading, automatically generates this hyper-vigilance, producing a fearful or greed-filled mind anticipating the future.

To regain control, traders must learn to focus their minds on the Present Moment. Recognizing when fear- or euphoria-based minds come into play is the first step. Emotions are not optional; they shape the quality of thinking in a given moment. Instead of suppressing emotions, traders should consciously manage them to prevent being hijacked during crucial moments.

Notice the kind of thinking you engage in – anxious or euphoric. This inner chatter reveals the nature of your mind, indicating whether you're anticipating negative outcomes or overly optimistic. These skills are learnable, leading to a state of flow, trader's mind, peak performance, or attunement with the market. It's not about seeking to control outcomes but embracing probability and accepting the inherent uncertainty of this game. 

✅ Understand the Present Moment:
Educate yourself on the concept of the Present Moment. Realize that this moment is the only aspect of trading you can control. Understand that dwelling on the past or worrying about the future only distracts you from the trade at hand.

✅ Separate Past and Present
Consciously separate past trading experiences from the current moment. Understand that each trade is unique, and past losses or gains should not dictate your mindset during the current trade.

✅ Mindful Inner Dialogue:
Pay attention to your inner dialogue, "your thoughts". If you find yourself engaging in "What if" scenarios, self-doubt, or overly optimistic thoughts, acknowledge them without letting them control your decision-making. Dettatch from viewing thoughts as "you" and question them when they arise.

✅ Recognize Emotional Patterns:
Regularly observe and reflect on your emotional responses before and during trades. Identify recurring patterns of fear, anxiety, or euphoria, taking note of your tilt triggers. Awareness is the first step towards effective emotional regulation.

✅ Embrace Uncertainty:
Shift your mindset towards embracing uncertainty. Recognize that uncertainty is an inherent part of trading. Rather than viewing it as a threat, consider it an opportunity for potential gain. Embrace uncertainty with an open mindset; accepting your actions in the present are the only aspect you can control.

✅ Develop Emotional Regulation Skills:
Learn techniques for emotional regulation to implement when you become aware your mind is being hijacked. This involves acknowledging emotions and thoughts without allowing your actions to be controlled by them. Deep breathing exercises, using mental rehearsals, and other relaxation techniques can help regulate the emotional intensity and bring you back to a state of homeostasis, allowing you to maintain continuous focus during trades.

By incorporating these perspectives into your trading routine, you can gradually train your mind to stay present, focused, and resilient in the face of uncertainty. Remember, success in trading isn't just about market knowledge; it's equally about mastering the psychology of trading and cultivating an intentional approach to each trade.

Inside Mental Edge, we are focused on removing the bullshit fluff, discussing topics in depth that other mentors won't touch and pride ourselves on giving actionable advice vs one-liners like "just stick to your plan". We are dedicated to positively impacting your trading results.

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