Did you know that you don't have to be mentally ill to have different personalities reside in your body? Actually, it is quite normal to have various "parts" of ourselves emerge at different times depending on what is going on at the moment. In fact, these parts of the self speak different languages and see different things, as well, which is why you may have slapped your forehead wondering how you made what can only be termed a boneheaded trade after seeing the chart's reality in the wake of a loss. This kind of personal and emotional volatility can play havoc on your trading account. Similar to the market, personal volatility is a direct reflection of the emerging emotions of the masses as they trade furiously, impulsively, and at times capriciously and compulsively. The market is continually sending messages; messages about volume, momentum, and volatility. But, those messages are best captured by first attending to your own volatility so that you can see the charts as they are.

The markets are representations of an organic process; they represent all the hopes, fears, and decisions of everyone executing a trade. When you trade, you climb into the skin of it and see yourself in its reflection. And, of course, every blemish, character flaw and weakness that you have is in that reflection because you "express yourself" while in the markets. The successful trader can "feel the markets" through insight and intuition that has been developed through countless hours of observing market charts, but she does not get lost in those feelings. The successful trader has an intimate understanding of the delicate balance between emotional intelligence, i.e., managing emotional volatility through protocols, routines and habits. They focus on doing the "right" things habitually (following trading plans, rules, money management and position sizing) as if their life depended upon it...and their trading life does depend upon it. In this way, they set themselves up to get the right results habitually. They know that consistent successful execution is intimately related to mastering this process of the right things. It becomes a Zen of trading by losing the ego attachment and using mind management tools that engage the subconscious to work for them rather than against them. This is accomplished by redefining the relationship to the trade. As in a business transaction with another human being, the objective is to be in the flow; that is, a detached interaction where (even when a profit is involved) we are not attempting to aggressively bleed the situation dry but come away having done well. To be and stay in the flow, you must be fully conscious and "watch" what you are doing. We want to activate the "internal observer" and this is accomplished by relaxing at every opportunity and creating the habit of "being fully present, in the moment for the moment; fully available and in the now of the trade." In this way, you can then access and activate internal resources like Emotional Freedom Technique (EFT) that can shift you from a state of fear, frustration, irritation, and stressful tension to a state of relaxation, mental clarity, and self-confidence with focused intention on doing the "right" thing in the trade. There are many, many internal resources that you have, a lot of which, you may not even be aware. But it is very difficult to be available to accessing and activating internal resources without activating the internal observer.

Activating the internal observer can be accomplished by doing the following:


Change physiology 

  • Change your physiology, stand if sitting or sit if standing 

  • Straighten your body 

  • Take a good stretch 

  • Take a few deep breaths, in this way you are initiating the parasympathetic nervous system 

  • By engaging the parasympathetic of the Autonomic Nervous System, you dilate blood vessels and increase oxygen to the brain and muscles, slowing things down and initiating a "Relaxation Response"

When ego investment and emotion rise, trading becomes a reflection of the ego; in other words, defensive reactions to neutral events and inflated self-seducing illusions that really distort reality. Overly invested egos create a sort of delusion, and consequently, what we thought was a great trade was in reality a "fake out" or something that came from internal bias not the objective reality of the charts. For example, one of my students, after trading in a position on the Dow E-mini futures the YM, violated their rules and failed to maintain a hard stop. It was on a day when the Dow lost over 300 points. The second rule that they violated was to "think" that the ATR (Average True Range) had been breached and that since its average daily range was violated, it would "come back." The third rule they broke, after finally closing out of the trade for a significant loss, was to believe that increasing their position size and essentially "doubling down" would bring them back to break-even in another trade attempt. Now that was delusional thinking. The analysis was distorted by the emotional upheaval taking place after incurring the original loss.

So, my friend, your ego is not your amigo. You'll want to get the internal observer involved early and often. And, you'll want to use exercises like the Power Circle, another highly effective, easy to use and fast acting "state shifting" tool taught in the Extended Learning Track (XLT) - Mastering the Mental Game class that can shake you out of that delusion. Remember, always find out "who's showing up to trade your account." It could save you from a lot of loss.