Mindful Trading - Book Club - Author Rande Howell

[Susan 111]

I would recommend beginning with the Breathing for Traders.  I would do it twice per day for at least 2 weeks. 

Once you feel good about it; I would spend 2 weeks twice per day in each of these mediations.  My recommendation is to begin with Mindfulness Training Exercise for Traders - once that has been practiced twice per day for 2 weeks; move into Developing Mindfulness: The Observer of Thought and practice that volitionally.  All the best & talk Monday!!

[Dan F 73]

Chapter 3
W- Pg.60 “Diaphragmatic breathing, you choke the emotional fire and return to a state of calm” “It is the first aid relief of an emotional hijacking.”

A- I still find it hard for me to breath properly when I miss my entry, this is where I’m working on the diaphragmatic breathing. The second quote made me realize that I might be there with breathing but this is just a rest and I need to tackle the actual problems that I’m having. My action plan so far is again trying to take my hand off the mouse when I miss my trade setup for 1-3 minutes.

 

Edited July 23, 2023 by Dan F

[Norma 33]

Chapter 3 – The First Step to Emotional State Management: Naming Your Fear

 

W: Your body, your brain, and your mind have to be calmed to begin this process. Otherwise the chemical nature of fear in the body will quickly reach high levels of arousal and will hijack the trader’s capacity to maintain a calm state of mind. Pg.66

A: we need as traders to learn how to keep our mind, body & brain synchronized to the calm state of mind. There are times when our body might be calm, but our mind is not, due to the negative thoughts going through our brains; or like Randy states, the fear felt in our body will reach quick to our minds and take over.

We can learn to manage this state of mind through meditation and relaxation. Unfortunately, I’m not constant in doing it. I’m working on it.

 

[DenHei1 13]

W:  Fear constricts possibility.  It locks you into predictable patterns of thought at behavior.  This is the comfort zone that you bump up against in trading.  And this fear cannot distinguish between biological threat to life and the psychological discomfort of risk management. 

I'm paraphrasing - but according to Rande, diaphragmatic breathing can halt the biological chemical response of fear by slowing the heart and thus slow the chemical cascade that hijacks thinking.   This is step one of peak performance trading.

Mindfulness is the second step in peak peformance trading.  You become an observer of your thoughts - vs just riding along with them wherever they want to go.  Mindfulness is observing the thoughts thus disempowering them.  Mindlessness is the state of not even being aware of the thoughts - the trader becomes a blind victim of them.  

-We trade our psychology - our biases and beliefs about ourselves, our worth, ... our power to affect the world.  

-In trading there is no place to hide from our deepest fears.  

-Developing a traders state of mind can be called a redefinition of the self - or a reorganization of the self.  (this is profound shit here)

-This is the process of knowing oneself and conquering your fears. 

-It begins by equiping yourself to embrace your deepest emotions and fears that manifest in your trading.  WIth an open mind you become what you were born to be and trading is your teacher. 

 

A:  All of these concepts make so much sense - and also explain the importance of both being able to bring yourself back from the chemical overload brink of biological fear AND being able to separate your identity from the barrage of monkey  mind thoughts that can be triggered by said chemicals.  This reminds me of a webinar where Rande discussed the hunters surrounding a mammoth - and the fact that they needed to overrule their instinctive fear to feed their tribes.  It's fascinating to think that the fears triggered by trading could be somehow linked to the life/death primal hunt of our ancestors.  It's wild - but also explains the intensity of that biological experience - aka FOMO, hesistation, impulse trading.... 

 

Edited July 24, 2023 by DenHei1

[Susan 111]

Hi Book Clubbers - hope you are enjoying a week off of club and still reading & studying!  I wanted to pass this Rande Howell webinar information along to you in case anyone would like to join.  I am going to try to attend, but we have practice that evening so I need to see if I am free or driving kids.  Anyways here is the info and it is free:)

Our August webinar, titled How to Stay Disciplined When the Money is Real will take place on Thursday, August 10, from 4:30-5:30pm EDT. Please click here to register. We hope to see you there!

[Susan 111]

 

Chapter 4 - The 9 Roadblocks to Your Trading Success: How Your Fears Manifest in Trading

- Story about Conquering the Fears that Limit Us (read together)

- Fear the idea of Fear; not Fear Itself...

- Rather than avoiding her fears she found a deeper confidence, discipline & courage from which to face her fears (from story)

[Susan 111]

A mind based on Calm Authority as opposed to being grounded in Fear can be learned and attained.

If we identify our fears; confront,  challenge & grow from them; we will discover our deepest worth & strength.

We all have the capacity to push through self-limiting fears & find resources to redefine our relationship with fear.

Fear creates a box for all of us; we become "boxed in" & create behavioral patterns to avoid discomfort.  To effectively trade; we have to push through our box & find the courage to challenge our fears.  Trading forces us to face out fears in a way we have never had to face them before...

(1) Fear of Uncertainty: type of anxiousness. Human nature tries to make order from chaos.  Brain creates a pattern to predict what will happen in the next moment, the next trade, the next economic cycle...

     - Fear of Uncertainty shows up in the form of hesitation. Traders strive to find certainty in confirmations, but trading doesn't provide certainty only probabilities.  

     - Risk Management is how we manage uncertainty with the probability of success.  Odds have to be in the traders favor.  This is not how brains were designed to work so we have to learn how to do this to trade effectively.

     - Traders must employ emotional state management to overcome the body's hardwired biological & psychological makeup in the face of risk.

     - The biology has to be calmed so that the fear associated with uncertainty doesn't overwhelm impartial thinking.  Impartial thinking is what you need for Risk Management.

     - Recall that Bellos Breathing is how we calm down the biology.  Without biology calm we cannot even start to open the door to the mind.  Emotions will always trump impartial thinking; so if you want to be able to get to the mind and to beliefs; you need to 1st practice this skill and get really good at calming the emotions down so they do not take over.  We cannot eliminate emotions, but we can learn to manage and calm them down so they do not take over our thinking.

 

[Susan 111]

(2) Fear of Loss (Pulling the Trigger)

- The moment of truth about whether you are emotionally stable enough to be trading at a particular moment in time.

- The body & mind is literally seized with fear - the traders hand becomes frozen; cannot pull the trigger.  His mind is seized by self doubt.

- Fear has set up the expectation of loss in the mind.  Fear restricts the possibility that the trader can see... If the trader were in a calmer & more disciplined state; a very different range of possibility is possible.

- There is unfortunately no way to "leave your emotions at the door", but there is a way to build the capacity to manage fear.  In SIM; this fear is not present b/c there is no chance of real loss.  As soon as the  money is real; the primitive emotion of fear rushes in...

- The emotional brain when considering the fear of loss associated with pulling the trigger is related to the deeper, darker fear of death. A threat is interpreted into the emotional mind & it cannot distinguish between a threat to money or to life. It just knows "threat."  An anxious mind will always sabotage your traders state of mind. When you add this to our cultures obsession with winning as a measure of self-worth & importance; you end remaining mindless to the pressure & get stuck in fear.

- We have to regulate the instinctive aspect of fear of loss.  The calming of the fear allows us access to the state of mind capable of accepting risk & loss.

- 

[Susan 111]

(3) Fear Based Urgency to Make Up for Prior Losses

- Fear based on prior losses & motivation to make up for them leads to impulsiveness that takes over the traders state of mind.  This is a mix of anxiety & exhilaration. The impartial mind is pushed out of awareness & we become blind to impulsive thinking.

- This attitude will often work in business & athletics as it is a single mindedness of purpose. It doesn't work in trading.

- Trading requires a certain detachment so that emotions cannot suck traders in...

- Successful traders come to a humble acceptance of losses. The trick is being able to discern what you can learn from losses. The losses are about performance (which can be improved) and not about the person.  I personally think this is a big one for many people and may be currently hidden to a lot of people.  Performance & identity MUST be separated. Losses are part of a traders life - no way around it. As adults we identify with our title, our income - we feel worthy as they increase in statute & in amount earned.  I see my children struggle when they do not have a good performance in their sports; like it is a reflection of who they are... if this starts for so many of us in childhood; imagine how deeply rooted of a belief this is for all of us to have to change to become successful at trading & truly accepting risk/losses. Traders have to reorganize how they think about markets and emotionally react to them.  Being able to know the market is not going to kill us and being open to learning through what psychological discomfort can teach us is walking into a new door; reaching a higher level as a trader. (IMO)

- The trader in the example chose to ATTACK his fear as opposed from learning from it. If not changed; this mistake will continue repeating itself. Regulating emotions and opening oneself up to change is a state of mind that has to be developed.

- The mind must reorganize to accept understanding of loss from a short term perspective on threat to a long term position where profits & losses are part of trading.  By effectively regulating emotions; the risk management is transformed so the trader has more winners than losers & the ratio of winners is larger to the ratio of losers.  Fear of loss is transitioned into Risk Management at this time.

[Dan F 73]

Chapter 4

“I pushed through the fear.  Fear is like a door.  Anytime you experience fear, you have to push through the fear and have faith that the resources you need will be found on the other side of that door”. This is a good reminder that conquering fear is not a onetime thing when dealing with a particular trading weakness.

1. “Fear of Uncertainty: To move from the biological mandate of deterministic certainty to the management of risk and probability requires emotional state management to overcome the body’s hardwired imperatives and the psychological mindset to manage risk.” What Dr.Howell talks about in this chapter is that you have some previous history with an emotion and that is why you are having such a hard time with it now. This overall thought I relate to, particularly to in regards to the fear of uncertainty in trading.

3. “Fear Based Urgency to Make Up for Prior Losses” - When I have some ambers of fear glowing from the previous day then it should be a no trading day. A little fear can give you the mental energy to start you on a YOLO day.

7. “Fear of Missing Out (Greed)” I know when this is going to happen because I lose focus when I’m watching for a break out or a reverse of a good setup.

[Susan 111]

Chapter 4 - continued

(4) Fear of not being right

- Perfectionist - have to deconstruct/reorganize understanding of self or difficult time trading.  Intellectually may know no one wins all the time, but emotionally they hold themselves to an impossible standard.  When win - still find faults. 2nd guessing eats away at confidence.

- Constant criticism in head of what "should have been done"

- Need for control/external validation

- Being right al the time = control of sense of adequacy & mattering

- Market cannot be controlled & we CANNOT stake sense of identity from trading - this is NOT how we measure our self worth (that is dangerous)

(5) Fear of Inadequacy

- Need to provide (men in particular per Rande).  Need to provide can become a measure of self worth - I think modern woman def have this too. This can become a liability in trading.

- If the need to provide becomes a need to prove traders self worth/adequacy - this is a big problem.  If not getting results they want - feel inadequate and experience shame...this should be avoided at all costs.

- The "FEAR" of feeling the sense of inadequacy can arise & this sets up POOR PSYCH for trading

- Self worth MUST be provided INTERNALLY by the trader, not EXTERNALLY

- In US - identity & self worth often become FUSED with JOBs/CAREERS - this just cannot be in trading....easy for people to fall into the assumption of "what you do is who you are" ...."how well you do" becomes the marker for many of how adequate they are as a human being...we are a consumer driven society - right house/cars/etc...dangerous in trading....the attitude of "I am going to show them, have something to prove to family/friends/etc"....a lot of people with all "the right stuff" deep down have a sense of inadequacy/inferiority....they become driven to cover up their vulnerability.  The sense of "attacking mentality" to cover up fear of inadequacy will be exposed in trading.

- Trading account will reveal this issue - fear of acknowledging sense of inadequacy (even to self) will blind you into destructive behaviors....we have to have the courage to face the fear

- We have to separate performance from our sense of self worth....In this separation we can take losses and actually learn from them.  We can use them in a constructive way as they are only a factor of our performance & PERFORMANCE CAN BE IMPROVED!

(6) Fear of self sabotage

- Things are going well and just like I thought; they turned bad - I blew up

- Self sabotage is a self fulfilling prophesy rooted in our brains about the expectations we hold for the future.  The belief has us (we do not have it). "Felt too good to be true.  I knew this would happen."

- Patterns of self sabotage can be formed early in life and carried into our trading....example of a kid who keeps moving; once they get somewhat settled - they move.  Brain comes to expect "rug keeps getting pulled out/things keep changing/blowing up in a sense....nothing lasts"

- We have to dig deep to examine these core beliefs; get to really know ourselves.  We have to know them, observe/examine & challenge them.

(7) Fear of Missing Out (Greed)

- This fear causes many to push aside risk management tools & keep trading.  Moving stops/exits can (at times) deem winning trades, but it also deems gambling as opposed to risk management.

- Gamblers ride the euphoria and do not see when the odds become stacked against them.  They are entranced with the greed of hitting the big one.  The greed seduces them.  Usually this leads to giving back gains & loss of capital over time.

- Ancestors used this trait to consume more than they needed so they had resources to survive in leaner times. Bred into our humane geonomy.

- The accumulation of money = external validation, sense of power/worth/mattering to a lot of people

- In trading; if this fear is not recognized & managed; it will blow up your account.  We need the psych strength & discipline to resist it. 

(8) Fear of Failure/Fear of Success

- We have to develop a new habit of learning to be mindful of our vulnerabilities rather than avoiding them.  If we can do this; trading can become a powerful tool of transformation.

- Fear of failure - works with need to prove ourselves/ sense of inadequacy...we have to mindfully explore this pattern of behavior that was probably formed in a young age.  By observing this belief we can challenge and begin to change it.

- Fear of Success - this is a learned way of coping where we feel uncomfortable with success.  Many forms - IE - punished if too successful so we self sabotage, learn not to risk b/c we may lose so we sacrifice success we may have gained for mediocrity of playing it safe.

- If we can utilize trading as a tool/a door to self discovery (not just a way to make money); we can observe & confront these beliefs.  We can challenge them and begin to change them.

(9) Fear of Growth & Change

- Stuck in a pattern that stunts growth...we hit a glass ceiling (that we have set in our own minds)

- Some traders create a self fulfilling prophesy that limits their financial success.  It can be our family vision of "making it/being successful" is cracking 6 figures and once we do that we just cannot get ourselves to surpass it.

- We have to really examine our beliefs, realize they are probably not our own and something we were actually born into that has been repeated/engrained into our mind.  When we can become mindful and step back to observe these beliefs; this is when we can stat challenging them..  Our beliefs become so familiar to us; we do not even recognize they are there so we do not know what to challenge - this is where the tool of mindfulness can be so powerful..  We have to "wake up" and stop mindlessly accepting these self limiting beliefs. 

[Susan 111]

Susan's Main Fears:

Fear of Loss: Comes out normally as a need to partial and not have a ticker move against me once in the position.  I am able to get in, but then I have to breath through when the stock is pulling back; especially close to my stop loss.

Fear of Inadequacy was a big one when I started....I had to prove to my old boss (whom I have zero contact and wouldnt care), my family, myself and everyone that I was good enough to make it in trading...

Fear of Failure use to plague me too.  I was afraid I would not make it with the failure rate so high.

 

[Dan F 73]

2 Fear of Loss (Pulling the Trigger) trading is about “future possibility” “emotionally stable enough to be trading at a particular moment in time”. I think China has issues + downward chart momentum+ $TSLA not doing well.(didn’t want to lose $16)

4 “Fear of Not Being Right (making a mistake)” as a perfectionist I aim to play the long game. There is always something that you can do better that’s why setting goals are important because if you hit the goal then you made it.

5 “Fear of Inadequacy (External Validation)” With my trading not contributing to my financially well-being I’ve lost a bit of the feeling tied to losing while trading. But I don’t I feel that I’m so care free with my trading that I’m gambling.

6 “Fear of Self Sabotage (blowing yourself up)” The mindlessness of self-sabotage is something that is fading. I’m getting better on sitting on my hands instead of making random mouse clicks.

[DenHei1 13]

(2) Fear of Loss (Pulling the Trigger)

This comes out when I jump out too quickly - prior to my stop AND before the move happens because I did not want to lose.  I think this fear also goes hand in hand with the fear of being wrong / not right.  

(6) Fear of Self Sabotage (blowing yourself up)

Comes out when I hit a green streak and feel like I've really got this.  

(7) Fear of Missing Out (Greed)

I experience this when I get into a move anticipating the setup.  I would argue that greed does not accurately describe this fear - it's more scarcity.  

[Norma 33]

Chapter 4 – How your fears manifest in trading

(1)    Fear of Uncertainty – “Traders experience the fear of uncertainty in the form of hesitation. They are looking for the confirmation of the certainty that something is going to happen. In trading there is no certainty – in trading there is probability”.

This comes up when I wait for additional confirmation, like confirmation on the confirmation. Looking for assurance on the outcome. The result is a late entry on the trade and small profit.

It has been a big improvement but still working on that. I keep a constant awareness, so I don’t get pulled into this fear.

(2)    Fear of Loss (Pulling the Trigger) – “A trader’s entire dramatic relationship with fear and future possibility are wrapped up in his fear to pull the trigger on a trade”… “Fear restricts the possibility that the trader can see. If he were in a calmer more disciplined emotional state, a very different range of possibilities would have been possible”.

I think Fear of Loss goes hand in hand with Fear of Uncertainty. Both issues deal with the issue of not taking the trade even when all indicators are there. On those occasions, it limits what I can see.