by Aaron Rentfrew
“Why the f*ck do I keep ______ when I know it’s a terrible trading habit?”
I get this a lot.
There’s nothing more frustrating than knowing your decision making is whacked and continuing to do it…over and over and over again. Despite desperately wanting to change - you find yourself stuck in a loop of repetitive mistakes that you’re unable to think your way out of.
This loop leads to self-doubt and limiting beliefs:
“I’m never going to make it.”
“Everyone else is crushing it; why is this so hard for me?”
“Maybe my Dad’s right, and I need to go back to my soul-sucking job.”
“If I do this again, I might just give up; there’s something wrong with me.”
I’m speaking of poor decision issues, such as overtrading, revenge trading, chasing moves
(FOMO), fading trends, anger trading, not trading your plan, etc. There are many more, but you
get the idea.
Like some of you, I’ve suffered from many of them too, both in trading and in life. I took my first trades in 1999 and came back to the markets off and on for many years. My worst mental break in trading came in 2012-2013. I blew up two accounts thinking we would crash after the
downturn in 2011 and fought the uptrend for over a year. I made every mistake in the book on
repeat until I had nothing left.
The odd part about it is that I got sober in 2009, so I had a lot of experience breaking bad habits and working with others on how to change. But, I never really considered applying those principles to my trading mistakes; it seemed like I should be able to change my decision making by simply “wanting to change.” But, that’s not the case.
I’m not saying you’re addicted to f*cking up, but it’s kind of like that.
The brain works on a rewards system. It’s an evolutionary process that guides us, conserves
energy, and assists in survival. When we were hunter-gatherers for a million years, this served
us well; this food gives me calories = good, that saber-toothed tiger ate Grok = bad, orgasm
helps reproduce = good.
All of this leads us toward pleasure and away from pain, a simple psychological concept known as “The Pleasure Principle.”
But, in our increasingly complex world and often conflicting signals, we can quickly get our
wires crossed as to what is healthy behavior and what is destructive. And in trading, this can be the difference between millions of dollars and complete and utter devastation.
“Just tell me how to stop f*cking up, Aaron.”
Ok, ok.
What we need to do is bring on the “felt experience” of trading your plan/executing the proper habit and have it be more positively impactful than the “felt experience” of whatever the bad habit is.
“WTF does that mean….?”
There is something about your bad recurring habit that is attracting you; it’s like an addiction.
Perhaps there was that one time you fought a trend, and you caught the bottom and got a
massive rush of dopamine and adrenaline, a big ego boost, and the feeling was incredible. Or,
you envision all the money you’ll make chasing this uptrend, you can literally FEEL it playing out in your favor, and you don’t want to miss that feeling. Maybe, you just need to be right and that future feeling of having that come true is an overwhelming reason to hold a loser into the
ground.
This is what I mean by “felt experience,” it’s your future projection of what it will feel like if you
do whatever shit behavior you’re about to do.
You’re currently wired to feel that executing that poor behavior is the goal because it will feel
amazing if it works out. Maybe it’s greed because you think you’ll make millions; perhaps it’s so you can tell your dad you finally made it. The reasons are individual, but if you dig a little, you can find it. (you can’t think your way out of that)
You have to flip the script and begin to reprogram your mind.
2-part strategy to habituating healthy habits around our decisions:
A) Diminish the current reward system perception that (insert the goal of the bad habit)
is the goal (for example: focus on how FOMO’ing into trades makes for a constant feeling
of failure, or that they bring down the win rate, get you trapped)
B) increase the reward system perception of what it would feel like to _____(insert good
habit) and trade to your full potential. You need to increase the perceived value of this
and how good that would feel. (for example: focus on how patience in execution and
getting in at an advantageous price would feel, how good would it feel to be fully in
charge of your performance)
With all habits, it’s like this, think about an addict that’s struggling to quit. You can’t tell
him to “just stop” - the drug activates the rewards systems very powerfully. When an
addict finally stops, they see the diminishing returns due to their behavior, and the
reward, on the other side after quitting, has a “felt experience” more significant than the
effect of the drug. Same is true of being addicted to unhealthy foods, there’s a strong
rewards system attachment to high calorie sugar rich foods. Your cave dweller brain still
views this as important for survival and we get a big fat dopamine hit when we smash
some cake. To change we have to look at the deterioration of health/weight gain - and
contrast it with the what it might feel like to be healthy, fit, and full of energy – and we
have to remind ourselves constantly until it’s habituated. But, once habituated, you’re
unstoppable. Ok, back to trading.
“That all sounds good, but how do I do this today?”
I’m going to make it stupid simple because that’s how I need it also. The first thing you
need to do is be more mindful of how you feel when making these mistakes. Please
write it down, document how it makes you feel.
Next, I would ask you to start doing some visualization practices. For traders, I like to
run the visualization of a chart, envisioning the ups and downs of the two different paths
good habits vs. bad habits.
We must attach feelings to these mistakes (which I’ve labeled for this example but use
your own if they don’t match):
This is where we can begin to diminish the deeply held reason we continue to repeat
poor behaviors and increase the positive future felt experience of performing the proper
behaviors.
Sounds hokey, I know. But, there is a ton of neuroscience backing this up, and it has
proven very effective for me and all of my clients, so I’m confident that it’ll work better
than simply “wanting to change,” which is what most people do.
IN PRACTICE: (don’t set timers, go as long and as detailed as you can in the
visualizations)
Sit down in a quiet, comfortable spot where you won’t be disturbed for a while.
Take deep breaths into your belly, allowing the diaphragm to push down and fully expand into the gut.
From the top of your head to the bottom of your toes, I want you to slowly move your attention downward, with each breath allowing muscles to relax, releasing the muscles behind the eyes and in the scalp (you can probably feel them straining right now).
After 5 minutes or so, begin to visualize the charts below (or build your own, which is better as it makes them easier to memorize).
Start to run through the downtrend and how these mistakes make you feel, mindful that they rarely lead to positive feelings. The more honest you can make the feelings, the better. We’re trying to imprint the emotion without having to make a ton of shitty trades and lose a bunch of money.
After 5-7 minutes, turn your attention to the uptrend, think about how great these attributes would feel, literally FEEL them, consider how proud you and others would be.
When you feel like you’ve concluded the visualization, start from 12 and slowly count backward to 1. With each exhale releasing some of the negative feelings from the poor decisions, each inhale breathing in good feelings from the positive habits.
Slowly allow your eyes to open. There’s no rush.
Be mindful of the first few thoughts that enter the mind. Please take note of them.
Repeat as often as you see fit but a minimum once a week (I do visualizations daily for a range of things).
One thing that bears repeating, make the visualization as real as possible, really allow yourself
to feel the range of emotions. Fill in the details of the situation, the scene, the situation, the
aftermath, etc.
Trading is hard enough without the mental warfare that goes on between your ears. You must
find ways to beat your weaknesses without crushing your P/L and going broke. This simple visualization can be built on, adding layers to attack many things in trading and life. Get creative and make it your own.
You can be successful at this, and you can change your behaviors over time. Mastery in any field takes time, attention, and resilience. It’s vital to understand that growth is a process and that you can make it as long as you stay in the game and continue to grow and develop your
knowledge and skills - but most importantly – your understanding of yourself.
Be kind to yourself. Every trader I work with is fighting a battle they feel no one else
understands. You’re certainly not alone in this despite the plethora of folks on FinTwit that
attempt to appear perfect and never seem to make mistakes. (they all do)
I hope this helps, and feel free to reach out anytime if you’re struggling.
Aaron is the creator of Mind Unbound – Master the Trading Mindset Course
You can check him out on Twitter: @livingrightco
To learn more, you can check out the course here: https://courses.aaronrentfrew.com/courses/mind-unbound-master-the-trading-mindset
To chat about private coaching, you can book a call here (serious inquiries only):