In this short post, I want to share with you what is probably the number one thing that stops you from being a consistently profitable trader. I’ll also share a quick hack to change it quickly.
Let’s get to it right away…
The number one thing that is stopping you in trading is yourself.
Wow… what a great insight. (sarcasm)
No but seriously… it is your own mind that’s stopping you, and, more precisely, your beliefs that are getting in your way… perhaps more than anything.
And no, I’m not saying that you don’t need a good trading system and that you don’t need to practice risk management. Those things are super important. You can’t expect to win without them. But that should go without saying.
What I’m saying is that at the end of the day, you are the person behind the wheel, and if some limiting beliefs are preventing you from pulling the trigger at the right time or sticking to your well-thought-out process, then success will be hardly attainable.
Even with a good strategy and excellent risk management!
In the past, I never realized how important beliefs are towards shaping our world and actions. I guess I never really thought about it. I only began doing so when my failures as a trader stared me down in the face.
What are Beliefs?
At the most basic level, beliefs are enduring patterns in our minds that translate to a certain attitude to a particular proposition —usually, it’s an attitude of acceptance, confidence, and commitment towards that proposition.
Here are some examples of the beliefs we hold:
– Beliefs about goodness: whether we think we are good or bad people, or whether we think most people are good or bad.
– Beliefs about likability: whether we think we are lovable or not, or whether we think people like us or not.
– Beliefs about the world: whether we think the world is a safe or scary place, or whether we think life is fair or unfair.
– Beliefs about competence: whether we think we are smart and capable, or whether we think we can achieve our goals if we work hard.
– Beliefs about religion: whether we believe in God or something else, or whether we follow a certain religion or not.
Some more casual examples:
– Beliefs about food: whether we think pizza is better than burgers, or whether we think pineapple belongs on pizza or not.
– Beliefs about music: whether we think rock is better than pop, or whether we think rap is real music or not.
– Beliefs about sports: whether we think soccer is better than football, or whether we think LeBron is better than Jordan or not.
– Beliefs about movies: whether we think Marvel is better than DC, or whether we think Star Wars is better than Star Trek or not.
– Beliefs about animals: whether we think dogs are better than cats, or whether we think pandas are cute or not.
So you see, we use beliefs to understand and navigate the world, and we believe certain propositions because we have begun assuming at some point that they’re true, whether they are actually true or not.
Our beliefs form to keep us safe, that’s why we generally try to preserve them after they are formed —we guard them carefully.
Beliefs typically form from associations to pain and pleasure. And that often occurs when you’re a young kid because those are the most formative years for you, but they can also happen at any other point in your life.
And usually, when formed, a belief will stick with you for a lifetime, unless something major happens —usually another emotionally charged event that questions the validity of that belief.
Failure is Bad…
Take the belief that failure is bad, for instance.
That belief is a major clutch for us traders because it directly translates as a fear of being wrong, which means that it’s bound to affect how you experience unsuccessful trades which are really just part of the game.
As traders, we all know that we need to embrace being wrong because time and again the market will make us wrong. And often, when we least expect it.
Despite knowing this, you can’t stop but feel bad about being wrong, can you?
Being wrong creates discomfort and pain, impairs your judgment, and often spurs impulsive behavior.
That’s because your belief that failure is bad is stronger than your knowledge that losses are just part of the game.
So, to “de-energize” that belief (and that fear of being wrong), and to begin seeing failure as a more constructive thing (something that doesn’t threaten your sense of wellbeing but helps you grow and understand the game better), you could just keep trading, build a list of positive experiences, and expect that belief to die off over time.
If you stay long enough in the game, that will happen.
That’s one way to go about this.
But you could also be a little bit more proactive about it.
1. Recognize your mind’s positive intent
The first thing you would want to do is to recognize the positive intent.
Your brain (God bless it) is only trying its best to protect you. Typically, your belief that failure is bad comes from when you were a small child. You probably had an experience (or a bunch of experiences) where you felt pain, ashamed and rejected for being wrong, whether you remember that experience or not.
For example, when I was in middle school, I had to do a presentation in front of the class. I speak with a stutter and that stutter was really bad back then, and I was very nervous and completely forgot what I wanted to say.
The other kids laughed at me and I felt humiliated. Since then, I have always been afraid of public speaking, and to this day, I have this pull to avoid it whenever possible and as much as I can.
For me, I think that was the moment when I associated failure with pain and rejection.
Whatever happened in your life, at some point pain got linked up to being wrong. That’s where your belief that being wrong is bad stems from.
When you went through that initial painful experience, your brain began forming a pattern of anxiety, fear, defensiveness that aims to keep you away from experiencing that pain again in the future.
And I know this sounds insane because anxiety, defensiveness, insecurity, doubt… those feelings suck! But they suck for a reason… your mind is just doing its best to stop you from feeling even worse.
So, again, recognize the positive intent. Don’t just think it, really feel it, feel the gratitude, and maybe thank your brain out loud for doing its best to keep you safe. Even though your brain is a little confused about what’s best for you, it’s really just trying to protect you. Really!
So, acknowledging the positive intent behind your fear of being wrong. This will help create more ease and harmony in your mind.
2. Form a New Association
Remember: Beliefs typically form from associations to pain and pleasure. So, now, to shift that belief, we need to create a new association.
What you need to do is to associate a tremendous amount of pain to not changing that belief —in other words, you need to associate a ton of pain to wanting to be right!
For me, a few years ago when I did this exercise, I had to go down and write all the things that wanting to be right made me do.
– It locked me in bad trades
– It affected my income
– It make me hesitate to pull the trigger on good trades
– It make me exit good trades too early
– It affected my mindset in detrimental ways
So, do this as well. And as you go through your own reasons (in all likelihood, they should be very similar to mine), you’ll see how they negatively impact your trading.
The point is: you need to find the strongest leverage out. So, underline the number one thing that really hurts!
Then, you want to go through the pleasure that is there IF you change!
– Maybe you’ll get to generate a consistent income
– You’ll get to quit a day job that you dislike
– You’ll move closer to becoming a well-respected trader
Whatever your reasons, now you have a really strong pain principle and a really strong pleasure principle.
This is a simple mental exercise that you could do once a day (as part of a trading routine or ritual) before the market opens when you’re preparing yourself for the trading day.
Lastly, from now on, after taking a loss, notice the story playing in your mind about how this situation sucks, how discouraged or cheated you feel, how much of a loser you are, and so on.
When you hesitate to pull the trigger, notice your doubts. And, in both cases, just think and say the opposite.
Here is the pattern one typically falls into when perceiving an event:
– The event is perceived and immediately interpreted, based on some familiar framework of meaning-making.
– An emotion arises in response to the meaning you have given it.
– You react to that emotion and keep reinforcing and perpetuating that pattern.
But, with this little strategy, you’re stopping the cycle the moment you’re noticing it.
Meditation can help you to do that on purpose, as part of a daily habit. In addition to being an experienced trader and trading psychology consultant, I’m also a meditation teacher. If you’re interested in learning more about meditation with me, and how it can benefit your trading, you might want to check out my Patreon page and/or the Trading Psychology Mastery Course.
Last Few Words…
So, this is how you get to be a little more proactive about changing a belief like “failure is bad” and reducing the fear of being wrong.
Studies on conceptual change show that beliefs evolve over time, and the consensus is that it could take you a few seconds to change a belief or it could take you a few years.
It’s going to vary for each individual but also based on how strong that belief is. But, as per my personal experience, I will tell you that, for the fear of failure, if you do this little exercise every day, you will start to see the difference within a handful of days.
If you flip your fear of being wrong to acceptance that you’ll be wrong, all of a sudden your whole world is transformed —a paradigm shift occurs. Because when you shift your feeling, you shift the actions that you take. And when you shift the actions that you take, everything changes.