How do you currently think?

One of the major challenges that unsuccessful traders need to overcome is to recognise or admit that they are making trading errors. Even though their trading results will always be a stark reminder that they are not making money in an environment that is an endless stream of opportunities to enrich ourselves. (Trading in the Zone by Mark Douglas)

Why do traders not recognise that they are making trading errors?

There are a number of reasons for this—however, it all comes back to beliefs. The beliefs that stand people in good stead to make them successful in society/business, do not work in the markets. I call these the 10 Perceived Beliefs to Obtaining Success.

Many people hold that to be successful in society/business they must:
1 control people, companies and any opposition
2 be better than other people, companies, and any opposition
3 have better ideas than all others
4 have bigger targets than all others
5 manipulate data, people, companies and situations, to achieve those targets
6 convince people that they are right and their company is the only solution
7 compete and beat, and compete and beat again
8 win and be right—or, more appropriately, not lose and not be wrong
9 outsell and outmaneuver the opposition
10 be a step ahead of the opposition, always trying to predict their opponent’s next move

This is the paradigm of our success-at-all-costs society. People have created, formed and embellished this time-grown set of beliefs over the years to ensure that they survive day to day in society and business. Like them or loathe them, these beliefs determine everything that many people feel, perceive, think, say or do.

Typically when you achieve any of the above perceived success you are rewarded either by getting paid, getting a bonus, getting a commission or through being victorious and luxuriating in the associated feelings of joy that come with positive feedback and acknowledgment from other members of society.

We are social creatures and constantly monitor how we are doing in society by subconsciously measuring and judging feedback that we get from our environment – those around us such as competitors, colleagues, strangers, friends and family. Trading is not a social activity – it is a lonesome activity where your only feedback is your trading outcomes.

So we focus on these and use them as an avenue for the same positive acknowledgment and feedback that we get from our other social activities. The only source that we can find for such positive feedback is winning or profitable trades. Therefore we make profitable trades our focus and magnify the need to have winning outcomes to make us right and feel good.

The paradox is that to achieve sustained profitability in the long term we need to do just the opposite, forget about outcomes and focus on process and hence remove the meaning from the outcome.

Of course, you cannot achieve all of the above perceived successes on a regular basis. And when you do, they don’t always work! You will, however, achieve some of them from time to time with an associated perceived successful outcome. When you do–on a random basis, I might add–your existing beliefs, which are counter-productive for consistently trading successfully, are reinforced and strengthened. When you don’t achieve the above in any given situation society will enforce that we have failed and hence you will feel pain—emotional pain. Along with emotional pain come negative feelings of anger, frustration, revenge, betrayal, envy, not belonging, missing out and so on.

In that context, two of the automatic hard-wired programs that all human beings have are to associate the current moment with previous experiences, and to avoid emotional and physical hurt at all costs. For more detail on this material study Mark Douglas’ book “Trading in the Zone”.

We need these two automatic hard-wired programs to learn what is dangerous for us to survive in society (which used to be the jungle in humans distant past). For example, a young child associating a stove’s hot plate that can potentially cause physical pain. Of course, there are other variables that need to be assessed like is the hot plate on at the moment.

In a market environment, emotional hurt is experienced through:
• being proven wrong,
• losing money,
• missing out,
• leaving additional profit in the trade.

These are the four primal trading fears that traders–whose trading paradigm is set by the same 10 Perceived Beliefs to Obtaining Success that they operate under in the community and in business–try to avoid. Consequently they become hard-wired to avoid the above four situations in a market environment. The point is, any action that a trader takes to avoid any of the above four situations is a trading error.

This is why people do not recognise that they are making trading errors. To them, their mind, through their time grown beliefs, is operating correctly. And it is! Only it is operating correctly for a non-market environment without putting the current situation into the context of their big picture.

To better understand what is going on in our minds we need to understand that there are other variables involved and hence the four primal trading fears need to be put into context within the big picture.