What’s On Your Mind?

 “I can’t get out now.”

 “The market will come back.”

 “You can’t afford to take that loss.”

 “You need this trade to be a winner.”

These are some of the thoughts that Rakesh, a client of mine, typically has when faced with taking a loss. Especially if he has had a previous losing trade or is in a run of losses.

What thoughts do you experience when you are faced with a loss; or when you are holding a winning position; or when you waiting for a trade to set up?

What thoughts are getting in the way of you making good trading decisions?

Are You Battling A White Bear?

Rakesh’s strategy for managing his mind was to try to ignore his thoughts. To not think them. Or to try and think something else instead – something more positive. These are typical ways of managing our thinking; you may recognise them from your own thoughts. The result was that he felt he was in a constant struggle with his thoughts. In his own words it was “a battle” – and it was tiring.

Try this;

Don’t think of a white bear.

Take five minutes. Sit still and quiet. And try not to think about a white bear.

Every time you catch yourself thinking about a white bear, make a note somewhere.

Keep score.

How many times did you think about a white bear?

This exercise is taken from a study conducted by Daniel Wegner in 1987 which focused on thought suppression – what happens when you try not to think of something.

In Wegner’s study, the participants were asked to use suppression techniques to avoiding thinking about a white bear and to ring a bell if they did have a thought about it during the five minutes.

The study found that using suppression strategies to resist thinking about the white bear increased the frequency of thinking about the white bear, a phenomenon know as ‘ironic mental processing’.

What is interesting is that this effect was even more pronounced in the time immediately following the experiment.

Suppression and control strategies may not be the most effective way to manage your mind as a trader, particularly where there is exposure to multiple stressors and difficult situations. Suppression is also metabolically demanding. It requires energy, drains brain resources, and takes your focus away from the task at hand.

New Approaches To Mind Management

Many traders I work with struggle with unhelpful thoughts that show up in their trading. At times of difficulty and stress, it is likely that such things occur. It’s normal – to some extent it is the brain doing its job. It doesn’t really matter if they occur – what matters is how you manage them.

In recent years the development of a 3rd wave of cognitive based psychological approaches has provided a range of alternative strategies for managing our thoughts, emotions and behaviour in different, and potentially more effective ways.

I have utilised such approaches increasingly in my work with my institutional trading and investing clients over the last few years, and found them to be highly effective.

4 Key Mental Skills For Managing Your Mind More Effectively

Here are four key mental skills that you can develop to help you to manage your own difficult trading thoughts more effectively.

  1. Awareness– of your thoughts. Being able to notice your thoughts as they arise.
  1. Workability– considering, is this thought helpful or not in context? 
  1. Defusion– learning how to ‘unhook’ from difficult and unhelpful thoughts. Seeing thoughts as thoughts e.g ‘I can’t get out now’ becomes ‘I am having the thought that I can’t get out now.’
  1. Poise– taking committed action and following your trading process, even in the presence of the difficult thought.

Assessing Mind

In the ‘Traders Mind Journal’, on the ‘Trading Performance Scorecard’ we think about mind as;

“The management of your thoughts and emotions is a key factor in successful trading. This process involves firstly being aware of your thoughts and emotions, noticing them as they appear and then being able to manage them in such a way that any potential negative impact on your trading is reduced.”

You can check-in on how your mind management is by asking the following question, and rating yourself on a 1-5 scale;

“I managed my thoughts and emotions well.”