This is a guest post Jared Tendler.
Your goal is to make money, but sometimes you find yourself losing money when you shouldn’t and leaving potential profits on the table. The question is why.
You’ll first look to tighten your technical skills by analyzing your trades, tightening your rules, and learning new techniques. That’s the correct first step. But when the bleeding continues, that’s proof the answer won’t come from that side of the game. Instead, the answer comes from the mental and emotional side of the game—your mental game, where you need to solve problems with greed, fear, anger, confidence or discipline. These problems are costing you more than you realize.
EMOTIONS AREN’T EVIL
Think about your most costly errors in execution. Do they include any of the following?
· Forcing mediocre trade setups
· Hesitating on entries
· Exiting trades too early
· Chasing the market price up and down
· Moving a stop too soon
· Moving your profit target before it hits
· Talking yourself out of a good trade
When these mistakes occur repeatedly, and at times when you can’t stop yourself from making them, your emotions are the reason. They have the power to force you to make these mistakes.
This is critical so it bears repeating: Emotions are the reason you can’t stop these mistakes from happening.
Why? Because emotions have the power to reduce and even shut down your decision-making process entirely. This basic mechanism in the brain is something that no one can control. It’s hardwired. Many of you know it as the fight or flight mechanism. Once your emotional system becomes overactive, you lose access to knowledge that is critical to avoiding these mistakes.
Even though you can’t control this mechanism, that doesn’t mean you have no options. This is why the mental game matters—it provides you with an understanding of how your brain works so you can properly devise a strategy. Just like any other game, if you’re going to win, you need to know the rules. Otherwise, you have no chance of reliably correcting your trading mistakes.
YOU NEED A MENTAL GAME SYSTEM
You have a system that guides your decisions in the markets, so it makes sense to have one for the mental and emotional side of the game as well.
While I just said emotions are the reason you can’t stop yourself from repeating your common trading mistakes, that’s not the complete picture. Emotions are also a signal of flaws, biases, or illusions in the way that you approach trading. For example, you might expect perfection and get pissed off or lose confidence when getting stopped out for the second time in a row, and then force the next set up.
Perhaps you have a confirmation bias towards a swing trade that you just know is going to blow up, so you keep moving your profit target or re-entering after getting stopped out. Or maybe you believe that you’re unlucky, and that causes anger when you lose and jealousy of other traders you think have better luck than you. So you immediately re-enter losing trades out of anger and FOMO positions other traders are in even though they are outside your system.
These are three of the many performance flaws that are the real cause of your trading mistakes. Emotions like greed, fear, anger, overconfidence and low confidence are signals that highlight those flaws.
Conventional wisdom says that emotions are the problem—which is true given the impact that emotions have on decisions. But you’ve only gotten advice that tries to reduce, control, and release emotion. That doesn’t stop you from making those trading mistakes because it’s not solving the real problem—the performance flaws.
Instead, pay attention to what your emotions are telling you. That’s the key to finally disarming them and getting past the mistakes that continually trip you up.
My mental game system is the product of 15 years of work, and has been proven to be successful with institutional and individual traders from around the world. As well as golfers on the PGA Tour, world champion poker players, and championship winning esports teams, among other elite professionals. What makes it so effective is that it targets the root of your emotional problems—the performance flaws, like the ones I just mentioned. To kill a weed you need to get the roots out, otherwise it just keeps coming back again and again. My system gets the roots out. Here are three steps, each of which has different tools and strategies embedded within it:
1. Map Your Pattern: You need to identify an overall macro view of your emotional volatility in order to have a clear idea of what you will face on any given day. You also need a detailed map of what those emotional reactions look like at a micro level, so that in real time you can quickly spot them and minimize the damage.
2. Identify the Roots of Your Problem: To get to the real reason behind your problems, you need to uncover the hidden flaws, biases, and illusions, including errors in learning that can either prevent you from progressing or create significant ups and downs in your progress.
3. Correct Your Problem: This is where you tackle the problem head-on, by consistently applying the correction in real time.
The outcome of this system is the elimination of the performance flaws causing your trading mistakes. That doesn’t mean you’ll never make mistakes again, as if that were possible. What it means is that you’ll finally get over the hump and get past the repeated mistakes holding you back from realizing your potential as a trader.
To learn more, check out my newest book, The Mental Game of Trading: A system for solving problems with greed, fear, anger, confidence and discipline.
About the Author
Jared Tendler, MS, LMHC, is a leading expert in how your mental game impacts performance. His roster of clients spans 45 countries and includes esports athletes, financial traders, some of the top poker players in the world, a top ranked pool player, and several PGA Tour players.
The author of two highly acclaimed books, The Mental Game of Poker, and The Mental Game of Poker 2, Jared is currently writing a book on The Mental Game of Trading and is the host of the popular podcast, The Mental Game. In addition to his writing and 1:1 coaching, Jared also previously served as the Head of Sport Psychology for the esport organization Team Liquid. He was a key driver of their success as they won multiple championships, including The International 2017 (DOTA2), the Intel Grand Slam (Counter-Strike) and four League of Legends Championship Series (LCS) titles.
Jared’s straightforward and practical approach to coaching has helped numerous clients solve their mental game problems and perform at their highest levels. After earning a Master’s Degree in Counseling Psychology (MS) and becoming a Licensed Mental Health Counselor (LMHC), Jared began his coaching career in 2005.