Do you ever feel trapped in a relentless cycle, tirelessly attempting to address your trading issues, yet seeing little to no improvement?
For many traders, their strategy for resolving problems falls short because they focus on managing the symptoms rather than addressing the root cause.
As humans, we naturally develop coping mechanisms to navigate life's challenges. Over time, these coping strategies become ingrained in our behavior, often leading us to rely on familiar responses without considering alternative approaches.
When faced with a triggering event, our instinctual coping mechanisms activate to ensure our survival. While these mechanisms may have been beneficial in the past, they may not be conducive to navigating trading situations effectively.
Consider a scenario where a trader learned to suppress frustration and anger as a child to gain approval from her parents. Now, as a trader, she may find herself repressing these emotions when they arise, leading to escalating tension that culminates in significant and costly errors. By clinging to outdated coping mechanisms that are ill-suited for trading, she inadvertently hinders her own success.
So, how can we dismantle these ingrained coping mechanisms and adopt new responses better suited to the challenges of trading?
The initial step involves pinpointing the root cause of the issue. To achieve this, it's beneficial to ask oneself:
"What event or emotion am I attempting to avoid or shield myself from by engaging in X trading mistake?"
Let's consider the case of a trader I worked with named Anthony. He struggled with overtrading and impulsive trading whenever he felt he was losing control. In his trading journal, Anthony frequently wrote statements such as "you need to be more disciplined" or "you should’ve exercised more patience for the setup." He firmly believed that his lack of discipline in following his trading plan was his primary issue.
However, contrary to popular belief, Anthony's problem wasn't lack of discipline; it was merely his coping mechanism for dealing with the problem. Whenever he encountered a scarcity of trading opportunities, he experienced insecurity about his abilities and began doubting his market perception. Consequently, he resorted to impulsive trades to escape this insecurity and mask a sense of dominance over the market.
Anthony felt that if he wasn't actively trading, he couldn't become the trader he aspired to be. His insecurity made him so uncomfortable that he felt compelled to take action to escape this mental state. Essentially, he was chasing trades to evade his insecurity.
By attributing his problem to overtrading and impulsivity, Anthony was essentially defending his self-esteem as a trader. It was his way of coping with the real issue. If refraining from trades meant a blow to his self-esteem, then he felt the need to protect it at all costs.
What we needed to address were Anthony's insecurities. While some might have thought the focus should be on enhancing his discipline and curbing impulsive behaviors, these approaches would overlook the root cause: insecurity.
The key to deactivating a coping mechanism lies in altering the associated emotion. In Anthony's case, he associated inaction with insecurity, a lack of opportunities with wasting time, and self-doubt with his own abilities.
To help Anthony shift his mindset, we redirected his urge to take action towards activities outside the market. Rather than constantly seeking new trades, I encouraged Anthony to journal his thoughts and emotions whenever he felt the need to act. Additionally, to distinguish between a legitimate setup and his urge to trade, Anthony was prompted to ask himself three crucial questions about the setup's quality. This heightened his awareness and prepared him for the next step: interruption.
Initially, our goal wasn't to suppress Anthony's behavior but to channel it in a more constructive direction. I aimed to show him that being a successful trader didn't mean taking every available trade but rather focusing on high-quality ones.
In the subsequent stage of our work together, we introduced periods of inactivity during Anthony's trading sessions. This was crucial in helping him practice restraint when no opportunities were present. By confronting his uncomfortable emotions without resorting to automatic coping mechanisms, Anthony learned that it was safe to be inactive in the market and to separate it from his self-worth.
The more he practiced this behavior, the more his perception of inaction shifted. When he achieved profits by limiting himself to no more than three trades per day, he reinforced this positive behavior. He learned that it was okay not to be actively trading.
When Anthony incurred losses, we transformed them into learning experiences and used them to refine his trade execution for the future.
The real work with Anthony involved reshaping his insecurity into opportunity. He learned to confront his fears and assign new meaning to inaction.
If you're grappling with execution issues in the market and recurring trading mistakes, I urge you to question whether the problem you perceive is genuinely the problem or merely a coping mechanism to it.
What are you attempting to avoid by repeating those mistakes?
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