TRADER MIND | KIHON
Trader Mind
The learnings presented in the Kihon phase form the first step in the journey from beginner to a battle-hardened trader with a Radical Trader Mind.
The trading journey is not an easy one.
That said, the trading journey is made much smoother with a sound understanding of how emotions can influence trading and a focus on the development of a trader mind.
Time to earn the yellow trading belt.
The Emotional Journey
Many of the books on trading that we read, and the advice found in broker training courses, suggest that the emotional brain is the enemy when trading.
The key message is that success in trading is, in part, dependant on conquering emotions.
In our first year of trading, we attempted to eliminate all emotions in our trading.
In reality, it wasn’t that difficult. It fitted well with elements of our corporate and business experience.
Controlling outcome in business, being a perfectionist and not losing, not making mistakes, can be enormously successful in some business areas.
We put that thinking into play in our trading; Hard work, persistence, a winning attitude, a force of will.
However, when put to the test in trading, that cash machine that is our trading account, just swallowed up cash.
Our trading performance was inconsistent.
We tried to use successful thinking. We tried to create a prosperity mindset; however, we knew something wasn’t working.
That winning attitude, all that knowledge, all those courses we had taken, and still our trading strategy failed.
We started to look for answers to what might be missing. To what the problem might be.
We looked everywhere, but we didn’t look in the right place.
We looked in all the wrong places because we were convinced that the problem was somewhere in the trading system or the trading methodology.
What we weren’t seeing was our mindset when we were exposing ourselves to risk and capital.
We did not doubt that the mindset that we brought to our trading was a critical factor in our trading performance. On that point, we agreed with the books and the broker training courses.
What we began to doubt was the suggestion that eliminating emotions in our trading was the way forward.
The Trading Brain
The limbic brain, the emotional brain, is an ancient brain structure and has been around for 6.5 million years. The rational brain, as we understand it, has been around for about 150 thousand years.
The emotional brain that we bring to trading evolved for managing certainty, for managing and controlling outcomes and controlling the environment.
The emotional brain hates uncertainty and wants to control the outcome by prediction or force. It hijacks rational thought under the stress of engaging uncertainty and risk.
The brain adapted to a world that no longer exists. A world of short-term survival based on fear’s avoidance of threat, rather than impartiality’s probability of long-term gain.
When managing uncertainty, ignoring this bias puts you at a disadvantage when trading.
When trading, the brain is tasked to think in probabilities, rather than in certainty type thinking, particularly when you have capital at risk.
Risking money is a biological threat to the emotional brain.
Naively, you are asking the brain to undo 6.5 million years of successful adaptation so you can trade.
That, in part, is why traders become extinct, and there is an enormous extinction line associated with traders.
There is no doubt that emotional intelligence is a critical factor in much of our corporate and business success.
Emotional intelligence is a balance between the emotional and the rational brain.
As part of our review of our approach to trading, we began to explore the benefits of using the whole brain in our trading.
Could we utilise the reasoning from the left brain, the thinking half of the brain, and combine it with the emotions that we had been trying to ignore in the right half of the brain?
We wanted to develop a very different “trader mind” to the one that we had been using.
Our aim was a very different “trader mind” to the one presented by the books and the broker training courses.
A “trader mind” based more fully on our more extensive corporate and business experience.
A Radical Trading Mind.
The Radical Trading Mind
The trading mind requires a paradigm shift in the way certainty and uncertainty are engaged.
We are rooted in certainty thinking while trading success requires probability thinking.
Your mind and your brain are programmed to be in control of the environment and outcome. It is that way… it’s always been that way… and that primitive brain is not going to change.
Outcome and probability management is at the core of the trading challenge.
Until you make that paradigm shift, the trading success that is possible for you will evade you.
The good news is you can develop emotional intelligence. You can learn to build that mind.
Does it take effort? Yes, but no more effort than all the work that you’ve put into trading up to this point.
Just imagine putting in a little more effort and developing a mind that can use all those tools and knowledge that you have.
That would be powerful.
We recognised that the main obstacle in our trading performance was our mindset.
Without an evolved probability mind you lose out on the one thing that you can control in trading… You.
By developing emotion and the mind as a unit, you can develop the mind for trading.
Emotional Mastery
Emotional mastery should be at the top of the list of the priorities taught from the start of your trading education. Click on the Emotional Mastery button below to access the page.
Personality Types
There are a few distinct personality types that lend themselves to trading. However, there are also some that struggle. Click on the Personality Types button below to access the page.
Steve Burns
“Your mind is the starting point of all trading strategy. A mind that is easily overwhelmed by emotion & ego, that is rooted in the money instead of the process, that can’t see the market price action with clarity & signals, will make bad decisions that lead to being unprofitable.”