Trading University, Chicago Blog

by Jay Norris 

There are only two core emotions in life: love & fear. Speculation wraps them both in a modern day Pandora’s box we call a trading platform.

“Something is weighing on my mind”, is an interesting saying, particularly from a trader’s perspective. What it means is the mind is contemplating a serious distraction. What that means in-turn is your five senses are not as tuned in to what is happening around you. When the mind is preoccupied it is by definition contracting around the distraction, instead of operating as it was designed to, which is expanding outward with all senses working at optimal levels. Distractions invoke emotions, instead of vision, and judgment becomes impaired; particularly when the distraction is money. And nothing provokes that love/hate rollercoaster like money. You love it when you have a pocketful of it, and you hate it when it’s gone.  More realistic you love it when you have enough socked away to where you don’t have to worry about how you’ll pay your mortgage for the next few years, and you hate it when you see your holdings drawdown. Nothing says you’re smart, and successful like driving a shiny Mercedes, and nothing makes you feel smaller than not being able to afford to go out to dinner.  Money very definitely is a notorious source of unhealthy emotions.  And money is the reason you trade. 

While money can have negative implications such as greed, ego and excess, losing money is even worse. Nothing evokes raw fear like quickly losing money. I can tell you not having a day-job and losing the equivalent of one month’s rent inside of 10 minutes is nothing short of terrifying.  

When your average retail account holder sits down to trade there is always something weighing on her mind. Whether it is the question of, “Will I succeed”, or “How much will I risk on this trade”, more times than not there is always some serious question at the forefront of the trader’s mind, all this at the same time she is trying to make trading decisions. Then there are personal issues such as family, health, and environment, both real and perceived…the list could be endless. No wonder everyone is failing!

What small speculators need to realize right from the beginning is buying and selling a market for income has nothing to do with them. Timing a market to generate profits has absolutely nothing to do with their perceptions of money or any other thing in their life and mind. Psychology plays such a huge part in our trading only because we let it!

The first time I read about positive mental attitude or PMA, I thought it was the biggest bunch of mumbo jumbo psycho-babble I had ever heard of. “You mean if I think about something having a positive outcome it will happen!?” I remember thinking. Twenty years later I can’t imagine an event not having a positive outcome once I apply myself to that. What you need to understand about positive attitude and envisioning success is how it physically puts us in the right state to be able to expand our minds and enhance our senses to where we can avoid mistakes and make the right decisions. We need to understand that the negative, restless thoughts that pop into our head every couple of minutes have nothing to do with the reality of the current job at hand. As traders we have to understand that the urge to exit a trade with a small gain or small loss despite having no signal to do so is the result of a distractive thought, and has nothing to do with our thoroughly back-tested and demonstrated trading method. We need to understand that if we aren’t following our plan then we are going to be wasting our time and our money. Next time you go against your plan and it costs you money ask yourself, “Do I want to fail?’. Because you are insuring that you will fail by listening to those negative thoughts in your head, and not sticking to your trading plan.

Positive thoughts create “happy” endorphins and negative thoughts create “unhappy” endorphins. Studies now show us that our brains get addicted to both happy and negative thoughts. Whatever diet we feed our brain it gets addicted to. The good news here is that natural endorphins can overpower any drug. Happiness is addictive!

And the real benefit to closing everything else out and seeing success and believing you will achieve it is the positive feelings it creates. Envisioning real and lasting success will expand your positive thought process and kick your five senses into high gear.  The optimal mind-set this creates will not only help insure that you be in a position to take advantage of the trading lay-ups that you encounter, but also help you to avoid the pitfalls because of the heightened sense of awareness those positive endorphins lend your other senses. It is that positive energy which will help you to spot that intermediate-term trend line in time to protect your profit, or stay calm and recognize that the correction against your position is lacking in momentum and you need to stay the course and heed your trading plan.   

Everything anyone has ever achieved or created started with a thought, then a vision, and the belive it could be achieved. Our success in trading will be no different. Once you’ve selected  a trading method and manually back-tested it extensively, close your eyes and ask yourself, “Can I achieve this dream of being  a succeful trader?”. If the answer is yes, ask yourself what’s the only thing that could stop you?  You will realize the only thing standing in your way is yourself. And the only thing that need be on your mind when you sit down to trade — be it demo or live – is how thankful you are for the pips you’re about to put in your account!   

Jay
Jnorris@brewerinvestmentgroup.com
800-971-2154

Jay Norris is the author of  Mastering the Currency Market, McGraw-Hill, 2009 and a Trading Instructor at Trading-U.com and a Senior Market Strategist with BrewerFX in Chicago. To see details of Trading-U’s available course work go to Trading Course  To schedule a complimentary, interactive tutorial with Jay on determining market direction and hear more about “Live Market Exercise” go to One on One Tutorial

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments. Any charts shown here represent market conditions at a particular point in time. Such conditions may not be replicated in the future. Past performance is not indicative of future results.

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