Episode 23 – Successful Trading Begins And Ends With Self Awareness

Episode 22 – TraderMind – The Power of Cultivating Awareness In Your Trading w/ Steve Ward
January 10, 2016
Navigating These Volatile Markets
January 25, 2016
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In today’s show, we’re going to have a conversation on the nature of beliefs and how they affect our trading. As well we’ll get into why developing awareness is the central tenet to success in trading.

Van Tharp has a popular quote –

You do not trade the markets.  You can only trade your beliefs about the markets.

Here’s a passage from Tharp –

What does it mean to say we only trade our beliefs about the markets? Let’s look at some statements and see what you believe about them:

  • The market is a dangerous place to invest. (You are right.)
  • The market is a safe place to invest. (You are right.)
  • Wall Street controls the markets and it’s hard for the little guy. (You are right.)
  • You can easily make money in the markets. (You are right.)
  • It’s hard to make money in the markets. (You are right.)
  • You need to have lots of information before you can trade profitably. (You are right.)
Do you see the theme? Your opinion about each one of these statements is correct, whatever it happens to be.
As Tharp says, “There is no real right or wrong answer. Some people will have the same beliefs as you and others won’t, but that’s not important”.
What is important to understand is that our beliefs for the basis for what we do.
Our beliefs direct our behaviours.
Your beliefs direct your thinking and your subsequent actions.

If we group all of our beliefs into a collection they form our identity.

So what’s the problem?

Somewhere along the line most of us have created beliefs that may have once served us but may no longer serve us.

Let me say it again.

Your beliefs are neither positive or negative. 

Simply put somewhere along the line the beliefs that used to serve us no longer serve us. 

Let’s say for instance that you grew up being praised for achievement and performance (grades, manners, rule following, people pleasing, appearance, sports).

Somewhere along the way, you adopted this dangerous and debilitating belief system: “I am what I accomplish and how well I accomplish it”.

Guess what your need for the external validation takes the form and identity of being a perfectionist.

You see we often think of perfectionism as a positive self-development trait.

It isn’t – Perfectionism is, at its core, about trying to earn approval.

Let’s think about how this may play out in your trading.

  • Maybe you’re unable to take the losses you need to take become you don’t want “appear” wrong.  That’s – The fear the failure.
  • Maybe you have issues with performance (that is being unable to execute your trades) because you can stand the uncertainty of not being right.
  • Maybe you have an overly judgemental inner critic.  What does the voice of your inner critic sound like?  When you’ve had a string of losses, Is it constantly berating you, criticizing you and tells you you’re not living up to expectations?

So here’s the rub –

Here you’ve created a belief for yourself that once protected you – in fact, it probably got you pretty far in the real world however it now no longer serves you.


In fact these beliefs have now turned on you.


This is why every trading psychology text talks about the importance of being aware of the beliefs that we carry.
Empowering and enhancing beliefs can carry us to great things.

Disempowered or self-limiting beliefs drag us down.

The trick is that Most of the beliefs we have about ourselves are often unconscious which makes them difficult to examine.

As the saying goes –

“The unseen is always the parent of seen; never the opposite”

In neuroscience terms the lower brain co-opts the higher levels to get what it wants.  The subconscious is what is driving our behaviours and the job of the subconscious protects us from harm not to produce the positive.

Most of the literature around changing our behaviours talks about the long process of changing about behaviour by examining our beliefs.

Usually, it’s a look in the rear view mirror approach where it is only after something has gone wrong can we do the post-operative analysis/triage and determine whether or not our limiting beliefs were at play or to blame.

This approach works but it’s not the only approach.

The ATI Framework

I’m going share with you a framework I’m developing as well as introduce you to some exercises for you to begin to unravel the nature of your beliefs, and how to begin to deprogram, and reprogram your limiting beliefs, and get at the core of what’s driving your behaviours.

The ATI Framework is as follows-

  1. Awareness
  2. Transformation
  3. In-tention

In this post, we’re going to spend our time talking about the A – Awareness.

However the T and the I will have to wait for another post as it just too much ground to cover in 1 article.


So let’s talk about Awareness.

The first step towards freeing yourself of limiting beliefs is awareness and understanding.

We need to be aware of What the problem is in order to change the problem.  Notice I’m not saying solve or fix the problem.

Furthermore, Awareness is always the first step because if you’re not aware that your mind is full of noise and conflicting beliefs, there’s nothing you can change.

What you’ll find is that when you go into the mind and start challenging your beliefs, you will find that most of the beliefs that guide you are not even true.

The first part of awareness is obviously to become mindful of the chatter.

Too many traders trade on auto-pilot.

Once they start trading it’s like they’re a racehorse with blinders on or a deer looking at the headlights.

Personally, my best trading comes when I can maintain a positive level of self-awareness

I like to go for a 90/10 split.  

That means keeping 10% of my awareness inward.

Here’s what you can do, anchor yourself in your breathing, or a part your body.  Can you feel your feet?

In a moment I’ll share some exercises to increase your level of self-awareness

But one the key goals and objectives of awareness is to stop feeding our limiting mindsets – the negative emotions that come from fear.

Think of these limiting mindsets as a parasite – and we’re the host.  The goal is to stop feeding the parasite.  

After a while, the belief will disappear.

To do this we have to gain mastery over our emotions.  we have to refrain from feeding the emotions that come from fear/aversion.

It’s easy to say yet hard to do.  most people try to control their emotions through suppressing through the use of willpower or discipline.  This is an uphill and losing battle.   This never works because it’s energy intensive.

Positive affirmations are also ineffective because most of the time they’re not grounded in reality.  In fact, they can create even more internal conflict,

This internal disharmony creates stress, and remember, when the unconscious and conscious “disagree” over an issue, the unconscious always wins. ”

S-E-T Exercise

Rich Friesen introduced the S-E-T Exercise in Episode 10 of the podcast.

S-E-T stands for Sensations / Emotions / Thoughts

I want you to take out a piece of paper and create a column for each one and every 30 mins. check in with yourself

  • Every 30 mins ask yourself, what are the quality of my feelings, emotions, and thoughts?
  • Rate yourself from -5 to +5.
  • Average your score by adding them all together and dividing by 3.
  • The goal is to get a close to 0 as possible.

What you will notice over time is that you will have a deeper and deeper awareness of your inner states.

Soon you won’t need to check in – you will just know.

The real benefit here is the more awareness we have over Sensations / Emotions / Thoughts the less influence they will have over us.

The Wanting Loop

The final exercise is a game of awareness that I play with called the “Wanting Loop”.

It allows us to catch our unconscious beliefs as they unfold.

This exercise will allow you to begin to unravel the source of your unconscious beliefs – to name them so that you can begin to deprogram their control over you.

Last week I was talking to a trader who was struggling with letting his winner’s run.

He had developed a preference to take quick profits.

The question is where did this preference come from?

Here’s the thing he had done his homework, reviewed his current history of trades, and had proven to himself analytically that it was in best long-term interest to let his winners run however he still had the preference/habit of taking quick profits.

In his words, “You know I know what I need to do but I can’t seem to do it.   In the heat of the moment, it’s really hard to do. ”

In trading after a certain point It’s rarely ever a lack of knowledge – this is as Steve Ward talked about in the last podcast, “capability vs. capacity”.

This is the classic dichotomy between knowing what to do and doing what we know.

Time and time again I hear this and see this in the trader’s I speak to and work with.

Because behind every behavior is a belief.

Let’s get deeper The beliefs that we hold for ourselves are expressed in the form of our preferences.

If you go to Wikipedia, Wikipedia says, “preferences could be conceived of as an individual’s attitude towards a set of objects, typically reflected in an explicit decision-making process.”

So whether you know it or not – Your wants drive your preferences.

That is the way your wants are expressed are through your beliefs and preferences.

As human being, all of us have 4 core wants – 

The Want for:

  1. Approval
  2. Control
  3. Security
  4. Separation / Significance

Here’s the thing, most of us have a bevy of wants.

But Wanting equates to lack. It does not equal having/being.

Would you rather want approval or have approval? Would you rather want control or have control? Would you rather want security or have security?

Would I rather want to be a good trader OR would I rather be a good trader?
Do I want trading success OR have trading success?
Or course I would rather “be” than “want”.
Again Wanting equates to lack.  And it does not equal having.
We all know intuitively that it’s way easier to make money when you don’t need it, or get a new girlfriend when you already have one.
Most of us have the tendency to focus on the struggle that leads up to having, rather than having itself.

These underlying motivators—the desire for approval, control, safety and separation—form the core of all our limitations.

  • Maybe you have the need to show people you’re right by trying to pick tops and bottoms. You care more about being right than making money = Wanting Approval
  • Maybe you have issues with Slow Developing Trades – you lack the patience to stay the course and close out your positions before they move to the target = Wanting Control
  • Have issues trading following a loss/losses – fear of getting into the next trade because you don’t want to lose more money  = Wanting Security
  • Not taking a loss – can’t lose money = Wanting Security
  • Not being wrong – fear of a loss = Wanting Significance

Can you see that it could even be a combination of several wants?

This model applies to all areas of our lives.  Everyone is motivated by four basic desires that exist beneath our thoughts: emotions, beliefs, attitudes, and behavior patterns.

So here’s the exercise

Just like the S-E-T exercise, every 30 mins. or at any critical juncture (hot button moment) in your trading I want you to check in and ask yourself –

  1. What am I feeling/thinking right now?  Furthermore what WANT is driving this behaviour?
  2. Ask yourself – Would I be willing to really welcome this want right now?
  3. Now Would I be willing to let go of this want?
  4. Could I let go of this want?
  5. When?

Now, check in again. If you have been open to this experience, you probably feel a little, or a lot, lighter already.

But if there is still more of that sense of wanting, could you let go of wanting that?  Go through the 5 steps again.

Do the 5 steps again until you no longer notice the charge.  This shouldn’t take more than 1-2 mins.

After doing this for a while you will begin to feel a real sense of freedom because when we can let go of wanting, we can feel more like we can have.

That’s because the most powerful place to LIVE from is the position that it’s “okay” whether we get it or not.

This is what it means and feels like to not be tied to the OUTCOME.

So let’s wrap things up.

In summary, in today’s show i shared with you the core concepts around understanding your beliefs, the ATI Framework, the importance of raising your awareness, and finally some exercises to do just that.

If these concepts or these exercises have helped you or your trading I’d love to hear your experiences.  Drop me a line.

Episode 23 – Successful Trading Begins And Ends With Self Awareness

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