
Ben thought to himself, “On that last trade, I left too much money on the table, and I’m not going to do that on this one.” “I’ve given up too much profit, and this time I’m going to get every pip I can out of this trade,” he added. Ben could feel how excited he was; he could feel the excitement all over his body.
As the trade went on, Ben let it go past the point where he usually wants to get out, because he “knew” that this one would keep going for “a while.” Ben felt a rush of adrenaline go through his body as the trade kept going in his favor. As the trade went better for him, he started to feel excited. Ben was now “hooked,” and he thought, “I’ve caught a huge winner! Now I’ll show them!”
The trade started going against him quickly, faster than he could have expected. Ben didn’t panic at first. He reminded himself that markets go up and down and that “this one would come back soon.” But it didn’t. It kept going against him, and he finally had to admit that he had lost another big trade he should have won. Once again, he had put a bullet in his own foot. Now that Ben was embarrassed and ashamed, he asked himself, “How could I have let this happen again?!?”
Emotions can easily win out over logic.
Why did Ben keep doing this? How did he get into the frame of mind that led him to make the same mistakes in the market repeatedly? From the outside, it would be easy to say that he didn’t stick to his trading plan and didn’t have any discipline. But this assumption leaves out a more important and deeper truth: that people are controlled by their emotions, especially when trading.
How and what we can think about is determined by how we feel. In Ben’s case, the fear and greed he felt were so strong that they overpowered the emotions he needed to have in order to take the clear, open profit when it was there. That is the fear of missing out and wanting “more and more” because you are so greedy. As his fear and greed grew, they started to control his thoughts and, eventually, his actions to the point where he could no longer trade in a rational way for a while.
Ben, like a lot of other traders, didn’t yet have the mental skills to keep his emotions in check as he entered the trade and watched what happened. So, a man who thought he had everything figured out became “possessed” by the more primitive parts of the human mind. Ben’s trading plan didn’t include anything about how he would keep his emotions in check. This is a very common mistake among traders. Ben, you, and many other traders will keep making the same mistakes and losing money until they learn how to control their emotions, which get in the way of trading logically and rationally.
When you trade, be aware of how your mind works.
The first step to becoming a trader with a peak performance mindset is to be aware of your emotional nature. Let’s talk more about what happened to Ben to help us understand this better.
What happened to Ben was that he traded with a mind that was out of control and too emotional. As the trade began, he didn’t know that the parts of his brain that make him too emotional were about to take over. The change from a rational and logical way of thinking to a more basic “fight or flight” way of thinking is often very subtle and hard to notice, especially when trading. It happens without you even noticing unless you are ready for it, have planned it, and know how to “fight” it. So, once the trade started, Ben’s mind was already shifting into a primitive “hunting of the prey” mode and moving away from the logic and planning that got him to that point.
As the trade went on, Ben was obsessed with “catching the big game this time,” and he wouldn’t settle for anything less. We all know that Ben lost money again when he was too upset to think straight. The hardest part was that Ben’s desire to “be the best” and “go for the big winner” had helped him in many other parts of his life, especially in his career outside of trading. But he was starting to realize that these qualities and habits were hurting him as a trader. How come? Most of the time, it’s because the traits that lead to long-term success in the market are things like patience, staying calm, being logical, and not letting your emotions get in the way, even though you’ll be tempted all the time. Not an easy task, to put it mildly.
From the outside, it was clear that Ben was greedy and afraid to take a profit because he thought he would get a bigger one. But for Ben, and probably for you too, when you’re in the “heat” of a trade and your mind has already crossed that line from rational to primitive or emotional mode, it’s hard to go back. So, the key is not to let yourself get to this mental point in the first place…
How to use your body to calm your mind
When traders try to fix their “mental” trading problems, they often make the big mistake of only focusing on the mind. People have tried for hundreds of years to separate problems with the mind from problems with the body. This is wrong, though. Modern Western science has found that it is almost impossible to separate the mind from the body. Our minds (and, by extension, our emotions) are so closely linked that they can’t be separated.
What Ben didn’t know, and what you probably don’t know either, is that changing how you breathe can have a big effect on your mind and help you keep it in check while you trade. By practicing diaphragmatic breathing, you can better handle stress and even stop your brain from going into “fight or flight” mode, which is when you cross the line from trading logically to trading based on your emotions.
Wikipedia says, “According to the University of Texas Counselling and Mental Health Center, diaphragmatic breathing lets you take normal breaths while getting the most oxygen into your bloodstream. It is a way to stop the “Fight or Flight” response and start the body’s normal relaxation response.
When you breathe with your diaphragm, you take deep breaths and tighten your diaphragm. It shows up when the belly goes out instead of the chest when you breathe. Many people think this is a healthier way to breathe, and it is clear that it also helps control one’s mind.
To be clear, I’m not saying that diaphragmatic breathing will solve all your trading problems or even give you the perfect trading mindset all the time. I’m just saying that it’s a very useful tool that you should look into to help you control how you think about trading while you’re doing it. It can help you keep your emotions in check and keep you from getting too attached to your trades. This breathing technique will go well with a good trading plan and mastering a good trading strategy. So, I suggest you learn more about it and start using it while you trade and even when you’re not trading.