We’ve all had those moments in trading where we know we shouldn’t do something, but we do it anyway. Then a split second later we are wondering what happened. It was like we were possessed for half a second and it ruined our trade, or made us miss an opportunity. Sometimes we can even get stuck in this possessed state for days as we watch a trade move against us, well past our stop loss point, immobilized and unable to hit the sell key to get out.
This video explains why this happens, and what to do about it. It is probably the most important trading video you will watch. Because if we don’t handle this, it doesn’t matter what strategy we use, we will always have these moments where our trades get sabotaged. And any single moment could ruin our entire account.
The Trader, and Your Other Parts
When we trade, our trader is supposed to be at the forefront of our mind, controlling the action. Our trader is the part of us that has done all the research and reading, is the best person for the trading job (usually)
But just because we have come up with a trading strategy doesn’t mean all the other parts of ourselves are just going to sit quietly in the background while the trader puts these other parts through emotional hell….Most of us have a conservative part or an anxious part that hates the fact we are putting hard-earned money at risk.
Other parts of us are going to try to take the reigns while we are trading, and sometimes they succeed. That’s why we have those moments where we feel “out of our mind” or “I don’t know why I did that” or “How could I have not seen that trade.” The anxious part, for example, jumps into the driver seat and hits the sell key on a perfectly good trade. A split-second later the trader part takes over again and have the feeling of “What the f*** happened?”
We need to be in trader mode when trading, and if another part is taken over by another, we are no longer in the best position to trade our strategy effectively. The perfectionist in us, or the greedy person in us, or the lazy person in us, isn’t a trader. If they are in the driver’s seat, it is very unlikely our trading plan will be followed.
The Path to Alignment
Each of us has loads of parts. And they may not all like trading or understand it. You may have a part of yourself that thinks trading is foolish and a waste of time (may take the appearance of a friend, spouse, or parent). You also obviously have another part that wants to trade and do well at it.
We have a conflict. If the part that thinks it’s foolish to trade gets hold of the reigns while you are trading, do you think you will follow your plan? No this part of you wants to fail and give up this foolish task. Mistakes will follow, and money will be lost.
What if we could align the parts that are in conflict? Not just in trading, but in every area of our life? What would that feel like for you? To feel like your whole mind is working towards a goal, as opposed to being pulled and torn in different directions. What if you could enjoy your trading time free of fear, greed, and nagging voices in your head. Similarily, what if you could truly enjoy your free time without being obsessed with the markets, constantly feeling drained, or feeling like you are on a never ending hamster wheel.
This is possible, with a parts negotiation.
A Parts Negotiation For Better Trading
I have heard about this kind of parts negation many times and in a number of books, but didn’t really think about in terms of trading until I attended a Van Tharp Peak Performance workshop.
I discuss the parts negotiation in the video above, and also in this article, so I am going to keep this to bullet points here.
- While trading, note a voice or a part of you that tries to take the reigns away from your trader. This will usually be associated with a feeling such as anxiety, fear, greed, lack of focus, laziness, distraction, boredom.
- Personify this part of yourself. What does it look like to you?
- Ask it what it wants? It is NOT trying to hurt you. It is trying to protect you. Find out what it is trying to do for you. Write this down. The anxious part is trying to save you money probably. The perfectionist in you wants the best for you. Note what it wants without judgment, because we can’t change that desire, but we CAN redirect it.
- Once you know what it wants, you can negotiate with the trader part. Imagine your trader part on one side and the other part on the other side. You are overseeing a negotiation between them.
- The trader needs to be focused while trading time. The other part wants something too. Can that be arranged outside trading hours? Can a compromise be made? Can the other part be told that the trader has things under control and they don’t need to worry? Write this down.
- Find something productive for the other part to do. It has gifts to offer. Use them. For example, I have a perfectionist part who used to get very mad when I had a losing day. Over the years, I have negotiated with this part. It knows it doesn’t need to get angry at a losing day or losing trade. It lets the trader work, but once I am done trading the perfectionist is allowed to come in and point all the ways things could have been done better. A gift the trader can use! They are not at odds fighting each other anymore, they work together, and know their place and time to act. As a result, both parts get what they want. The perfectionist gets improvement, and so does the trader! Find something productive for the other parts to do, and write it down.
- Negotiate for as long as it takes and come up with multiple solutions to resolve the conflict. It may require changes in your life. It may require multiple ongoing negotiations. This is a process. That said, a well done internal negotiation can leave you feeling very light and aligned. Write this down and follow through with what came up.
- Imagine seeing these parts of yourself shaking hands and agreeing happily to the terms of their arrangement. If these parts aren’t happy, the conflict is not resolved. Keep going.
- You may have MANY conflicts to resolve. The more I resolve the better I feel and the more centered and aligned I become.
Additional Trading Tips With This Technique
Only trade while in your trader mind frame. EVERY TIME you have your brokerage platform open, or have the capability to make a trade, you must be in your trader midframe (or whatever you associate your trader with). If are you wandering on the street and happen to open charts, up may not be in the trader mind frame. You may be in shopping mode, or some other part has the reigns, and that is not your trader mindset. Expect to make mistakes because this part of us doesn’t know how to trade. It may execute a trade and then the trader jumps into the driver seat again and says “What the hell did you do!?” We’ve probably all had that feeling at some point. The correct part for the job wasn’t in the driver’s seat.
As a second tip, do a mini negotiation before you start your day. Get aligned with what you need to focus on.
Do this parts-negotiation work outside of trading, but also, before you start trading, do a quick check-in. Take a deep breath and clear the mind. Let your trader take the reigns and then ask if there is any part that objects to the trader having control for the next 30 mins, hour, 2 hours, or however long you plan to trade.
If any hands go up or any voices start chirping, have a little negotiation right then and there, before you start trading. If something is unsettled before trading, you can bet trading will rattle it loose and it will get amped up even more. Take a moment to appease that part of yourself. Let it know the trader has a plan, it knows what it is doing, the other parts will have their turn shortly. Ask them if they will sit quietly while the trader works…don’t demand it! Ask, and then negotiate any objections before proceeding to trade.
Final Word on Why We Mess Up Trades
I am not talking about split personality or dealing with major mental health issues here. See a professional for that. I am just talking about all the different desires, and values, and beliefs that are inside of us, but that aren’t always aligned.
This is a tool to clear the path for your trader to work, unhindered. It is not meant to cure mental illness. I am not a psychologist, but I have found this tool very helpful. And the more I use it, the better it works.
Watch the video, try it out, and let me know what conflicts you discovered and how you negotiated between them. EVERYONE has conflicts. It is a liberating thing to learn of them and start turning conflicts into alignment.
Once the major conflicts are resolved a lot of the emotion in trading goes away. Losses don’t matter because they are part of the plan. Winners are nice, but just part of the plan. Losing days are no big deal. There isn’t anger at missed traders. There is more joy and a feeling of peace while trading. And a whole lot more productivity with many parts of our brain all firing in alignment toward similar goals. Each getting what it wants and feeling fulfilled.
Our own psychology is the KEY component to successful trading. But we do still need a trading plan to follow. The Complete Method Stock Swing Trading Course provides my process for swing trading stocks.
By Cory Mitchell, CMT