The last blog post presented ways we can listen to our intuitive inner voice as traders. Sometimes, we not only fail to listen to our inner voice, but we actively do what we know is detrimental to our trading and success. We're trading well week after week and suddenly we oversize the position, refuse to act on the stop, add to the losing position, and then blow up. Or on the other hand, we become so concerned about losses that we quickly exit winning positions before they reach their targets, leaving big money on the table and torpedoing our chances for real success.
Why is this happening? What can we do to stay aligned with sound practices and processes?
He contacted a reader recently, explaining that he occasionally experiences losses that wipe out a large share of his monthly profits. It is frustrating when we trade well most of the time, then we lose discipline and seem to undo everything we have achieved. As the chart above suggests, the root of self-sabotage is self-abandonment. We temporarily lose track of what we should be doing and instead act impulsively. In the terms of Radical Renewal Online, we abandon the spirit of what we do and allow our trading to become ego-driven.
I have never been convinced that the root of this self-sabotage is a deep inner desire to harm oneself. It's usually not a lack of self-esteem that makes us react. Instead, we encounter “triggers” that lead to automatic and often harmful actions. The problem is a temporary loss of free will. Under a certain set of emotional and physical conditions, we act in pre-programmed ways and become reactive rather than active. Quite literally, it is the loss of self-awareness that allows us to act in ways that are harmful to our interests.
Consider the many situations in which we *never* tend to act reactively and self-destructively. We are not careful crossing busy streets 99% of the time, and sometimes we walk directly in front of traffic. We don't operate machinery (lawn mowers and ovens) safely most of the time, only to occasionally cut or burn ourselves badly. Why don't we take action in those situations? The first reason is that our ego is not involved, and the second reason is that we are fully aware of the risks we face. If I don't *need* to cross the road quickly and I'm aware of heavy traffic, I'm perfectly capable of waiting for a pause in the flow of cars to cross safely. If I clearly perceive the danger, I will act cautiously. always.
This is where it pays to do a “thorough check” before taking any risks. If a surgeon is scheduled for surgery, but is in distress due to a personal circumstance, that surgeon will delay the procedure. “Above all, do no harm” is the practical principle. If a pilot is about to take off on a flight, they communicate with the copilot and — together — go through the pre-flight checklist to make sure the plane is truly airworthy. If a mechanical error occurs, the flight will be delayed. Above all, do no harm.
The opposite of self-abandonment is self-awareness. If we treat every trading session – every trade! – The way a surgeon approaches an operation or the way a pilot prepares for a flight, we are in the state we would normally be in when we cross a line. Crowded street. Awareness of risks and danger enables us not to do any harm. It is not discipline or a “practical” orientation that enables us not to lean when we handle a carving knife in the kitchen. It is the immediate and acute awareness of danger. The key is self-awareness: knowing when we're in the wrong mindset to take risks. Like a surgeon, like a pilot, we must take risk so seriously that we are willing to postpone our performance until we are sure “we will do no harm.” If we conduct our own examination from the neck up, we will not trade impulsively.
Other readings:
Understand trading sentiment
How to overcome the tendency
Video about tilt trading
Advice on leaning towards SMB traders
Radical renewal and spirituality of trading
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