Transforming Your Response to Problematic Triggers

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Traders often repeat mistakes unconsciously, acting on autopilot.

Adopting new responses is a process that takes persistence and patience! You may even be highly aware of your trading mistakes, but having the persistence to interrupt them is the real deal.

Today, we’ll explore the 3-phase process of transforming your reaction to a market trigger and how to cultivate persistence to stick with the new good response.

Trigger’s Intensity & Adherence to the New Coping Behavior

The chart below represents the process a trader goes through to replace an undesirable reaction to a trigger with a new healthier response.

The X-axis represents the time taken to replace the old response with the new one until it becomes automated.

The black line represents the intensity of the trigger over time: it starts at the maximum intensity as the trader gets highly triggered by a loss, a missed trade, or anything that can constitute a trigger. With time and the practice of the new behavior, the trigger becomes weaker until it no longer affects the trader the way it used to. This represents a shift in the trader’s perception of the trigger.

The orange line represents the trader’s adherence to the new response over time. In the beginning, the new response is not natural to the trader so it’s still very weak and difficult to execute. Then, there’s a moment when both the intensity of the trigger and the adherence to the new response by the trader get to the same level. As the trader keeps on practicing the new response, its repetition becomes easier; the intensity of the trigger declines and the coping behavior stays at its maximum, representing the establishment of a strong neural association between the trigger and the new response in the trader's brain.

Traders go through 3 phases until the new behavior becomes natural. The ball represents the effort the trader needs for each phase, as the image below suggests.

Let's look at each one closely.

Phase 1 - Upway

Phase 1 marks the beginning of change, as the trader adopts a new response. This phase demands the highest level of effort to counteract the influence of the old response. As the trader continues to practice the coping response, its repetition becomes more effortless over time. This progression is shown on the chart by a steep slope at the beginning, gradually reducing inclination until it levels off to a plateau.

This phase requires the biggest amount of energy for the trader to pull the ball up to the top of the climb.

Challenges in this Phase:

At this phase, the trader starts a new response that doesn’t come naturally. This is the phase most traders give up to adhere to the methods that solve their trading problems. They never get to experience the top because they don’t make the necessary effort to get there. Their charts in this particular phase look like a roller coaster, marked by oscillations, often regressing to the starting point. The smoother the line, the faster the trader progresses and the less effort is required. This takes consistent repetition of the coping behavior.

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Phase 2 - Straightway

Unlike the initial phase where the trader needed to climb, Phase 2 introduces a different landscape: a straightforward path where less effort is needed to maintain momentum.

During this phase, both the intensity of the trigger and the adherence to the coping behavior peak. This is a crucial moment; if the trader persists in practicing the coping behavior, it’s a matter of time until the intensity of the trigger starts to lose power.

At this stage, the trader starts getting positive feedback from his efforts which leads to a change of perception of the trigger.

Imagine the trigger as a missed trade that led the trader to take poor setups as compensation. Now, as the trader recognizes their ability to profit despite not participating in every market movement, their perception of missed trades starts to change. This is when the emotional amplitude starts to decrease, meaning the trigger no longer has the same effect on the trader.

Challenges in this Phase:

In this phase, the trader incurs the risk of becoming too comfortable. By this time, the trader has already seen some progress and can get overconfident, leading them to lower efforts. Since the new association is not yet fully established, this can result in the trader falling for the old habit. This can manifest as a single episode where the trader reverts to an old response after a series of days repeating the good response. If unaddressed, this incident can lead to a regression into the prior problematic pattern.

Once this happens, the coach or mentor needs to approach this episode carefully, identifying the root cause and addressing the problem head-on. Informing the trader about the potential risk of reverting to the old problem, which could jeopardize all the progress achieved thus far, can make the trader keep up the efforts.

Phase 3 - Downway

This is the final stage. It’s characterized by a downhill where the ball rolls on its own. It reflects a decrease in the intensity of the trigger. In this phase, a new habit was established and overlearned which makes its repetition automatic; it has become second nature. Minimal conscious effort is required, as the new response has been anchored as a belief in the trader's mind.

This stage is proof of the persistence and self-regulation abilities of the trader.

In phase one, the trader knows the belief leading their mistakes is unproductive, yet it remains superficial knowledge without practical backing. In phase two, the trader starts to reinforce the association and form a new belief that’s still weak; In phase three, this new belief is fully formed and solidified.

This is the phase where the trader reaps the rewards from his effort and patience in the previous phases.

Challenges in this Phase:

In Phase 3, challenges are more manageable. Unlike the previous phases where the risk of relapse was bigger, this phase's challenges often stem from external factors. For instance, personal issues in the trader's life could trigger anxiety, which is brought to trading. This might lead to sloppy mistakes and a lack of focus. A day of poor performance can initiate a cycle of negative outcomes, which might lead to market trauma.

Essentials For Persistence

It’s rather easy to realize what are your problematic triggers as well as to set a coping behavior. The real challenge lies in maintaining your commitment and persistence, especially in Phase 1.

Too often, what kills traders’ persistence is that they’re walking in the dark. They don’t know where they’re heading and this uncertainty makes them fall back to their old patterns.

Here are the most essential aspects a trader needs in order to hold persistence, especially in Phase 1:

• Execution-Based Feedback: Focus on lead indicators to extract fast feedback from your performance. Unlike results which can lag a long time behind your actions, an execution measure provides immediate feedback which allows you to make adjustments much faster. Don’t rely on your equity curve for short-term feedback, build a set of journals that measure your execution.

• Big Picture View: Keep on referring to the big picture to hold a long-term view. Probabilistic thinking doesn’t come naturally to us so you need to fill your routine with activities that bring you back to it.

• Positive Self-Talk Reframing: Become aware of the self-talk that might be pushing you down and reframe it to your best interest.

• Achievable Milestones: Set process-focused goals for your journey. Result-based goals lead to frustrations. Eventually, you can only control the actions that lead you to the results.

• Strong Support System: Surround yourself with people who can lift you up when things get tough: friends, family, coaches, and mentors.

• Optimal Routine: Build an off-charts routine that feeds your well-being and energizes you. Strive for balance. Make sure to keep in check your basic needs: 1) Sleep 2) Sunlight 3) Movement, 4) Nutrients 5) Relationships.

Notes of Advice

Advice 1: For traders starting this process, receiving constant feedback is essential. A good coach will be by your side, ready to explore the issue and help you perceive the flip side of the coin. With a coach, you know you’re on the right path and that your actions will eventually lead you to results. This type of confidence helps you keep going in tough times.

Advice 2: Understand that during Phase 1, it's normal to occasionally fall back to old responses. When this occurs, it's an opportunity to introspect and understand what triggered the relapse. Pinpoint the cause and work to address it directly.

Advice 3: There will be moments when emotions build up, and you might find yourself suppressing them. As losses accumulate, emotions can intensify, potentially leading to an outburst. Mastering the art of letting go is crucial. You want to release these emotions away from the trading environment to make sure you start each session fully reset!

Task of the Week:

This week's task is about improving your awareness to initiate your journey toward breaking your undesirable responses in trading, the ones that are destroying your results.

Identify a trading scenario that often leads you to heightened emotions - anger, fear, frustration. Throughout the next trading week, closely monitor your reactions to this scenario. Pay attention to your emotional responses, thoughts, self-talk, and actions. After each occurrence, take a few moments to jot down your observations in a journal or notebook.

At the end of the week, review your reflections. How do you go from being triggered to making the mistake? Look for patterns, recurring emotions, and hidden triggers that might amplify the emotional response.

After this analysis, outline your own coping behavior that aligns with your desired new response.

Once you identify your triggers and find a coping mechanism that resonates with you, that is when you can start with the real process!

With love,

Sara

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