Thursday Trader's Tip: How to Break Free from Self-Criticism in Trading
Thursday Trader's Tip editions offer quick trading psychology advice that can be digested in 5 minutes.
Watch this edition video at the end of the post.
How’s your inner critic been acting lately?
Do you catch yourself beating yourself up after a trading mistake and feeling the urge to “redeem yourself” with a quick win?
If so, your inner critic might be the one thing keeping you stuck in your trading progress.
Self-punishment can feel like a way to “keep yourself in check,” but it does not lead to real growth. In fact, it traps you in a cycle of self-sabotage.
Here’s the truth backed by science:
Better trading habits aren’t built through punishment—they’re built through reinforcement.
So, how do you actually shape behavior? Let’s break it down with the four methods from psychology:
Positive Punishment
(Adding something unpleasant to decrease a behavior)
Trading: A trader sets an alarm that plays an unpleasant sound every time they break their trading rules (e.g., taking an impulsive trade).
Life: A child is given extra chores to do after leaving their toys scattered around the house.
Negative Reinforcement
(Removing something unpleasant to increase a behavior)
Trading: A trader feels relief from anxiety (removal of a negative emotional state) after adhering to their trading plan and avoiding impulsive trades.
Life: A student’s parents stop nagging them when they start doing their homework without being reminded.
Positive Reinforcement
(Adding something pleasant to increase a behavior)
Trading: A trader rewards herself with a relaxing activity (like watching her favorite show) after sticking to her trading plan for the week.
Life: An employee receives a bonus after successfully completing a challenging project at work.
Negative Punishment
(Removing something pleasant to decrease a behavior)
Trading: A trader restricts themselves from social media after breaking their risk management rules.
Life: A teenager loses phone privileges for failing to follow household rules.
Why Positive Reinforcement Wins Every Time (and How You Can Utilize It In Your Trading)
Unlike punishment, which triggers stress and fear, positive reinforcement activates your brain’s reward system. And that’s key for behavior shaping.
Punishment might work temporarily, but it doesn’t teach what to do next. It just leaves you stuck, stressed, and unsure of how to improve.
Your strengths are the guiding light of progress (I wrote about it here).
Without acknowledging them, you’re left in the middle of the unknown, letting your mistakes overshadow your positives.
In my work with traders, I see this cycle all the time:
High self-criticism.
Perfectionism.
Toxic self-talk.
This results in a downward spiral of broken promises and harsher self-punishment. It’s a recipe for burnout—not progress.
Positive reinforcement takes you on a completely different route.
Here’s How to Start
Focus on what’s working: Identify areas of your performance that make you proud and the exact process that helped you get there.
Acknowledge your progress: Just taking some time to feel grateful about what went well and give yourself recognition for such is sufficient.
Reward yourself strategically: Research shows us that intermittent rewards (just like in the casino) are especially effective for consistency. Reward yourself occasionally for well-performed days, but not always — your brain’s reward system will get used to it and weaken the effect.
This is the approach I like to use with traders in my peak performance coaching program.
What About Mistakes?
Avoiding punishment doesn’t mean ignoring mistakes. It’s about handling them constructively. Instead of succumbing to punishment (destructive self-talk is a form of punishment), do this:
Categorize the mistake: I wrote about the 5 categories of mistakes here.
Own it: Take full accountability; it was not the market’s or another trader’s fault; it was yours. No accountability —> no progress.
Action plan: Create a strengths-based plan that makes sense to you. What works for another trader might be ineffective for you and vice-versa. Strive to know yourself and put up action steps based on that self-knowledge.
Many of us were conditioned to rely on punishment, but now, upon scientific evidence, you know better. And you have a choice—you can keep doing the same things and expect no change, or do things differently and open the door to new results.
How will you reframe your trading self-feedback? Leave it in the comments below!
Peaceful trading,
Sara
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I really like someone taking a real approach to trading here. Once you learn the basics it is all about how you handle yourself and your emotions. Only few understand this. Thanks for the post. Great reinforcement for me this upcoming week!
Thank you! Your articles are useful always! I love it you use the feminine for a trader.