Thursday Trader's Tip: Impulsivity
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Welcome to Thursday Trader's Tip - the free edition of The High-Performing Trader newsletter. Each issue presents to-the-point trading psychology advice that can be read in under 5 min.
This week's post is about impulsivity in trading.
Here’s what happens when a person makes a deliberate decision:
Now, here’s what happens when making impulsive decisions:
It’s not that there’s no thinking between the trigger and your response when acting impulsively, but the emotions rise so fast that you barely notice it, and by the time you do, you’ve already made the mistake. Then it’s when you make the thinking and regret kicks in.
Many traders I work with face the challenge of impulsivity. They've made promises to themselves before - vowing to avoid impulsive trades, resist taking profits too early, or stop oversized positions. But they repeatedly break their promises, getting them stuck in a frustrating cycle of disbelief.
What's going on inside your head when you "just can't stop yourself" or when "something stronger takes charge and you lose control"?
You may know how to be less impulsive before the session starts as you prepare yourself. Everything seems right and feasible: all you have to do is step back from the charts when things get out of control. So why does all your planning go to waste when the actual moment arrives?
Stepping back from the charts when ‘things get out of control' might be too late, and it’s a vague rule to act upon. To counteract your usual impulsive tendency, you need a stronger and more defined rule.
Let’s understand what happens in the chemistry of your brain when reacting impulsively:
Dopamine release: Reinforces immediate gratification.
Serotonin levels plunge: Influence impulsive responses through imbalances.
Frontal cortex inhibition: Temporary frontal cortex dysfunction, reducing the ability to regulate urges.
Noradrenaline release: Part of the "fight or flight" response.
Reduced GABA activity: Lowers inhibitory control and increases neural excitability.
Endorphin release: Acts as a reward, encouraging impulsive actions.
Cortisol levels rise: Heightens the likelihood of impulsive behavior in response to stress.
Under this chemical response, there's little room for rational thinking. How can you then increase the chances of taking control under this mode?
The key is timing.
You don't have to reach a breaking point and wait for self-control to kick in. Instead, grab the opportunity to identify the early signs of your impulsive pattern before you become trapped in this brain chemistry. A deep understanding of your monkey mind—triggers, thoughts, body changes, the evolution of emotions, etc.—is crucial for easily spotting these signs.
It's about the timing, not about fighting yourself into good trading decisions when the mental odds (chemistry of your brain) are no longer in your favor.
So, get to know your 'monkey mind' in detail and practice recognizing early signs of your impulsive patterns in real-time. If you can do this, you’ll remain in control.
Put the mental odds in your favor!
Happy trading,
Sara
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