Thursday Trader's Tip: Why You Keep Returning to Stage Zero
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Hi traders, so apparently, I mistook the scheduling of the Thursday Trader’s Tip yesterday, so this week it’s going to be “Friday Trader’s Tip.”
Enjoy, and don’t forget to leave a ❤️!
Happy Halloween! 🎃
A big change requires micro-changes.
Whenever we look for shortcuts around those micro-changes, what usually happens is we relapse hard and fall right back to square one.
I’m sure it already happened to you: you’re making progress for weeks in your trading until there’s that one day when you blow up everything. It feels like you undo all the progress made so far.
You might take some time to recompose: days, weeks... When you gain the motivation needed, you return, and it all starts again…
For how long have you been in this cycle?
And what tells you this time will be different?
The truth is, nothing changes unless we shift our perspective.
Lasting changes require fundamental mindset shifts.
Here are two powerful mindset shifts I find crucial in helping my clients break free from this cycle:
#1 Look behind the curtain…
In the same way the drug addict uses drugs as an escape from reality, you’ve been resorting to [insert mistake] to escape from an uncomfortable emotion.
The truth is: If you keep escaping it, you’ll never get the chance to feel what it is to face that emotion.
Take the example of a trader who takes early profits. Every time this trader gets to a certain emotional threshold, he can’t help but exit early. This escaping mechanism might’ve been helpful in the past when the fear represented a significant threat. But now, there’s no need to utilize it in the market — the trader can deal with the risk and uncertainty even if the worst-case scenario happens (a loss). Continuing to resort to early exits will never expose the trader to the threat, reinforcing the pattern of avoidance.
So, what’s the emotion you’ve been trying to escape from?
If it’s fear of loss, an event from your past might be pouring into your trading performance.
Find out which emotion that is, how you’ve been coping with it (both in and off charts), and start practicing to face it.
#2 Relapses will happen.
Divorce yourself from the idea that change happens linearly: everything happens smoothly until you fully ingrain the new behavior and forget about the past one ✨
The ugly truth about addiction recovery: Relapses will happen.
I know what you’re thinking: calling a trading mistake an “addiction” is a bit much, but in essence, any hardwired habit is somewhat of an addiction, so let’s set labels aside for a moment.
We tend to celebrate how long the addict is sober, but another key measure of progress is the size of those relapses.
The alcoholic might relapse into drinking one glass of wine but then become aware of the danger and decides to stop there. He did relapse, but there was also a lot of self-control in the mix. It wasn’t a complete relapse, as he noticed and stopped on time.
Same with traders. You will relapse into impulsive trading, for instance. But this relapse doesn’t make you eligible to keep on acting irrationally until you blow up. That’s the critical piece that differentiates irreversible relapses from recoverable ones.
You still have much decision and control after that first impulsive trade.
Two scenarios:
You fall for an impulsive trade, become aware, and step back for the day.
You make an impulsive trade and keep the irrational cycle of mistakes until you blow up.
The difference? Survival.
In the first one, you get to trade the next day. In the latter, you think the world will end if you don’t win and don’t get to trade the next day, at least in the same account.
Your perception of your setbacks defines your behavior toward relapse.
When you shift your mind around these two perception shifts, you’ll forgive yourself much faster for your setbacks, which inevitably results in a better ability to sustain change.
Peaceful trading, and happy Halloween!
Sara
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Many thanks Sara - I was in a series of drawdowns trying to tweak my trading plan which has been consistently profitable over the years - I became bored with it. I took your advice , hung up my trading mouse and traveled to Tucson AZ for a week of R&R to reset. I spent the week reviewing your weekly trader's tips and weekend series of articles - I returned back to my trading plan that had been successful and BAM! success - you have to look inward and be able to identify when you have to have a reset. Again, thanks for providing us with the framework for introspection!
Sara, do you ever move a stop loss above break even after a significant move?