Taking a brain-based approach to trading recognizes the advantage and understanding that our own neurology provides. Remaining calm and relaxed when everyone around you is losing their cool provides a prospective most accurate for the markets.
Your perceptions are least limited when your PFC is fully open for business and not crowded out by the latest whipsaw event. Expanding your consciousness in time and perspective allows a more rounded and all-encompassing view of market movements. And of course, this allows you the trader to exploit market mania to your profits.
When your mind is relaxed and merely observing the markets it does so as a casual observer. There is nothing to gain or lose, it just is. The only time you are truly objective on your trades is when you are not in a trade. This is the completely relaxed mind, fully aware and fully mindful of all perspectives. Here is where we strive to be even when we are in a trade. How do we get there?
One solid method is Mental Rehearsal. In Best Loser Wins the author Tom Hougaard shares his mental pre-market routine where he mentally places his trades in the worst possible light and sees himself navigating unemotionally. His heart rate initially elevates, then returns to normal. His sweaty palms regain their sweat free state. In effect his mind takes him through the jungle and back in a few seconds as he mentally regains his composure from temporary amygdala emotional overreaction and back to PFC dominance. This is called being prepared for a disaster in advance. As trading is mostly about learning your own psychological responses to stress that is where much of your training should focus.
Seeing through your mind’s eye these situations in advance alleviates the burden when it actually happens. Remember in trading the unimaginable happens at least once a week. Your task is to imagine it in advance.
You should also go the other way through euphoria where your trades unexplainably explodes in your favor. What should you do? Work through it in your mind so that nothing the market does today can surprise you. You have already been there, done that.
Your job is to focus on the process of trading while being uncertain of the outcome, something you cannot ultimately control. You can control the process of mental rehearsal, relaxing your mind, expanding your time horizon, remaining calm when all around has lost their minds, and mentally executed entrances and exits like the professional you are and want to be.
If what you imagined happens and you still get emotionally overwhelmed, you can be sure your mental imagery of the situation was not real enough. When you mentally rehearse your physiology should change to sweating and elevated heart rates and breathing. Then you know you have already been there and back. Mentally see yourself correcting this arousal state into the calm relaxed trader you desire to be. All great athletes do this. All great traders do as well.
You can learn from your mistakes by journalling them as well as your successes. This is a process that is under your full control. Are you journalling to help cement the trades in your neurology? Recall that writing fires off many more neurological connections than does either recording your trades in audio or video. Writing crystallizes your trades as you think about what you are writing.
Of course, this method is effective in everyday life just as much as it is in trading. I think if you start to implement these methods your trading day will go much smoother, and your profits will in time reflect the new you.
Enuf said.