Mind of a Trader Part 2: Coping With Losses & Visualizing The Future

Editor's note: ‘Mind of a Trader' is a series of articles covering the emotions involved with trading. It is authored by Norman Hallett, CEO of Subconscious Training Corporation, which is widely known for ‘The Disciplined Trader Mastery Kit'.

Be warned. You’ll hear these quotes all the time….

“Part of overall winning is taking losses along the way.”

“If you have 55% winning trades, you’ll win in the long run.”

We’ve heard it said a million times in a hundred different ways. In any trading system, we will experience losing trades as well as winning trades. We know this. So why is it that as we move forward
 from trade to trade, we become frozen with doubt when the losing trades appear in bunches?

If you think about it, when winning trades appear in bunches, we get motivated and we look for reasons to find the next trade. We’re on a roll and we love it. We’re on top of the world. The words “genius” and “professional trader” seem to fit us perfectly.

Conversely, when losing trades appear in bunches, we become fearful of the next trade and look for reasons to shy away from following our system. We become filled with doubt and the words “gambler” and “loser” seem to describe us best.

So why does it play out this way? 
It’s because you are viewing your trading outcomes as reflections of you as a person. This leads to the destruction of virtually all failing traders. Negative personal evaluation leads to you being emotionally out of control, which leads to straying from your tested trading system. The result of this is trading by the seat of your pants.

You must develop the mindset (and the true understanding) that you are a winning trader whether you are experiencing a run of losing trades or winning trades. Your self-image of a winning trader allows you to glide through losing streaks so you can be there for the winning streaks. Most new and “intermediate” traders do NOTHING about their mental trading fitness. They are willing to spend thousands of dollars on “holy grail” systems and out-of-town seminars, but are totally neglecting mental conditioning. You should be training as hard on your mental fitness as you do on preparing your trading signals.

As a broker/trader/CTA for 21 years, I have probably seen 50+ trading systems that were money makers. You need to find a system that suits your personality. Back-test the system and appropriate the money to trade the system. Then GO FOR IT. The “go for it” part won’t actualize without the mental strength to take the good with the bad.

What would you rather have? The perfect trading system or the perfect soul-mate? I would venture to say that most traders are so “into” their trading that they would hesitate and ponder that question. The answer is the perfect soul-mate, but that because there is no perfect trading system. The perfect trading system is the right system for YOU.

Let’s assess. Are you the impatient type? Let me stress here that by impatient, I mean that you don’t like the notion of waiting more than, say, a day, to see your trade results. You use logic like….

“I don’t like to stay in a trade overnight, because that’s where the risk is...anything can happen in these crazy times.”

“My signals are just as valid with a 60 second chart as they are with a weekly chart and I’d rather be able to keep adjusting.”

These things that you say to yourself (valid or not) come from your inner-self trying to move you to comfort. Are you the Position-Trade Type? Then you’re probably saying…

“The market can be controlled short-term, but eventually the fundamentals come home to roost.”

“I’m not looking to eat up my capital in transactional costs. As far as I’m concerned, the trend is your friend and I’ll stick with a trade.”

“A signal is a signal, whether it’s on a 2-minute chart or a monthly. When my signal sets up, I GO!”

“Sometimes I don’t even know which (stock/commodity/currency) I’m looking at.”

“That really doesn’t matter to me. I just care about the technical pattern.”

I won’t bore you with more types, because they are unlimited. In my coaching of traders for years, these above types were the predominant ones. There is no right and wrong type. There is only assessing which type you are comfortable with perceiving yourself as and then committing to a trading system that reflects that type.

There is plenty of winning trading systems, of all types, that can be very successful. The best way to have a good system work for you is if you can follow its signals without hesitation. You are more likely to follow your trading signals if the system “agrees with you.” Now look inside yourself. Then commit to following what your tested system tells you to do! You must win the BATTLE WITHIN YOURSELF first, before you can win in the markets.

Believe it or not, it’s true what they say. visualizing your future the way you want it, is much more likely to make that future a reality.

I'm personally a “doubter” by nature and this notion of visualizing didn’t really make much sense to me when I heard about it the first hundred times. It all sounds a little fluffy at first.

I’m supposed to sit in a quiet place wishing, hoping, and praying that all my dreams will come true? I don’t 
think so. At least I didn’t think so. Then I met a subconscious trainer (whom I later married), who sat me down and stated, “Thoughts are things.”

Ok, so what kind of things? I’ve seen Kreskin and other guys bending spoons with their thoughts...is that what she means? Rather than give you the entire exchange of words (I don’t know that I remember all of them, as I was falling in love while I was listening), I’ll give you the capsule.

According to her, there is this stream of consciousness somewhere up there that you can plug into, and then, by directing your thoughts, you can harness this consciousness somehow to get what you want. This, combined with the notion that time, as we know it, is not linear; we can affect the future from the present through this universal consciousness!

That’s all I’ll say about that. Excuse me while I hug a tree... I’m back.

I don’t understand all of this, let alone believe it, but I’ll tell you one thing I do know…if you get your brain into an alpha brain wave state and you tell yourself (or have someone else suggest to you) what you’d like to happen in the future, say, the picture of you as a successful trader, you will head in the direction of that picture you’ve created in your head. At least that’s what happened to me, and just about every successful trader I know.

There are different ways to visualize. During a quiet time, like even sitting in the bathroom, picture yourself living the “Life of Riley” (am I showing my age... for those of you that don’t recognize that phase, it means “the good life”) and having people around you recognize you as that successful trader whom everybody is talking about. You then can move up the effectiveness ladder as you get used to the notion of visualization and get more and more affective with your thinking, but the idea is to get started.

Once you start creating pictures of yourself as the money-bulging-pocketed-successful-trade, you will actually become less likely to allow your emotions to lead you to trading mistakes because “Doing the wrong thing,” like pulling your stops when the market comes close to them, becomes inconsistent with your picture of who you are.
Eventually, if you keep up your visualizations, you become that picture.

Learn more about managing and disciplining the emotions of a trader.