Fear can strike in the market just like anywhere else in life and when it does, the amygdala is in high gear. Irrational thoughts and negative self-talk begin to kick in and low probable trading can ensue. Fear is a part of the market, there’s no getting around that. What we as traders can do is manage how we react to fearful situations. There’s no better example of how to control fear than the Navy SEALs. In each new class there are around 140 candidates of which, on average, 36 complete the training. That’s about a 25% success rate, much higher than those venturing into the markets to make a living.
Four steps that the SEALs take to help in controlling their reaction to fearful situations include:
- Setting goals: Simply having goals to get through the day lead to success. As traders we can set smaller goals or milestones that will lead to an overall goal for that day. It’s easy to be consumed with fear and doubt if our overall goal seems unattainable. Keeping focused on short-term goals builds confidence and eventually leads to overall success.
- Mental rehearsal: Visualizing success in the markets may sound goofy, but it’s a technique that’s used by many professional athletes and others on a daily basis. Visualize what the trade looks like as you enter and watch the right-hand side of the chart unfold in your mind and how you react. This simple exercise will help in controlling emotions while trading that could otherwise lead to taking profits too soon or losing more capital than needed because a trade went against you.
- Positive self-talk: Having nothing but positive thoughts in your mind throughout the trading day is difficult. On average we talk to ourselves anywhere from 300-1000 words per minute. If the first thought out of your mind as the trigger is pulled is negative, you’ve got an uphill battle out of the gate. Changing that thinking into a positive tone can lead to better trading.
- Arousal control: Biofeedback is obvious when trading as our heart rate increases, pulse races, perhaps a little sweat forms on the brow and gut feelings are more pronounced. Breathing exercises, like those found in yoga, are a great way to control arousal and practiced by many. Keeping the arousal level lower makes it easier to control emotional reactions is otherwise stressful situations like trading.
Here’s two great videos that outline what the Navy SEALs are doing to help their recruits be successful as the need for more special forces increases. I’d love to hear any comments that you may have about this topic so please use the comments section below.
Seems like a nice simple approach to follow Darren. I doubt most take the time to even do #1 above – that would be a great place to start.
Indeed. 1st page of my trading journal each option cycle starts with goals. That’s followed by each weekly entry, which also has goals at first and daily entries starts with goals as well. Each day in the market is an opportunity to grow but many fail to set a goal to gauge that growth.
Thanks for the comment, Derald. Have a good time in France!
Émile Coué (February 26, 1857 – July 2, 1926): For (3) can always go with “Every day, in every way, I’m getting better and better”
Nice! A few posts from Dr. Steenbarger @steenbab:twitter work well too:
http://traderfeed.blogspot.com/2009/04/we-gravitate-toward-our-self-talk.html
http://traderfeed.blogspot.com/2007/04/changing-your-self-talk-by-talking-to.html
Great blog. Biology and psychology are so profound in what we do. Thanks for sharing
Great post Darren, great overlay with the elements necessary for a SEAL’s success to that of a trader. The stats might favor becoming a SEAL, but I’d rather trade after seeing the videos!!
Thanks, Jeff. No question what I’d rather do between the two.