“I don’t understand myself at all. I know what I am supposed to do. But that’s not what I do. Instead, at the moment I need to be disciplined, I get rattled and do exactly what I’m not supposed to do and that’s what I keep doing. I know the trading plan rules are good for me and my trading. And my bad feelings after breaking the rules prove that I need to be following my trading plan. During my review I see and realize what I should have done, but I seem to fall apart during the moments I need to be focused on executing my plan.”
Offensive Coordinator vs. Defensive Coordinator PsychologiesThis trader had done a good job up until the moment he entered the trade. The trade met trading plan criterion for entry. The opportunity was there. The position size was prudent. He was ready to exploit the high probability, low risk trade that the market was presenting. All he had to do was execute his trade plan. But it is in this moment of transition from a psychology looking for opportunity (offensive coordinator) to a psychology of defending his position (defensive coordinator),
and his ignorance of this difference, that kept leading him into emotional hijackings.
If you follow American football, you will notice that there is a vast difference in the mindset of an offensive coordinator looking to exploit opportunity and a defensive coordinator looking to defend turf. It’s similar in trading. In the trader quoted in the opening paragraph, his lack of understanding and management of his emotional nature when exposed to uncertainty became his undoing. His ignorance, over time, had led him into numerous emotional ambushes while he was trying to manage the trade he was in. His ability to pick winners was high, as evidenced by his win percentage. The problem was that he did not do a good job of defending his trade once in the trade – evidenced by his weak ratio of winners to losers.
The fear behind the emotional hijacking is common to traders attempting to manage a trade. It is a fear of missing out on profit. And it swept this trader into an emotional vortex that caused him to exit his trade long before it reached its target.
First, he didn’t know that he needed to shift his mindset from offense to defense at this particular moment. It was not in his trade plan. So he entered the trade and all was well until that moment. Then he ran into the flux around the entry point that commonly happens. The trade bounced around. It would come close to his stop, then it would go up and then, back down. But it was not establishing a trend yet. The drama was killing him. A mix of frustration and dread took over his mind as he watched, waiting for the trade to take off.
“How long is this going to last?” he asked himself as he tensed up. All he could think about was the money he could lose. He felt muscle tension and was hardly breathing. His eyes were fixated on the screen. Then the trade finally went into positive ground. A flood of relief coursed through his body. After he had been bounced around by this trade, he saw an opportunity to get out of the trade at a small profit. Rattled by what he had gone through, he took the profit before something bad could happen and wipe out the profit he did have.
Play by Play Analysis
Let’s take a look at how this drama unfolded and see what can be learned from it. First, notice this trader did not have a problem with pulling the trigger. As an evaluator of opportunity to the point of entry, this trader had followed his trading plan. However, what he had not built into his trading plan was a psychological plan. The Offensive Coordinator mindset was natural to him, so a need for emotional and psychological management didn’t occur to him because of this bias. He then, in his mindlessness, generalized this assumption of psychological competence from set-ups to actually managing the flux while riding the trade.
But when he was in the trade and the uncertainty of outcome was a real and present concern, he simply tried to push through the moment. He didn’t even acknowledge that the fear of uncertainty had triggered and was building up emotionally, physically, and psychologically in the mindset he was bringing to the trade. His historical way of dealing with this kind of circumstance was to hunker down and resist the feeling. By doing this, he accelerated the emotional build-up. Once the fear had become highly aroused, a trip-switch flipped. The emotional chemistry of fear coursed through his body and his thinking was contaminated. His capacity to think clearly and disciplined was compromised.
However, if he had been prepared for this transition between offense and defense, a very different outcome could have played out. And this is an important aspect of trader psychology training in both the DTSM self study course and the Ignite individual course.
A Mindful Approach to the Management of Uncertainty
Now imagine that a psychological trading coach is watching a film of where this trading play blew up. The major problem he would discover is that there was not an anticipation of the stress while moving from entry to trade management. Looking at the film, this coach would see the emotional arousal in the way the trade was handled (holding of breath, muscle tension, and fixation) that led to the blow up. In the aftermath, the
concern for trade management
was converted to a fear of loss that led him to get out of a trade early that had actually showed good promise.
Both physical and mental preparation could have remedied the way the deal was handled. First the transition from watching for set-ups to dealing with the uncertainty of being in a trade could have been practiced. Breathing and relaxation skills could have been employed to calm the bio-emotive system to prevent it from overwhelming his thinking. Then, intentional self-soothing could be developed, rather than resisting the stress. By anticipating the need for self-soothing and applying this skill as part of a trading plan he would have stayed calm and better able to manage the trade.
Finally, intentionally taking on the mindset of a defensive coordinator would have set up a mind rooted in disciplined impartiality. Like other skills, this mindset can be taught to be present to mind during the rigors of managing a trade. This mindset, built into the methodology trading plan, would have been practiced so that it could be called forward as a skill.
You may give up some ground – but you’re not going to give up the big one. And you know when to go for the kill – target or stop. Here a psychological trading plan is integrated into the process of the rules that govern your trading.
Notice that the defensive coordinator brings a mindset to the performance of trading. It is in cultivating these emotional traits of discipline, courage, impartiality, and self-soothing that the mindset is developed. The energy of the defensive coordinator takes the field after the offensive coordinator provides the opportunity. Together, though very different, they produce a winning formula for a trader’s mind.
About J. Rande Howell
Rande Howell (MEd, LPC) helps traders develop a peak performance state of mind. He is both a licensed thera[censored]t and performance coach whose work is grounded in emotional regulation, mindfulness, and Jungian archetypes applied to trading. He has a clinical background in training people to master their emotions and to transform self-limiting beliefs into productive mindsets. His work centers on how to break the fear-based beliefs that imprison a trader's performance and that block the development of a trader's potential to achieve financial and personal dreams. By learning how to manage the biology of emotion, real and long lasting changes can then be made to the mind's core beliefs from which the trader engages the uncertainty, risk, and probability that must be mastered in trading. He is the author of four books including
Mindful Trading: Mastering Your Emotions and the Inner Game of Trading.
