Three reasons Why Preserving Your Psychological Capital Is Key To Trading Profits

Anybody who has invested in trading course and books knows the dogma: Discipline, discipline, discipline.

Discipline is hailed as the very thing that ensures your success as a trader and investor.

Not only do I beg to differ but I would go as far as to say that this premise is incorrect since it is based on outdated information of how our brains operate. The old assumption that we can make decisions purely based on a rational basis while ignoring our other senses is flawed given scientific research of the last few decades.

Scientists are now proving what the wisdom traditions have taught for eons, namely that there is no difference between the brain and the rest of your body, but that both operate together in a holistic fashion.

This in essence means that you cannot separate your rational mind from your feelings.

When you are just using your mind to make your life's decisions it is like attempting to walk using just one leg.

Trader burn out is a well known phenomena. The job requires intense focus and the ability to process large amounts of fast changing information very quickly. Most people simply are not capable to operate on this level for very long and this is one of the reasons why so many traders fail before they even had half a chance to prove themselves.

The issue with discipline

When you force yourself to follow a strict trading regime placing the main emphasis on discipline and ignore the signals your body is sending you, you will end up losing money unnecessarily sooner or later.

Let's take a common issue that affects everyone at some point: Tiredness. Recent research shows that we need much more sleep than commonly recognised. An average of 9 hours in bed is required for the average person. Sleep deprivation is a common cause of many  problems. It pushes body and mind into overwhelm.

Tiredness  has been proven to increase risk tolerance and this is bad news when trading or making decisions on your investment portfolio. Yet many a trader work far too many hours often without  proper breaks and wonder that they make mistakes. Then they get angry with themselves and try making the money back. A vicious circle starts which could easily have been avoided by becoming aware of the symptoms in the first place and heeding them.

Similar to operating from fear and anxiety when tired you see things in a distorted way. You omit pieces of information and you also see things which are not there.

When you suppress fear based emotions of anxiety, guilt and greed a very similar thing happens. Your brain distorts the information in front of you. When you are immersed in the emotion of fear you conceive of it as the real you. Nothing outside that fear exists. For instance, you are unable to tell whether intuition is telling you to stay in a position or whether fear of losing is preventing you from operating your strategy.

It is hardly rocket science to figure out that none of the above will aid your trading decisions. In the long run this lack of awareness can lead to trader ruin.

So, why do you keep making the same mistakes over and over again?

The definition of insanity is doing the same thing over and over again and expecting different results. Intellectually we all know this adage, yet why is it so difficult to adopt new behavioural patterns? The reason is to do with lack of awareness of yourself.

This lack of cognitive awareness leads you to repeat patterns of sabotaging behaviour which are almost always rooted in unresolved early childhood issues. The well known trader van Tharp makes all his " super traders" spend a year on resolving their psychological issues. And for good reason: Unless you have the awareness to understand how and from what belief system you are repeating un resourceful behaviour patterns you will find it extremely difficult to let go of old habits.

Patterns are just that: Patterns. They repeat until we can see with clarity that they do not serve us.

I can tell you over and over again: "Stop hesitating, pull the trigger earlier, take a break when tired", unless you can see clearly for yourself that your behaviour is costing you money the odds are that you will continue.

This is in a nutshell why maintaining discipline alone is not going to make you a successful trader. If that were the case there would be many more success stories. Discipline alone is  relatively easily learned. Self awareness however takes a lot longer. It requires your willingness to be open and honest with yourself. Neither characteristics come easily to the average person.

Clear psychological blocks

Start with clearing you psychological debris. Releasing old energetic imprints from your matrix help to clear your vision and will increase your cognitive awareness.

As you learn to stay out of your story, and become more self aware, you notice with more clarity how you react to the information on your screen. This is not about suppressing your emotions and feelings, but about learning to acknowledge them without having to react to them.

The ability to clear your mind and observe your thoughts and feelings calmly helps to preserve your energy. This in turn enables you to develop endurance. As you develop endurance you develop patience. Endurance and patience increase confidence. Endurance, patience and confidence are the traits you need to maintain your psychological capital and thus your profits.

Nurture your  psychological capital  as much as you nurture your trading system, actually more so, and your trading profits will look after themselves.