Psychology for TradersPsychology for traders is probably the hardest obstacle to overcome for both beginning traders and experienced traders.  Just when you think you have it conquered old habits and thoughts seem to creep back in and sabotage what progress you did make.  In this article, I want to talk about the psychology for traders and how expectations can affect outcomes.

Psychology for Traders – Expectations

Most traders have heard the old adage that “You are what you eat” but another one is “You are what you think.”  Yes, you have probably tried positive thinking before and didn’t see results but it’s more than likely because you had no expectation of the positive thought occurring.  Without the expectation of a statement occurring, then you are actually conveying that you don’t believe the statement and, therefore, just the opposite is likely to occur.

Overcoming psychological issues when trading involves 3 steps:

  • Ask
  • Believe
  • Receive

Some of you may realize the theory behind the three steps:  Laws of Attraction

The laws of attraction are rather simple — what you emit in energy is what you receive.  So if you are emitting signals for losing trades, losing trades occur.  If you emit signals of fear, you receive more fear.  While you may think it doesn’t work, think about this for a moment.  The U.S. Army invokes very powerful, positive statements to transform a civilian into a soldier.  How?  Through the Soldier’s Creed (http://www.army.mil/values/soldiers.html):

I am an American Soldier.

I am a warrior and a member of a team.

I serve the people of the United States, and live the Army Values.

I will always place the mission first.

I will never accept defeat.

I will never quit.

I will never leave a fallen comrade.

I am disciplined, physically and mentally tough, trained and proficient in my warrior tasks and drills.

I always maintain my arms, my equipment and myself.

I am an expert and I am a professional.

I stand ready to deploy, engage, and destroy, the enemies of the United States of America in close combat.

I am a guardian of freedom and the American way of life.

I am an American Soldier.

Notice the use of power words like “I am” and “I will”.  These two words are embedded in almost all the U.S. Army creeds. Soldiers have to memorize these creeds and repeat them early in the morning before their day starts, sometimes in between and even at night for 63 days.  Because they are required to memorize them, more likely than not, they are stating these over and over again before they go to sleep and first thing in the morning (these are the most powerful times to do so).  Soldiers are made to believe them not through words but through their Drill Sargent’s expectations.  And at the end, most do become what the Army has planted within their subconscious mind — soldiers.  In fact, most army soldiers even after they leave the military can recite the creed ten years later.

And, since changes takes a minimum of 63 days, it is no surprise that basic training lasts for 63 days either.  Of course, the Army also makes sure there is little outside interference while they are transforming these individuals.  No television, no phones, very limited outside contact.  Even parents and spouses are encouraged to use positive statements in all communications with soldiers.

If the laws of attraction and positive statements can transform civilians into soldiers, surely psychology for traders can utilize the same methods to become successful traders.  In my next post on trading psychology, I will show you how to use the power of words to change your trading and mindset as well.