Why It’s So Hard To Change Your Trading Behavior

By | July 19, 2022 4:06 pm

At the beginning of the year, many people make resolutions for the new year. They want to lose weight, exercise more, work less, be more loving to their Partner and quit smoking.

Most of the time it stays with the resolutions, after just a few days or weeks they find themselves back in the old wheel of their habits.

Trading is no different:

  • You know that you should let profits run sensibly because the big profits offset the many small losses.
  • You also know that you should set stops to preserve your capital. Still, you Fail to put Stoploss Thinking Operator will come and trigger my SL and than position will go in my Favour and I will miss the move.
  • You keep tinkering with your stop logic. You know you have to do it, but you still can’t!

Why is it so difficult to change behavior?

Because our behavior is linked to emotions. And stored emotions are far more powerful than any rational argument.

Here the mosquito fights against the elephant. Our brain can access what we have already experienced at any time and assesses in fractions of a second whether something is important or unimportant, good or dangerous for us. This happens in our
Limbic system, the emotional control center of our brain. This is where our feelings are produced, compared and evaluated.

Hormone production starts and determines our behavior.

Humans are creatures of habit and most of the time our weaker self has us on a leash – instead of Stronger Self. We find the reason for this in our brain. To be more precise, in the neural network. It is the supreme control center of man. All habits are stored here in the form of tens of billions of brain cells and linked to emotions. If you have a thought or perform an action, the associated neural connections are activated at that moment. You can compare it to using the keyboard on your computer.

If you press the letter R, an R will appear on your screen. However, the neural network does not have closed boundaries. Everything is connected to everything else, like a fishing net. We can experience the effect of these interconnections in the
most simple actions of our lives:

If we turn on the television, we suddenly get an appetite for chips because we have become accustomed to the behavior “TV + eat chips”.

It is this harmony that makes it so difficult for us to break our habits, because we always draw from what is available. If you want to behave “newly,” then you first have to create the new neural connections. Like learning a foreign language. Again, you can only use vocabulary that you have previously learned. So if you want to use new skills, you have to train them first. This varies in difficulty depending on the task.

It is usually more difficult when trading because the connections are more complex and linked to our strongest protective emotion, fear. But of course it is possible.

Since our habits are mainly activated unconsciously, a change via the unconscious is also very useful. However, it works just as well through active behavioral changes. In my experience, a mixture of both is the most effective, fastest and most sensible.
When trading, you have learned many harmful habits, especially at the beginning: not setting stops, changing stops, getting out of a position too early, senseless money risk, etc. These are usually associated with strong feelings. Some misconduct has been practiced by the trader for years. This has created particularly strong neural connections, which makes it much more difficult to change this behavior.

Old habits cannot be erased from the brain. They are dormant, so to speak – like lightbulbs that are currently not receiving any electricity.
Acquiring new skills stimulates the growth of new brain cells. The more you repeat this learning process, the more it becomes a natural habit, which means less effort for the brain and therefore much easier for us to carry out in the future. An unconscious competence develops more and more from this. That means you practice something without having to think much about it.

When trading, this simplifies the course of action enormously! This is also why professional traders say successful trading is boring. They reel off unconscious competencies again and again.

Just as we carry out most actions in our daily life: opening doors, getting dressed, brushing our teeth, driving a car, climbing stairs. Since we don’t have this autopilot function in our brain, especially when we start trading, it takes a lot of effort. We feel overwhelmed, get bogged down and try to reach our goal quickly with simple solutions. Mainly to avoid losses.

In terms of behavioral psychology, this is also the only right way, since our brain can only consciously absorb a maximum of seven impressions at the same time. At the same time, however, hundreds of thousands of sensory impressions are unconsciously processed by our brain. Humans would be completely overwhelmed if they had to consciously process all this information. To accomplish this task, our brains consume so much energy that humans would not even beable to consume. Your brain would then use more energy just eating your breakfast muesli than you consume with the muesli. Our brain is therefore constantly working in economy mode. This leads to extreme simplifications in our thinking and actions, including when trading. Socalled sensory filters, which are controlled by the unconscious, constantly decide which of your impressions (beliefs, experiences, events) are important for the current decision.

For example, if your fear of losing is very great, then the unconscious programs will prompt you to behave in a way that will not make you lose. However, this can mean that you are no longer disciplined in sticking to your trading plan (removing stops or moving stops, realizing profits too early, etc.). And thus experience exactly what you actually wanted to avoid – losses! In order to consciously counteract these forces, you need self-control.

SELF CONTROL

Consciously controlling one’s behavior is a very demanding task. If you want to experience this, you only have to go into the silence.

Close your eyes and try to catch only your thoughts

 

Self-control is a skill that has been with us since childhood. It is partly innate to us and we learn it from our parents.

A long-term study by the research couple Avshalom Caspi and Terrie Moffit has shown that self-control can be predicted as early as childhood.
To prove this, the two scientists followed 1037 children from birth to their 32nd birthday.  The research couple tested the children’s character at the ages of three, five, seven, nine and eleven. To do this, they interviewed the children
themselves and obtained information and assessments from parents and teachers.

During the surveys, they focused on the characteristics that have to do with self-control: perseverance, patience or diligence. 

It was clear to see: the degree of self-control was an indicator of success. The less pronounced this characteristic was from the age of three, the poorer the children developed – and significantly so.

Children who did not discipline later had health problems more often, did worse in school, earned less money, committed more crimes and were more likely to become addicted to drugs.

So trading self-control is something that we need to consciously train ourselves to do if we haven’t learned the skill well enough. However, the less the foundations for this were laid in childhood, the more difficult it is.

Modern living conditions don’t make learning willpower any easier.

Primitive man used to have to set out to find a few nuts or berries or he would have starved to death. Today you go into the kitchen and stand in front of a fridge. In addition, you had to walk through the wilderness for days to collect firewood. Today you pull your lighter out of your pocket. It used to take many days to obtain knowledge and information.

In the age of Google & Co, all this is just a few clicks away. So discipline used to be a part of natural life. Today it is a conscious and voluntary decision that we prefer to forgo in order to devote ourselves to our usual preferences

One learns self-control the better and faster the greater the necessity. What it takes is the will. A powerful motor is a powerful motivator. We have to ask ourselves, “What drives us, what convinces us, what gives us the absolute will to get there?”

You need something that pulls you like a strong magnet to your goal. Finding this magnet will make everything easier and faster.

To Be Continued

Category: Trading Education

About Bramesh

Bramesh Bhandari has been actively trading the Indian Stock Markets since over 15+ Years. His primary strategies are his interpretations and applications of Gann And Astro Methodologies developed over the past decade.

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