Site icon Trading Heroes

Advanced Trading Psychology: The High-Performance Trading Toolbox

Hugh Kimura

If you've been implementing the usual trading psychology tips from blog posts, books and courses…

…and it's still not working…

Then this post was written for you.

If you don't have the results that you want in your life or in your trading, and you are working hard at it, then there's really only one reason:

Your mindset is holding you back. 

It's not your trading system.

It's not your broker.

RELATED: Learn Forex Hedging in the FREE Guide Here

It's not your mentor.

Your mindset determines:

But how do you change a mindset that has been with you for years, or even decades? 

If you have ever tried to make major behavioral changes, it can seem impossible.

In this post, I'm going to share with you my 18+ years of experience in working to figure out how to get past my deepest limiting beliefs and change my unfulfilling habits.

I'll share:

My hope is that this post will give you a starting point to figure out how to change the behaviors that you want to change, in order to reach your goals and live a more fulfilled life. 

There's one key concept that you need to understand before we get started…

Negative emotions can get trapped in your subconscious mind, from various traumatic events in your life. These negative emotions can then cause addictions, irrational behaviors and even diseases.

In trading, they cause of things like overtrading, revenge trading, a lack of discipline and much more.

The key to changing your undesirable behaviors is to release your trapped negative emotions. 

If you want to see how I came to this conclusion and what has worked for me, then keep reading…

[toc]

We have only to follow the thread of the hero path. And where we had thought to find an abomination, we shall find a god; where we had thought to slay another, we shall slay ourselves; where we had thought to travel outward, we shall come to the center of our own existence; and where we had thought to be alone, we shall be with all the world.

– Joesph Campbell

How to Get the Most Out of this Post

What I'm about to share with you can help you become the heroic trader and human being you have always known you could be.

But it won't be easy.

You will have to go on what Joseph Campbell calls the Hero's Journey.

Since you found this post, you are probably ready to start your journey.

Before we get started however, please keep the following 4 things in mind…

1. The Same Things Won't Work for Everyone

There are no panaceas.

This post will give you some starting points, but it's up to you to put in the work.

You have to be willing to try different modalities and figure things out for yourself. What works for me, may not work for you. 

Some people will tell you that a certain treatment will cure everything.

That's simply not true.

2. Dogma is the Enemy of Progress

Put down your existing beliefs, just for the duration of this blog post.

Do you remember the game of Telephone in elementary school? Here's a good example.

If you don't know what I'm talking about, the game is basically used to teach kids that statements can change dramatically, as they are passed from person to person. So don't always believe what you hear.

The same thing can happen in belief systems like:

The difference is that the “telephone effect” in these belief systems can be multiplied by billions of people over thousands of years. More than a few things probably got lost in translation, are out of date, and got twisted to serve personal agendas.

So be willing to judge ideas on the only criteria that matters…if it works for you or not.

You can choose to pick up your existing beliefs again at the end of this blog post.

3. This is a Continuous Process

Source: GIPHY

Even if you solve some big issues in your life, it won't be all unicorns and rainbows. You will need to maintain the gains you have made and there will inevitably be new shit that comes up.

The good news is that if you are able to solve the big issues once, you are much better equipped to deal with new stuff later.

It's like Spring cleaning.

If you don't do it every year, the mess just piles up.

4. I'm Not a Doctor

Consult a licensed medical physician before you try anything mentioned in this blog post. 

All information in this post is for informational purposes only and is my personal experience and opinion. It's not medical advice of any kind. I don't pretend to have all the answers, just a lot of curiosity and a willingness to try different things.

Alright now that we have that out of the way, let's dig into why we have psychological roadblocks on the journey to becoming a consistently profitable trader.

Why We Have Bad Habits, Addictions and Self Sabotage

It all starts with a traumatic events in our lives. 

There are things in our trading that we know we “should” do.

Maybe you know that you should stop moving your stop loss. Or maybe you know that you shouldn't trade after you've had 5 beers.

But why are these behaviors so hard to change?

Because our traumas have created habits.

In the book The Power of Habit by Charles Duhigg, shows us how habits get formed and why it's so difficult to change them.

Through several examples, he demonstrates that habits are the result of doing the same things over and over. They are stored in a part of the brain that is separate from short-term memory and they can be formed even when the part of the brain that handles short-term memory is damaged.

So good luck trying to change a habit with your conscious mind. 

When we experience a trauma, we start acting in a certain way.

It may be a depressed state, exhibiting defensive behavior, or a deep aversion to failure. After we have been acting this for a some time, we form the habit of living in that state and it “sticks.”

In his book Breaking the Habit of Being Yourself, Dr. Joe Dispenza does an excellent job of explaining the neuroscience behind our most deeply engrained behaviors.

He says that we basically become addicted to the physical and neurochemical states that we find ourselves in on a daily basis. If you are living in a state of trauma and fear all of the time, then you cannot imagine yourself any other way.

It's your identity.

Another way to look at is that your trauma has become your personality.

Still another way to look at it is you have PTSD.

We All Have PTSD

This might get weird, but if you stick with me, I'll show you exactly why I believe this is true.

More importantly, I'll also show you why this belief can provide the clues to solving your most annoying behaviors.

What is PTSD?

PTSD stands for Post Traumatic Stress Disorder.

In other words, you went through a traumatic experience which is causing a negative pattern in your current behavior.

Most people think of war veterans or victims of abuse when it comes to PTSD.

But in reality, there is a wide spectrum of PTSD and we all have it because we have all been exposed to trauma.

It's like muscle strength.

Everyone has muscles. But some people are very strong and others are weak.

My research has shown that there are only 4 sources of trauma:

  1. Environmental – A physical accident, genetic disorder, toxins, etc.
  2. Emotional – Traumas that have happened between your conception and the present.
  3. Inherited emotions – You can genetically inherit traumas from your family line and culture. If you don't believe me, read this book.
  4. Past life – I'm not religious, so this belief is not based in religion. Past lives are a fact. If you don't believe me, read this book. Also watch my video at the end of this post.

A lot of psychologists will focus on traumas in your childhood. The source of your major traumas could be there.

But if you only focus there, you can miss out on so much more.  

This is one of the reasons why I believe over 90% of independent traders fail. They aren't addressing the right psychology issues.

Now let's look at some common examples…

Your Parents Meant Well But…

Even the most caring and nurturing parents will give their kids a little PTSD.

(But in all fairness, the opposite is probably also true, so it evens out 🙂 )

If you're a parent, don't freak out about this.

Trauma will happen to everyone, there's nothing you can do about it.

One of our responsibilities as adults is to figure out how to overcome this trauma and live the best life possible.

This is all part of the human experience and the Hero's Journey.

These traumas usually happen between 0 and 5 years old, when we are still too young to comprehend what is going on in the world.

Everything has the potential to be scary and possibly traumatic.

The birth process can cause trauma.

In his book, Game Changers, Dave Asprey talks about how he was born with the umbilical cord wrapped around his neck and this led him to him being a pissed off adult.

He also talks about how some healing modalities understand this link, and can reliably predict birth conditions, based on personality traits.

Not getting fed on time can cause trauma.

Being taken away from your mother at birth (like in most American hospitals) can cause trauma.

…and those are just the first few days of your life.

Other Sources of Trauma

Of course, trauma can happen at any point in your life.

Your biggest traumas may have happened after childhood.

The obvious ones are things like: going to war, domestic abuse or getting into a major accident.

But trauma could be the result of less obvious circumstances like a relationship breakup, or the loss of a job.

If you experience trauma at any point in your life, it's simply an overwhelming experience that you didn't know how to cope with.

The negative emotion gets trapped in your body/mind and can cause problems later on.

With each subsequent year that passes, your subconscious database gets bigger and bigger, and there is the potential to stack on more and more traumas.

It's like an iceberg…

The Iceberg Analogy of Advanced Trading Psychology

You've probably seen this on a trading psychology webinar somewhere.

Sigmund Freud popularized the idea that our minds are like an iceberg. Our conscious mind is above the water and our subconscious mind is below the water.

The part that we can see above the surface is only a small fraction of what is actually going on below the surface.

In other words, there's a lot more going on in our subconscious than we realize.

But I believe that there is much more to the iceberg analogy.

It's missing our Inner Hero.

People also call this the true self, the authentic self or our soul.

When we are born, we are the closest to our Inner Hero.

If we live our adult life connected to our Inner Hero, life is fun, we are doing fulfilling work and we express our true feelings.

…and we usually trade like a rockstar.

In other words…we are the fullest expression of our true selves.

PTSD disconnects you from your Inner Hero. 

When you are disconnected from your Inner Hero, life becomes a struggle and everything seems difficult. If you have ever been at a job that you absolutely hate, you know exactly what that feels like.

I'll represent our Inner Hero with this image.

As small children, our mind looks like this, with our Inner Hero pretty close to the surface. Our subconscious has not developed much yet, so there isn't much space between our conscious minds and our authentic selves.

This is obvious in small children. They express their true selves all the time.

Kids cry hard when they get hurt and they jump up and down when they are happy.

As we get older, our parents, school and society tell us to “tone it down” and we get away from what really makes us happy and allows us to express ourselves fully.

Consequently, our Inner Hero gets buried deeper and deeper in our subconscious.

Unusually well adjusted? Then your Inner Hero might be a little closer to the surface.

But there is always some separation.

Either way, it's going to take some digging to get down there and reconnect with your true self.

Think of this as rescuing your Inner Hero.

When you finally make that connection again, you will have more self awareness and have a deeper understanding what is right and wrong…for you. You will also be able to forgive yourself for your mistakes and move on faster.

The Hidden Barriers

Rescuing your Inner Hero probably won't be easy though.

There's a major barrier that is going to prevent you from rescuing your Inner Hero.

It's your ego. 

Your ego wants to maintain your current state and doesn't want you to resolve any of your traumas.

It's very heavily invested in your current identity.

You can think of it as a giant granite wall that is lodged somewhere in your subconscious, between your conscious mind and your Inner Hero.

Along the way, there will also be other smaller barriers. You will be able to get through some of them easily, and others will take more work.

Advanced Trading Psychology Tools for Rescuing Your Inner Hero

Now that you understand that you have an Inner Hero buried inside your subconscious iceberg, it's time to start digging and bring your heroic ass to the surface. I believe that there are basically three levels of healing modalities to do this.

Again, I might think that a treatment isn't particularly effective, but it may be the thing that moves the needle for you.

So be open to experimentation.

At the end, I'll also give you a list of things that I haven't tried, but my research has shown can be useful.

Level 1: Like Using a Spoon to Dig Into Your Iceberg

The following resources are great for giving you the awareness that you have certain issues. They can also probably solve a few of the smaller ones.

In my experience, the positive effects of these methods usually don't last long. However, if you don't know where to begin, these can be great ways to start your journey.

Talk Therapy

This can include talking to a psychiatrist, a coach or a trading partner. Talk therapy can work well for some things.

From what I have seen and experienced however, talk therapy will only get you so far.

You might be able to get really deep with 15 years of talk therapy. But it's really difficult to bypass your ego when you are primarily using your conscious mind during talk therapy.

Talk therapy has helped me chip away at the surface and change a few things, but it never helped me make any major changes.

Books and Courses

Books and courses are a must have if you want to gain new knowledge in any area.

These are my favorite trading books and courses.

Used books can be very cheap and you can benefit from the decades knowledge and experience of the authors.

Trading courses can also provide a lot of knowledge and give you access to some of the best traders in the world.

However, books and courses probably won't be able to give you all of the answers and I've found that they have a similar effect to talk therapy.

They are just a good starting point.

Seminars

Have you ever left a trading seminar feeling like you were jacked up on steroids, 10 cups of coffee and a hot coal up your ass?

I sure have.

But what usually happens after that?

We usually lose motivation and revert back to our old habits.

Don't get me wrong, I've learned a ton of valuable information from seminars and I've met a lot of great people. I will continue to go to trading seminars and conferences.

But I wouldn't consider any of them life changing.

So if you continue to go to seminars and wonder why they don't help…stop right now. You probably have enough information already.

You just need to put it into practice.

Medication

Most prescriptions medications just numb the pain. Sometimes they can quiet our conscious mind long enough for us to work on our subconscious.

But most of the time they just zone us out so we forget about our problems.

I've never taken prescription medication, but I think most people occasionally self-medicate with things like alcohol…and I'm no exception.

It does help me feel better in the moment.

However, it obviously never solves anything long-term and I never use it for that.

I'm not telling you to get off your prescribed medication. You should always consult a doctor.

But of you are on meds or using alcohol (or other drugs) a little more frequently than you should, then consider that they may be preventing you from feeling what you need to feel, in order to heal.

Nootropics, AKA Smartdrugs

Nootropics can help boost your brain capacity, but they won't solve any of your issues.

They can make you more aware of what you are doing, and that can lead to some insights. I use them to tune-up my mental performance and maintain my brain health. But they aren't a treatment for trauma.

You can see the nootropics that I've tried here (and the results).

Level 2: Like Using a Jackhammer to Dig Into Your Iceberg

If you upgrade your spoon to a jackhammer, then your digging will really pick up speed. This is where we get into advanced trading psychology tools.

Meditation

I've been meditating since 2001, when I first read Zen Mind, Beginner's Mind. Since then, I've had one very profound experience. It was a “one with the universe” type feeling which I am grateful for.

I consider meditation an essential mental and spiritual maintenance tool and I do it almost every day. It helps me calm down and think clearly. 

But meditation has never given me any deep insights on how to fix my traumas.

If you do it long enough, I believe that you can have some major revelations. However, you will probably have to do it for several hours a day for 10+ years, before you can get into a “spiritual flow state” that will help you resolve your traumas.

Here are the best resources that I've used:

Tapping or EFT

EFT was invented by Gary Craig and Tapping is the more generic name for the modality. I believe that Tapping can resolve some of your traumas, but I found that there is one big issue with it.

Before I get into that, here's how you do it:

Pretty easy, right?

The issue that I ran into with this modality is that you need to know the real emotion that you want to get rid of, in order for the protocol to work.

For example, let's say that you get mad at someone for talking down to you in a meeting. So you start tapping to get rid of the anger.

But that may just be the symptom and not the cause. The real cause could be low self esteem or problems with authority. Figuring out the real cause can be difficult when you are only using your conscious mind to analyze your feelings.

When used correctly this method can work well however. People have gotten over phobias and other mental roadblocks in just one treatment.

But it's too hit or miss for me.

Dream Analysis

Analyzing your dreams sounds a little weird…until you actually do it.

Now, I'm not talking about the type of dream analysis that tries to slice apart every single element of your dream and assign a meaning to the bird, the river and the rainbow-colored elephant.

What you're really looking for are overarching themes that can give you clues to what your subconscious mind is feeding your conscious mind.

I learned this from Walter Peters and Denise Shull talks about this in her book Market Mind Games.

But what if I don't remember my dreams?

In a nutshell…you're being lazy.

It does take some concentration to remember your dreams, but if you make a conscious effort to do so, you will get better at it.

Start by telling yourself that you will remember your dreams, before you go to sleep. Then leave a notebook or your phone next to your bed and start recording your dreams as soon as you wake up.

Most of my dreams featured situations where things did not work out.

This was my limiting belief.

It gave me a starting point to figure out why this was the case, which was extremely valuable.

But it never gave me any clues on how to fix them.

I'm sure they could at some point, but it has never happened to me.

I still pay attention to my dreams.

Subliminal Messages

I've had some success with this healing modality.

This is when you listen to an audio track that has the sound of rain or a water flowing and there are subliminal messages behind that sound.

Movie theaters used to insert subliminal messages in movies so the audience would buy more popcorn. The subliminal ads increased popcorn sales by 57.8%.

This stuff works.

But only to a certain point.

In my experience, subliminal messaging can help you change surface level behaviors. But it won't get you to the really deep stuff.

I believe that even if you bypass part of your subconscious mind with subliminal messages, your ego can still block any further change.

I've found Inner Talk audio recordings helpful, but there are others out there.

You simply put them on very low volume before you go to sleep and let them do their work.

These recordings have helped me get over past traumas and resolve self doubt. I used them for 30 days each.

It's recommended that you only do one at a time.

Most of the time the changes were subtle.

But there were a couple of times where I did feel a significant mindset shift around events in my past.

I was noticeably less bitter about them and did not dwell on them.

NLP

Neuro-Linguistic Programming was created by Richard Bandler and John Grinder in the 1970s. Tony Robbins uses a lot of NLP in his work.

I've never found NLP useful, but I do believe that it can help some people.

My issue with NLP was that my conscious thoughts kept getting in the way of doing the exercises.

This is where working with a NLP coach could be very effective.

In my case, other modalities were much more effective.

But NLP is certainly worth exploring.

Emotion Code / Muscle Testing

This one is almost a level 3 therapy, in my experience.

…and it could be a solid level 3 for some people.

To get started, simply read this book: The Emotion Code

In this modality, you use applied kinesiology, or muscle testing, to access your subconscious mind and release trapped negative emotions.

The process is very easy, once you get the hang of it.

There are flowcharts that you can download and there are only a few steps required to release a trapped emotion.

The cool thing about this method is that you don't need to know where the trapped emotion came from and you don't need to see a therapist.

You just ask your body if there is a trapped emotion that can be released right now.

If the answer is yes, you use the protocol to release it and Bob's your uncle.

Dr. Bradley Nelson, creator of The Emotion Code, says that there can also be hidden trapped emotions or “heart walls.”

These “walls” were built as a response to traumas in our past and protect us from feeling heart-breaking pain.

They served as defenses and helped us at one point in our lives, but end up becoming obstacles later on.

After my first session, I felt considerably more positive and energetic.

This is a great maintenance protocol because I can do it every day and it takes very little time.

Hypnosis

I feel that this one could also be a level 3 treatment for some people.

Dave Asprey mentions in his book Game Changers, that the best trauma treatment for him was a combination of hypnosis and breathwork (explained below).

I've used hypnosis audio recordings to try to change certain behaviors and they have worked, to a certain extent.

The best audio recording I used was the Perseverance track from Hypnosis Downloads. Until then, I had the issue of giving up too quickly. After listening to the recording before bed, for about 15 days, I found that I stuck with tasks longer and completed tasks that I would have previously given up on.

But those were hypnosis techniques that had the goal of bringing about a specific outcome.

There is probably more value in resolving trauma through exploratory hypnosis, but I haven't tried that yet.

Level 3: Like Using a Tunnel Boring Machine to Dig Into Your Iceberg

Tunnel Boring Machines (TBMs) are the devices that dig giant underground tunnels like the Chunnel. When it comes to digging holes, it's probably the most badass machine on the planet.

…and if you want to resolve your traumas and rescue your Inner Hero sometime during your lifetime, these modalities are the equivalent of a TBM for your subconscious mind.

Here's why I believe that this stuff works so well.

You went through an experience that caused trauma.

In order to resolve that trauma, you usually need to have an opposite experience that will allow you to unravel the pain of the trauma.

Since these therapies can induce hallucinogenic or altered states, they can allow you experience the resolution of that trauma.

On top of that, there might be traumas down there that you never knew existed.

These therapies can help you dig out those deeply buried experiences because they are able to bypass the ego and whatever else is standing in the way.

A HUGE warning here: These modalities have tremendous power to heal. But when used improperly, they can also be equally harmful. Always consult a doctor before trying any of these modalities and always, always, always do them under the close supervision of an experienced therapist. A therapist will help you understand what's going on and guide you through the process. If you experience something scary and you don't have someone there to help you deal with it, the experience can cause even more trauma. Some of these treatments are also illegal in certain areas, so always obey your local laws. It's not worth going to jail over.

Energy Healing

There's a wide range of energy healing modalities. I've tried Reiki, but that didn't help much.

The one that helped me the most is called Clairvision.

On the surface, it seems like a flavor of meditation.

But when used in the hands of a trained therapist, it is a powerful tool for positive change. Again, the key here is to go to a therapist that's an expert.

The way it basically works is the therapist first puts you into a meditative state. Then they scan your body for trapped traumas.

When they find something, they help you figure out the real source of the trauma and can help you resolve and release it. The trauma can come from present life, past life, or it could be inherited. 

I really like this method because it looks for the symptom, then the therapist can help you trace back to the cause. It's very pragmatic.

When I release emotions with this technique, I usually have to lie down for a little while afterwards.

The energy that it takes to hang on to these negative traumas is substantial. After that attachment is released, I have a feeling of relief, exhaustion and I feel energized at the same time.

Breathwork

The father of Holotropic Breathwork and Transpersonal Psychology is Stan Grof.

He was a psychiatrist who had great success treating his patients with LSD in the 1950s and 60s, but had to stop his work when LSD became illegal in the late 1960s.

Read the book Higher Wisdom to learn more.

At that point, he felt that the same al