So how can we prevent cognitive and emotional triggers from sabotaging our trading?
My favorite approach addresses prevention rather than care: not allowing state shifts to shift our trading processes.
The approach begins with acceptance. We are not going to eliminate frustration, uncertainty, or mood swings. Trading operates in an environment of uncertainty and risk. That will elicit unwanted thoughts and emotions at times. It's OK to be human and to have human feelings. It's going to happen.
Once we accept that these patterns will crop up, we can then actively anticipate them. Instead of putting them out of our minds, we want to make them our focus.
Once we're in that state of acceptance, we want to make use of a straightforward, but powerful stress management routine. We listen to peaceful, relaxing music; close our eyes; slow and deepen our breathing; and sit very still while slowing down and focusing on the music. We use the breathing to bring our body's level of arousal down, and we use the close listening to the music to intensify our cognitive focus. Through this routine, we keep ourselves out of the "flight or fight" mode of stress and into a mode of peaceful alertness.
The stress management routine requires some practice, so we want to repeat the exercise a few times a day for several days to become good at reaching that peaceful alert state. With practice, we can focus ourselves and get ourselves out of fight or flight mode on demand.
Then, once we've become good at the stress management, we do the exercise with the music and deep breathing, but now we add imagery. We imagine the challenging market situations that normally trigger our frustration, distorted thinking, anxiety, etc. In other words, while we're playing the music and breathing slowly, we're vividly walking ourselves through situations where we miss a trade, lose money, go into drawdown, trade poorly, etc. While you're imagining those situations, you want to actually imagine and *feel* those emotional responses that have sabotaged your trading in the past: you want to feel the fear or greed or frustration.
But you're now experiencing those emotions while you are in control, focused and relaxed. You keep focusing on those situations and emotions until you can stay in your calm, focused zone.
This is an exercise you'll want to do every day before the start of trading and perhaps also during midday breaks. The repetition allows you to actively face emotional challenges while staying in control. Through repeated experience, we reprogram our negative patterns of thought and emotion. We experience them, but they no longer define or control us.
Once we've achieved a level of acceptance and self-control, we then add a final component to our imagery work: we vividly imagine the problem scenarios and our negative emotional and cognitive reactions to those, but now we also vividly walk ourselves through how we would like to deal with those reactions. So, for example, we might imagine missing a trade and feeling frustration and thinking how stupid we are and then visualize ourselves stepping back from the screen temporarily, doing some deep breathing, and coaching ourselves in a more constructive mode, telling ourselves that it's OK to miss something, that opportunities will continue to arise, that the important thing is to stay focused for future opportunity, etc.
All of this mental rehearsal is also done while we're breathing deeply and slowly and listening to the relaxing music while seated in a still position. So through repeated mental rehearsal, we're imagining situations that upset us--and we're practicing ways of thinking and behaving to handle those situations constructively.
The repeated mental rehearsal builds new habit patterns for us. As we build those new habits, we can then experience frustrating and discouraging situations in our trading, take a few deep breaths, and engage in the constructive self-talk and actions that we've been rehearsing. The visualization exercises act as practice, so that we are more prepared to sustain control during actual trading.
Over time, this accomplishes prevention. We still experience losses, we still have frustrating experiences, we still feel giddy at times, but now we have a set of tools for staying calm, staying focused, and staying in control by responding to these challenges in the ways we've practiced. Once we accept that emotional and cognitive overreactions will occur, it becomes easier to anticipate them and deal with them effectively.
Further Reading: Performance Anxiety in Trading as a Cause of Discipline Lapse
For those looking to go into greater depth into related topics, The Daily Trading Coach book contains a cookbook of psychological techniques for traders. The Trading Psychology 2.0 book contains strategies for enhancing positive emotional experiences as a way to buffer trading stresses.
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