How to stop the Habbit of Repeating Trading Mistakes

Insanity: 'Doing the same thing over and over again and expecting different results'.

This quote from an unknown source declares almost everyone for insane.

What is insanity?

Insanity Definition

It’s a state of mind which prevents normal perception according to the google definition. Are we really all insane? Is it the normal state of mind, that keeps us in the rabbit hole of repeating mistakes over and over? Let’s find out.

Bad habits

It’s good that you have the ability to memorize behavioral patterns, it keeps you alive. It makes you find the way to a destination, lets you memorize names and navigate through daily life.

By default, your habits let you slip back into the existing pathways in your brain to be more efficient, as a side effect it also lets you repeat the same stupid mistakes over and over again.

When repeating bad behavior there is internal struggle. It means that deep down you haven’t learned the lesson yet. You didn’t burn your hand on the plate yet.

In trading you will deal with abstract things, numbers etc. which don’t really trigger physical pain. Losing money doesn’t let you feel something intensive enough to build new pathways in your brain. Maybe the trigger point is just too weak. This is one of the reason why so many traders have to lose a lot of money before being a trader with more good than bad behavioral patterns.

Stop Repeating Mistakes in Trading

If you’re honest with yourself, if you didn’t commit so many trading mistakes you would be super profitable already. You have to stop repeating mistakes!

But how? Of course, as a human being you can’t be perfect. Chances are that if you’re under performing, you’re in a bad conditional state on top. Maybe lacking sleep, having psychosomatic pain or something else going on in your life.

Contradictory beliefs make your mind inconsistent, reality doesn’t show up to your expectations. You feel the struggle inside your body. The goal therefore has to be to release inner struggle, to find inner peace once again and trying to resolve deep conflicts, trigger points that make you feeling lax about bad behaviours. Maybe you think “You don’t deserve to have X amount of money.” or “Trading is gambling”.

You should find positive triggers, for example by meeting people who actually make money consistently in real life, changing your belief system. Reading stories from people who made money, not having anything going for them before it.

Cognitive Dissonance

An easy example for cognitive dissonance is the following example: Peter smokes cigarettes.

His opinion: 'Smoking is bad for my health'.

His behavior: Smoking two cigarettes per day.

He feels mentally inconsistent and also physically unpleasant. The main concept of the cognitive dissonance theory by Leon Festinger is this drive in us to create a consistent mental state with as less contradictions as possible. He can do two things to regain inner consistency.

  1. He can change his belief to: 'Smoking won’t kill me. And I like it. Most people die from other things anyway.'
  2. He can stop smoking to be in line with his opinion, that smoking is bad for his health.

By repeating your daily trading routine, you bring along your core beliefs from the past. Linear thoughts marked your days in the past. Diligence. Discipline.

Always wanting to be right. Instant gratification. Independent, irresponsible behaviors, indecisive actions. Until before starting to trade these dormant, unconscious beliefs clash into the trading reality. As a trading beginner you will feel many discomforts, cognitive dissonances and every of these things has to be resolved before getting better.

Now a typical trader (beginner obviously), his opinions and behavior:

Opinion: 'I’m a good trader and I’m putting in a lot of work. I’m already very close to being the best trader in the world and I know it better than everyone else anyway.'

Behavior: Doing many mistakes and losing money.

It’s a weird discrepancy, a dissonance which this person involved really wants to get rid of. Two ways of changing the discomfortable feeling:

  1. The market was not good for me, I’m still a good trader, I’m having bad luck at the moment. Everything is gonna be fine, just repeat what you’re doing everyday. Discipline and stuff.
  2. 'Im not a good trader, I’m doing many mistakes and have to work on identifying them and not repeat them. I’m putting in a lot of work, maybe on the wrong places. I’m still far away from being a world class trader and have to develop more methods to understand myself and the markets.'

By knowing something about your tendency of the brain to build pathways and to repeat these pathways, be it a good or bad behavior, it”s very likely you will repeat mistakes in trading, even if you know you’re repeating them.

Choosing Option 2 every time, while accepting the imperfection of your very own behavior and the randomness of the markets, will bring you closer and closer to stop repeating mistakes.

An important ability for a trader is to shift the mindset towards probabilistic thinking. This requires so much change in perception and must be fight for over time and countless, some expensive, insights.

Summing it up

The world before trading was linear, you had to learn for an exam, get a result for memorizing learning materials and then forget it again. You were told if you do this, get this degree, then you will get this or this, a job etc.

Now in trading, no one cares how much effort you put in it. No one cares what you’re expecting, no one cares how much of a hard worker/learner you are. The prevalent feeling when repeating a trading mistake (not following rules, disrespecting stop loss, exiting before the target, etc.) is a feeling of powerlessness over your own behavior. “How am I still repeating this stupid mistake again and again?”, you’ll ask yourself.

You have to admit you suck in the beginning, you have to develop probabilistic thinking close to the reality of the market and you will do many mistakes. But...

"Mistakes are just an opportunity in disguise: to start again, this time more intelligently."

Henry Ford

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