Promising the Result

A critical aspect of proactive trading is to make a conscious commitment to a financial objective greater than what you are accustomed to achieving. You must do what it takes to realize this objective. This means relinquishing any inclination to trade in terms of comfort and safety, to bypass self-doubts in response to the uncertainty of the marketplace, and to allow your choice of price, volatility, and size of positions taken to be guided by parameters commensurate with your goals. The trading objective provides a lens for trading experientially rather than in terms of habits or fears. The conscious decision to follow a proactive strategy, rather than passively waiting for market or trade trends to govern decisions, allows traders to stretch beyond their habitual stopping points.

Committed traders do not allow their emotional reactivity to limit their trading, nor do they retreat at the first setback. They recognize when their old habits and fixed notions come into play, especially in a negative market, but do not allow them to influence their decisions as long as their original decision remains tenable.

It is important to recognize that an unconscious expectation of failure may hold you back from being as committed and successful as you can be. One trader I know, named Ben, routinely hesitates to buy a stock at the very moment he recognizes its potential. Invariably by the time he buys, the stock has made 50 percent of its move. This delay in acting is often followed by public self-flagellation that draws attention to his failure. If he is to grow as a trader, Ben must relinquish his "dance of failure" which lets him be "right" about being "wrong."

Another trader, Phil, was dominated by memories of "crashing and burning" and was afraid to use larger amounts of his trading capital to buy and hold volatile stocks. Slowed by his chronic fears of disaster, he had to learn that the manifestations of anxiety were identical to those of excitement. He had to learn to ride out the anxiety and take greater risks by putting in larger orders of higher priced stocks and using more of his allocated capital in line with his strategic objectives. In effect, traders must learn to notice the impact of their unconscious fears and expectations on their trading behavior and use their discomfort to empower them to make conscious choices based on their stated goals.

The Value of Proactive Trading

To succeed, traders must separate their comfort needs and defensive responses from trading reality. The proactive approach encourages traders to relinquish their preoccupation with losses that may lead to a negative spiral. If no buyers are willing to take traders out or if a rush of sellers occurs, proactive traders can begin to look for new opportunities without becoming so focused on getting their money back that they use all their effort in fruitless activities.

Proactive trading is a useful standard against which to identify conservative responses to uncertainty. Proactive trading is especially valuable in times of adversity

when most people are taken out of their games by their own reactivity and self-protective responses. Rather than be governed by their own cautious responses to trading dilemmas or market downturns, proactive traders continually assess whether they are utilizing an appropriate amount of capital or need to trade larger or more volatile positions. In the process, they are more willing to embrace the inherent paradox of excitement and discomfort associated with taking risks.

Centering

Centering, or entering into a meditative state of consciousness, is one of the most critical skills for reducing anxiety and tension and decreasing the impact of distracting stimuli. It helps you distance yourself from the sequence of emotional responses and negative interpretations of stressful and unsuccessful trades that trigger panic, denial, rationalization, and avoidance-all of which perpetuate the circle of failure.

By recognizing the automatic nature of your negative thinking, you can turn off your self-doubt and self-criticism and adjust your behavior to respond to events in a disciplined way. Centering lets you turn off fearful, automatic thoughts that project negative images onto events. Centering reduces misinterpretation by minimizing distractions and the inclination to focus on past mistakes or worry about future events. It leads to increased control over the autonomic nervous system enabling you to stretch objectives and the tape action with a minimum of preconceived notions and fears.

One of the best illustrations of the centering process is demonstrated in archery where any tension created by trying to control anxiety will be reflected in the tension applied to the bow and the arrow at the moment of release. Thus, the skilled archer allows thoughts to pass through his mind without reacting to them so that they do not interfere with his actions. The best shots occur when the arrow is released effordessly.

Being centered enables you to commit to a specific trading objective and then maintain sufficient discipline to follow your trading strategy rather than be disturbed by fears of losing, which may lead you to trade too cautiously. Once centered, you are able to follow the market trend, cut your losses, and let your profits run. Most important, you can follow your own rules and not keep trying to explain your results in terms of market vagaries.

Through centering, your greatest asset is your ability to control your own actions. You will learn that uncertainty is more an internal factor than a factor in the marketplace, that your internal concept of the marketplace influences your interpretations of events and trading decisions. As such, you find value in maintaining a centered state so that your fears and emotional reactions to market fluctuations do not influence your trading.

Through a conscious process of centering, which also can occur spontaneously when it is called "being in the zone," you can choose to break the endless loops of destructive trading. When you are centered, you are better able to continue to follow your trading strategy, despite carrying a continuing loss. You can be more proactive in

pursuing your own concepts and are not afraid to climb aboard a trade after it has begun rather than assume it has reached its limit. You do not have to be "first" to a trade or certain of the outcome before trading. You are able to be less emotional and reactive and can focus more narrowly on your trades. You are confident about your decisions and do not dwell on past errors. If you are a day trader, you are assiduous about marking your profits and losses daily. You are able to expand as you succeed and not shut down if you lose. You are willing to cut your losses rather than ride them out to avoid admitting to them.

Stress and Trading Success

Stress is a natural response to uncertain events. The stress response, which is associated with an increased flow of adrenaline, increases alertness to stimuli and enhances performance. The stress response prepares you physically and psychologically to trade by increasing blood flow to the brain, increasing your capacity for memory retrieval and your ability to handle complex situations in which stocks are moving in unpredictable patterns. The stress response can enhance your ability to concentrate on the tape, observe your own internal trading signals, and maintain your pace and strategy in the face of conflicting signals. Emotional arousal can also keep you from getting bored if things are slow, from being distracted if things are hectic, or from being paralyzed or confused if your positions are dropping precipitously.

Beyond the optimum level of stress, however, stress responses become negative and are experienced as anxiety associated with declining performance. Fear intensifies the stress reaction, which in turn may lead to distraction and errors. Negative memories from the past may be reactivated leading to fear of failure or criticism, misinterpretation of data, and misinterpretation of your own responses. This may be followed by further anxiety, decision paralysis, and a retreat to a comfort zone of defensive trading.

To keep stress responses within reasonable limits, most traders learn to trade within a comfortable range. When the stressed trader approaches a range that is uncomfortable, rather than hold on to or increase a position in a rising stock to maximize profits, he may sell too soon to take a quick profit. While most traders tend to be better at cutting their losses than extending their profits, some may hold on to losing positions too long, hoping that their positions will reverse rather than acknowledging their loss. Others, afraid of duplicating past market disasters, may panic at any hint of failure. They may engage in elaborate self-induced ruses to avoid acknowledging their losses and may end up losing far more than they would have had they sold out when they first realized their positions were failing.

As anxiety mounts, you may become fearful and uncertain and second-guess your decision. You may become depressed and convinced you are destined to failure, especially in the face of significant profits or losses. Numerous fears come into play when trading beyond the psychological comfort zone, irrespective of your performance. These fears include fear of losing and disappointing others, fear of shame and embarrassment for not succeeding, and fear of making errors and looking bad. For