Learn Your ABCs for Better Trading!!

Here's a quote from Bill Russell that I love. But contrary to what people think, a self motivated athlete is rarely one who eats, sleeps, and drinks his sport, to the point that all his self worth and even his self respect depends upon his performance. The all consuming players value themselves as people only because they play ball. Now, if that was the case, you expect them to play their hearts out, right? Wrong. They don't. Because such players usually do not like themselves. They choke, they complain, or they have strange things going on inside their heads that injure their performance. This is a 1979. Think about what he's saying. He's saying the person who eats, sleeps, and drinks trading, all they're about is trading and they value themselves only because they're great traders. He saying you would think that they would be the best traders. He's saying that is wrong. They're not. Because somebody who depends on something like being a trader, to value themselves usually means they do not like themselves and the fact that they have this belief actually prohibits them, inhibits them from being their best.

Last week, we talked about mustarbation. Today, we're going to continue our conversation and today we're going to talk about the ABCs of RET. RET is Rational Emotive therapy and it is a method for coping with emotional stress through rational thinking. Our emotional behavior, and our actions do not result directly from our circumstances. In other words, our behavior and actions are not actually a direct result of our circumstance, or the event. We don't respond at point C, only because something happened at point A. Point A stands for activating event, like a losing trade. C stands for consequence, the emotional consequence, which is being angry over losing money. Almost everybody would look at this and go why I'm angry because I lost money. Here's the thing, point C is profoundly influenced by our beliefs, which is point B. One of the things that Dr. Van Tharp used to say all the time I used to love is he said, all you do is change your beliefs about the market. You don't trade the market. You do not trade the market. You trade your beliefs about the market. This is why you have buyers and sellers. One person buys from another person who sells and sometimes, one person is bearish, the other person is bullish. They're looking at the same data, but they have two very different opinions. Why is this? Because they're trading through the lenses, the lenses of their beliefs. One is a bearish trader, one is bullish.

The market or things are neither good or bad, only our beliefs, only our thinking makes them so. Let's get deeper into this we can see that point A, as I said, A stands for activating event and C stands for consequences, which is our emotions and our behavior and down below is B which is beliefs. Another example I'm going to show you, but our thinking can be so automatic. Going from A to C that we don't even realize that our beliefs are the driver of what's going on. It is our beliefs that triggered us, not the event itself. When we look at Rational Emotive therapy We're going to examine what's going on, we're going to examine our beliefs and by examining our beliefs we're going to determine is our belief rational? Is our belief irrational? If it's rational, rational beliefs will help us experience appropriate consequences. We're gonna have peak focus, we're going to be passionate, we're gonna have security. irrational beliefs arise from inappropriate consequences and this is what's important for us to be at peak state to be at peak performance, we need to be dialed in at the right level. If we're over aroused, if we're too up, or too angry, or too anxious, or too upset, anger, fear, anxiety, frustration, they're over arousal, and the blood flow increases to our brain and increases to our muscles and we're not able to make good decisions, we're in fight or flight. When this happens, we see the market as binary. We're either in or we're out, we're either right or wrong. There's no shades of gray. As you know, I call this the trading matrix and why do I call it the trading matrix, because there's usually literally almost infinite combinations available to you to manage your trade, infinite. When we're in a situation, all we could do is buy or sell. We have to look at ourselves and go, Are we being irrational. That it's over arousal, then we have under arousal. In under arousal, it's the opposite. We don't get enough blood flow. We're apathetic, we're lazy, we're indifferent, we're powerless. We don't have energy. Without energy, we're not going to make good decisions, either, we're going to be slow. With this getting into analyzing our beliefs, it's easy enough to say this, but understanding our beliefs is not easy. In fact, it's one of the hardest things in your life. Because not only do you have to be aware of what your beliefs are, but then you have to be willing to acknowledge and change them. This is one of the reasons why so few people make it as traders, their beliefs get in the way, their beliefs about their beliefs get in the way.

Okay, so let's look at the ABCs. As we said, point A is the activating event and so look at the little diagram we have, we're drawing an A, A stands for the activating event. You can think of the Titanic with the iceberg in this example, this is a good way of thinking of it. Our problem is fear of taking a trait. Because it's easier to see and recognize our feelings. They exist above the water. It's like the iceberg. It's the tip of the iceberg. So we identify the tip of the iceberg as the consequences, which is point C. Now, when we're evaluating these consequences, we got to be completely honest with their feelings. This is one of the core premises that I spent a lot of time talking about, is being really honest with their feelings. another ways say it is Stop fucking lying. Tell the fucking truth. Because there is no growth without the fucking truth. Stop lying and be honest. In your head, it may say something like I suck at trading and I need to skip this trade to avoid losing money. If you feel like you suck at trading, then admit it. Don't lie. Or if you have a narrative of if I lose money trading, my wife's gonna leave me. Then admit that, don't hide from it. Now, once we have A, B, and C, it's going to move us to D, which is disputing irrational beliefs. Before we get there, though, I want to look at this diagram. Here's what we see. This is like the iceberg. C is consequences above the water and then as we know, the biggest part of the iceberg sits below the water, like in Titanic. The big part that sits below the water is the B, it's the beliefs. A is the problem. A is the event the activating event, C is the consequences, B is the beliefs. We can see over here we have the beliefs and then we have consequences emotions of anxiety, frustration physical symptoms, tight muscles, sweaty hands, pounding heart, panting. Mental consequences, being distracted, thinking about how much money I'm going to lose on this trade.

This brings us to disputing. Once we identify the consequences, and we start to then dive into the beliefs, we got to examine whether the beliefs are rational or irrational, we've got to dispute them. What evidence is there that my belief is true? An example may be I have a fear of taking a trade because if I have a no losing trade, I can't ever add another losing trade because my wife will leave me if I lose money trading. Just think about that. You're just going to be totally handcuffed, if this is a belief you have. When we have this belief, and we identify it, then we have to say, what evidence is there that my belief is true? What evidence is there that my wife is going to leave me? Has she told you this? Has she literally said, if you have one more losing trade, I'm out of here? Probably not. Now, if we look at this, then we are analyzing is this belief true? If you say yes, it is, then you gotta ask, are you 100% sure? 100% sure that this is true, that one more losing trade, your wife is gone? Now, then you start to flip it. First of all, challenging whether it's true and then moving on, and flipping it, what might be possible for you if the situation in this story was false? What might be possible for you if you knew that your wife would never leave you? Then what is it that you truly want? What is it that you want in your marriage? What is it that you want in your trading? Get clear about what it is you want. Now notice the next question, what evidence is there that what you want could be true? Can you see evidence that your wife loves you? Can you see evidence that your wife is all in with you? Can you see evidence that regardless of what your wife thinks you're fine? Can you see evidence that you actually are a great trader, and if you just relax a little bit, you'll be fine.

Now, here's another powerful flip, what is the opposite version of your original belief. If you're if your belief is you have a fear of taking a trade, because you don't want to lose money, you can't have no losing trade, because your wife will leave you. What's the opposite of that? You're bold and taking trades, because you know, you make money and regardless of how you traded, your wife would always be with you. Notice how you feel when you hear the opposite? A lot of times it is stunning to people. Now, what meaning could you choose to assign to the trade instead? Every trade I make is a learning experience in which I grow as a trader. Now, if you had that belief, you'd be excited to take trades because every time you took a trade, you'd be getting better. Win, lose or draw, you'd be learning something and gaining confidence. I want you to notice this, by disputing your irrational beliefs, you develop a new set of beliefs that support you, based on your wants. This results in more supportive and emotional decisions, it puts you in the zone, it puts you in a sweet spot to make great decisions.

Now, this leads us going all the way back to the first quote from Bill Russell. We've talked about this briefly, I've talked about this in the past, self esteem versus self confidence. When I first learned this, this just wrecked me. Because I could look back in my life and see how much pain and stress and agony I'd put myself through because I didn't understand this frame. You see, I'm a hero from an alcoholic family. I'm the achiever and I'm the one that believed that if I did enough, if I worked hard enough, if I was successful enough, I could save me, I could save my family and then I always had issues with performance anxiety. Because I had every single bit of my self esteem tied up in my performance to the point that I was suicidal over it. Now, bring this in and look at this, self esteem versus self confidence. Nobody, most people do not understand the difference. Self Confidence comes from developing aptitude in a skill. It comes from being a great trader, understanding price action, learning, understanding options and option strategies. Being a great violinist, being a great singer, being a great dancer, being a great tennis player, being a great student, passing the the bar or the CPA, things like this. You develop self confidence because you can repeat a skill over and over and over again. Self esteem comes from the belief that you are loved and accepted as you are. You don't need to be better. You don't need to earn anything you already have it

This is fascinating because this is one of the core issues that we see in society. People who grew up in homes where they are loved by both parents get self esteem and some of you are not gonna like to hear this, but this is the truth. A lot of times people who grow up in churches, and religious homes, and I'm not talking about the downside of religion, I'm talking about the good side of religion. They have a belief that God loves them. This is all basis of Christianity, that Christianity is in Jesus, that God loves you unconditionally. You cannot fail. When we grew up in a home where both parents love us, or we believe in a God who loves us unconditionally, we get self esteem because we are loved and accepted as we are. People get into trouble, this is where I got into trouble, is they substitute self confidence for self esteem. They start to believe if I'm a great trader, I will be loved. If I'm a great basketball player, I will be loved. If I'm great in my career, I will be loved and when what happens is that the problem is our aptitude is inconsistent. What does this mean? This means we have good days, and we have bad days. Some days we shoot it well, some days we don't shoot it well, some days we sing well, some days we don't. Sometimes we put together a project that's amazing, sometimes a project is not very good. Aptitude goes up and down and one of the reasons aptitude goes up and down, is it's based on our physiology. If we're over aroused, we will not be our best, if we're under arouse, we will not be our best.

Then this opens up the backside, which is that if I believe that if I'm a great trader, I am loved. Then what happens is when I start to underperform, I start to have a losing streak, then I'm starting to equate that if I lose, I will not be loved and so therefore I have to avoid losing at all costs. Which one of the things that always talked about trading is whatever it is you try and avoid, is what you're going to get. If you try to avoid losses, you're going to get losses. If you want to avoid being wrong, you're going to be wrong. As you start to slide into a slump, and it threatens your self esteem, you do everything possible to make sure you don't lose, which then puts you in a state of over arousal and you will make poor decisions. Because you make poor decisions, you will lose even more, which puts you in a tailspin because you lose even more, your self esteem goes down even further, which gets you more aroused and all of a sudden, you're in a funk, where you just can't make trading ever, make money trading ever. We need to be in a place that we know that we're loved no matter what. This is why your spirituality is so important in your success. Without it, it is much harder. If you grew up in a home with only one parent, or you grew up with abusive parents, a lot of us have, I did. Then we have a lot of work to do, because we have to get to the point that we know that we are loved, that we are accepted. It's Trader Tip Tuesday. This is why I come to you with tips like today to help you perform at an outstanding level. Think about what I taught you today. This is big. This is way bigger than any friggin indicator. This is why we spend time on this. Have a great week. I'll see you next week. Bye