Kardec Trader breaks down impulse trading as overtrading driven by euphoria, revenge, or the need to stay busy. The real problem: tying your self-worth to wins and losses, which triggers revenge trading after a loss. Build discipline by separating your performance from who you are, then manage the emotions that push you to act when you should wait.
How many of you have impulse trade?
I define impulse trading as over trading from euphoria, irrational exuberance, and revenge. Training, trading out of a sense of anger to get something back. Both those fall under the rubric of impulse trading. How do you conquer that? Because there's many, many traders who get in who know how to trade, they know how to work, and they get into it and get sucked down the vortex and end up out of control, unraveling and taking heavy losses. How do you go about working with this? First, let's define impulse trading in three different ways. One is your notion of work. In work, if you bring into trading a notion of work that's built around taking action, doing something, making things happen. Like, you turn on the screens and you say, hey, let's make something happen, that's the first thing is that you're already ready to chase trades. You're not necessarily going to see good setups, but what you'll see is you'll see chases that you get sucked into. That's the first thing. Work is not anything about doing and trading. Work and trading is about patience.
And then ambush. It's waiting for the setup to come to you patiently and then striking very different. Then let's take a look at the biology. There is a whole section of biology about chase. It feels good, you know, when you're chasing, what you've got is. You've got testosterone, you've got dopamine pulsing through there. And it feels good to be in there, to be trading, to be doing something. And yet that very exuberance, that very thrill.
Dangerous because it takes you out of the mind that can measure risk well. Or on the other hand, let's just say you put some good things together, you've had some winning stuff, you're on the streak, and all of a sudden you take a couple losses, and all of a sudden you get angry, say, I want it back, I want it back. Suddenly, anger, the chemistry of anger, shows up. And all of a sudden you're no longer trading from a calm, rational mind, patience. You're trading anger. You want to punish, you want to get it back. That's a primitive impulse that has to be learned to manage. The third one, though, the psychology. The psychology of impulse is pretty simple, really, and very straightforward. What you're ultimately doing is you are measuring your worth as a measure of your performance. And suddenly what you're seeing is you're going, like with overtrading. What you're doing is going, wow, look at me, look at me.
I feel it. I feel the euphoria. I can make things happen. It's going to roll on forever that way. And suddenly there you are, you're trying to prove yourself. When it comes crashing down, suddenly what happens is the proof of self is gone. You're no longer proving that you're worthy or that you're adequate. You're proving that there's something wrong with you, that you're inadequate. And that's when everything kicks in. That's when you decide, I've got to make it back. I've got to make it back. So if you're overtrading, where everything's irrational exuberance, and you've got that whole thing about, wow, this is great, it's going to turn to revenge trading. Because what happens is that you're going to take the losses and it's going to trigger threat.
And the real key is, how do you manage threat? When you are faced with something that you cannot control, with your best anger, with your best perfectionism, what do you do? Most traders feel inadequacy and they feel powerlessness and it feeds back on them. And suddenly they're in the loop, falling down.
This is why traders lose so much money. And very few traders learn to win money. The real key, as you come to a moment where you separate performance from your being, you are enough. A really great trader knows that they're enough. And they're no longer swayed to make themselves feel better by exuberance or in anger, try to take it back. That's how you win at trading. The mind has to be built, friends. You're not going to magically make it happen. It has to be built. You have to learn this process to be able to calm down, manage the emotions so that they are working for you rather than against you. Thank you for your time.
