Keys to Trader Self-Talk

“And the talk slid north, and the talk slid south . . .” Rudyard Kipling

What do you say to yourself when you trade? Now some of you may be thinking, “Talk to myself? I don’t talk to myself.” But of course you do. You’re talking to yourself when you think that. That’s how we think. We think in words (and sounds, pictures and feelings). But most precisely we think in words; therefore, we talk to ourselves.

When you’re considering entering a market, what are you saying to yourself? Are you saying, “What if I lose? “What if I’m wrong?” If you hesitate before entering and have trouble pulling the trigger, I guarantee you’re saying something similar to that.

Since good trading is very much about controlling the risk, often the first consideration is where to put our stops. You might first ask yourself,”What is my risk?” This is better than asking, “What if I lose?” However, it still takes your thoughts to risk and loss rather than reward and profit. If you’re hesitating when you should be entering the market, you could change your comment to something like, “How much can I make?”or, “What if this trade is a big winner?”

Of course, not everybody hesitates to enter a trade: some jump the gun and some overtrade. These people are anticipating large profits. If you hear yourself saying, “This is going to be a big move!” or “This is going to the moon!”, you’ll need to activate caution. Remember, gamblers often think they’ve got a sure thing. When you hear yourself promoting a trade, it would be wise to ask yourself, “What is my risk?” and “What would have to happen to know that I’m wrong or no longer right?” Our self-talk reveals our biases. If you’re talking up your trade or talking it down, you have a good clue that you’ve lost your neutrality. In such an instance it would be advisable to ask yourself, “What is the market showing me now? What does the market want? What do I know for certain? Have my rules for entry been met?”

If you hear yourself saying, “I don’t believe this!” Look out. You’re warning yourself that you’re not taking the market action at its face value; an extremely dangerous thing to do. Remember price is your predominant reality when you trade.

Some traders demean themselves when they trade. They speak to themselves in negative ways they would never let another person talk to them. They call themselves stupid idiots, failures, fools, losers, and so forth. While their intention in so speaking might be to motivate themselves to better behavior, it seldom does. Self-denigration rarely produces good results. Have you ever noticed that the more you scold yourself, the more your behavior reproduces itself? The strangest secret is that we become what we say. I tell my clients that I won’t allow anybody to speak unkindly to my clients, including themselves.

Much better to encourage yourself. “You can do better than this.” “You don’t need to do that again.” “I’ll do better tomorrow.”

Start writing down the words you say at critical junctures in your trading. You’ll begin to understand where your thinking is helpful and harmful, and you’ll be able to change the direction of your thoughts by shifting your words. There’s an article on my website discussing the critical importance of questions. Check it out. What if you could learn to direct your words and thoughts in such a way that you truly support your success in trading?