The Market is a Mirror - It Reflects Your Internal Makeup
This article was written by a special guest - Matt Thomas, Trading Paradigm.
The concept of The Mirror can be applied to all life pursuits, but it’s especially critical to understand if you’re striving to become a consistently profitable trader.
In essence, the concept asserts that your trading results are a direct reflection of who you are at a foundational level. Your overall experience within markets is a manifestation of your attitudes, beliefs, values, principles, etc. - which guide your actions/behaviors, and ultimately determine your results/outcomes.
For example: if you think negatively, feel lousy, and act randomly within markets - then your trading results will reflect all of these unfavorable terms (negative, lousy, and random). Said another way: if your process is poor and inconsistent, then you can’t expect anything other than poor and inconsistent results.
Whether you realize it or not, your internal makeup dictates every action that you take. So you have to be hyper-vigilant about your thought, feeling, and behavior patterns - strengthening positive/constructive ones and weakening negative/destructive ones - because they ultimately determine your success or failure over time.
Learning technical patterns/setups and pushing buy/sell buttons is the easy part of trading. The hard part is aligning your mental framework with indisputable market characteristics. So if you’re constantly fighting deeply ingrained attitudes and beliefs that don’t align with market realities, then be prepared for an afflictive experience.
When your mindset/psychology is out of alignment with core market characteristics, internal conflicts and impulsive behaviors are bound to arise. But when these components are in harmony, you can actually follow your rules/plans with little to no mental resistance.
How you handle the feedback provided by The Market Mirror quite literally determines the quality of your individual trading experience.
You Don’t Have Trading Problems…
Struggling traders tend to think they have trading problems. But they don’t usually have trading problems - they just have personal problems that show up in their trading.
You might not have realized you had these issues before you started trading because they were hiding below your conscious awareness. But the market environment has this amazing ability to expose every deep-seated fear, bias, insecurity, and defense mechanism you have in regard to money, loss, risk, change, and uncertainty.
How you handle this highly personal feedback will determine your level of success/failure.
Will you continuously ignore what the market is trying to tell you and repeat the same destructive cycles of thought, emotion, and behavior until you’re wiped out of the game for good?
Or will you put in the time and effort to replace those negative cycles with constructive ones?
If left unchecked, the default mindset/psychology of a new trader tends to be characterized by impulse and self-sabotage. So changing things around requires the cultivation of a new identity - which isn’t established and maintained solely within the confines of the market. Who you are outside of markets drastically impacts who you are inside of markets, and vice versa.
The fact is: it’s hard to excel at trading (which requires a great deal of patience, balance, concentration, discipline, etc.) when other aspects of your life are in disarray. Inconsistency in your life equates to inconsistency in your trading. Unhealthy personal habits equate to unhealthy trading habits. Your personal habits and trading results are all interconnected.
Even the “little” things (which most people don’t take seriously and are actually “big” things) like staying hydrated, eating right, getting enough sleep, meditating, and exercising can have a distinctly positive impact in every area of your life. These are all keystone habits that support peak performance.
When you clean up your personal life, your trading will improve right along with it.
“Everybody Gets What They Want Out of the Market”
There’s an incredible quote from Ed Seykota - a highly successful trader featured in Jack Schwager’s Market Wizards - that goes like this:
“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money”.
When I first heard this quote, I was a little confused by it and didn’t quite grasp the message he was trying to convey. But after a few minutes of contemplation, the layers of depth and complexity hidden within these 2 simple sentences dawned on me.
The obvious surface-level answer to what traders “want” out of the market is money. If I took a poll, I bet “money” would be the top answer, by far. But is money and everything it potentially represents (comfort, safety, freedom, status, power, recognition, etc.) really what most people want out of the market?
Because if money was what most market participants truly wanted above everything else, then they would change their psychological/behavioral habits to align with that goal - wouldn’t they? Yet most don’t. They tend to avoid personal development and replace it with all sorts of gimmicks/nonsense instead.
What I’m getting at here is that most hopeful traders actually desire short-term emotional gratification over money. It sounds hard to believe, but their impulsive, inconsistent, and irrational actions over time don’t lie. Feeding their in-the-moment urges, cravings, and addictions is their form of “winning” - even if it comes at the expense of their long-term profits.
A Challenge For You...
So as I wrap up this post, I challenge you to consider what it is that you truly want out of the market. And once you have your personal desires definitively identified, I challenge you to examine whether or not your current habits, routines, and overall processes are in line with achieving them.
Overall, the market offers unlimited opportunity in both directions - up or down. And your identity (the collective set of all your attitudes, beliefs, habits, routines, etc.) dictates the direction in which you and your equity curve trend over time.
You can’t hide from yourself as a trader. There’s no evading the connection between cause (your mindset/psychology) and effect (your results/experiences).
To put it simply: The Market is a Mirror.
Matt Thomas, Trading Paradigm
Internalize the essential values, qualities, habits, and skills required to become the best trader you can be.
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