Today I'd like everyone to welcome Larry Levin. Larry is a very well known trader and is often featured on CNBC and other financial television shows, and today he's going to be talking about one of the hardest things we as traders must do - pull the trigger! He's got some excellent advice that can be applied to all levels of traders. Please enjoy the article, comment below, and visit LarrysBook.com to learn more about Larry and check out his book.
Sometimes we can’t pull the trigger when we sense an opportunity in the market for one reason; we’re afraid! But we are not afraid of the market, we’re afraid of ourselves. Our fear comes from not trusting in ourselves to act in our own best interest.
You fear your inability to do what you need to do, when you need to do it, without hesitation. Being afraid causes us to freeze and makes us unable to pull the trigger to execute our trades. This causes missed opportunities, but the result of these missed opportunities is the real problem of not being able to pull the trigger.
After we miss an opportunity (because we are afraid), we play the scenario in our minds in a very unrealistic way. For example, let’s say we wanted to get long the market. The opportunity comes up for us to get in the market, but our fear prevents us from pulling the trigger, so we do nothing. Then the worst possible thing starts to happen in our minds…
The market rallies and we start counting the money that we are missing out on because we didn’t pull the trigger. If the market moves our way 5.00 points, we think that we should have had those 5.00 points. We do this whether it is realistic or not.
This is the failure mechanism hard at work.
This kind of thinking is the most harmful to our trading. We mentally beat ourselves up for missing the trade and we feel like we lost money that should have been ours had we gotten in on the trade. We get mad. We call ourselves stupid. We play the trade repeatedly in our minds, thinking about the things we did wrong. This is exactly like the visualizing techniques I’ve been talking about. The only difference here is that you are visualizing yourself doing the wrong thing. By continually thinking of yourself as a person who can’t pull the trigger, you are reinforcing that idea in your subconscious. These actions are destructive and only make things worse.
Therefore, we need an exercise to help us pull the trigger when we see a trading opportunity. We need to get past the fear that is causing us to freeze and not pull the trigger. And we definitely want to avoid visualizing or continually thinking about the mistakes we’ve made and the opportunities we’ve missed. We can’t change the past, only the future.
Here is a visualization technique I use to overcome fear:
1) Get in a relaxed state with the relaxation technique “calm body, calm mind.”
2) In this exercise, we want to visualize ourselves being able to pull the trigger without hesitation when we see an opportunity or when it’s time to get out of a trade.
3) Go into the theater of your mind and first play back with detail times when you’ve pulled the trigger as soon as you’ve seen a trading opportunity. Remember to see the details. See yourself watching the charts and seeing the opportunity. You see the green light go off in your head and you don’t hesitate. You place your order. (Can you feel how the mouse feels in your hand? Notice how you feel sitting in your chair watching the screen.)
4) See the trade going your way. Feel the feelings you have had when you’ve seen an opportunity and jumped on it. Feel how you felt when you did not hesitate and were able to pull the trigger without hesitation.
5) If you haven’t had trades where you were comfortable pulling the trigger, then try this: Remember a time when you did something you were comfortable with, something that is hard for most others to do. For instance, maybe you are a good negotiator and you’re not afraid to ask for a lower price when others wouldn’t be confident doing so. Remember that time vividly and feel those confident feelings. Or maybe you are a person who is good at fixing things and wouldn’t hesitate tackling a big fix-it job. You would obviously feel confident that you could get the job done correctly. Then switch the scene in your mind’s eye back to the trading situation and see yourself pulling the trigger at the right time. It’s O.K. to make up the situation, as long as you have the confident feeling first and are seeing the pictures in your mind vividly and with detail.
6) See yourself liquidating this trade when you feel the time is right. See the details clearly. See yourself clearly getting out of the trade. See yourself hitting the correct keys to liquidate the trade. Feel the confident feelings you get from having a successful trade.
7) Again, it’s important that you do these exercises on a daily basis. They will not work after just one day. You didn’t become afraid to pull the trigger in just one day, so you can’t expect to fix that problem in just one day either. Also, these exercises work better if you do them at the same time each day.
8) This mental practice will reprogram your self-image. After several weeks of practice, if you feel the confident feelings, your inability to pull the trigger will be a thing of the past.
Attempting to do these exercises right after a losing trade or a bad day will not work. It’s very unlikely you’ll be able to get relaxed enough for the visualization process to work if you are upset or mad at yourself. I would suggest only doing these exercises when you are in a relaxed state. Trying to do them when you are aggravated will not get you anywhere and will simply turn you off from continuing to do them in the future. The term “time heals all wounds” is very true here. If you give yourself some time to calm down (a day, an hour, whatever), you will be in a much better position to relax and then get some benefit from these exercises.
Relaxation Technique: Calm Body, Calm Mind
It is hugely beneficial to be physically and mentally relaxed before doing the visualization exercises. Here is a simple technique to use in the theater of your mind to bring on relaxation.
1) Sit in a comfortable chair or lie on a bed. There should be no other distractions. Turn off the TV, radio, and the lights. Go into the comfortable theater of your mind. See yourself getting ready to watch a movie about yourself.
2) Lie down and imagine your body’s a series of rubber balloons. There are two valves in your feet. They open and air escapes from your legs. Your legs collapse until they are empty and lie flat against the bed. A valve now opens in your chest and your whole body begins to collapse limply against the bed. Continue this exercise with the arms, the neck, and the head. You don’t have to do this in bed. If you’re in the office, try to fix a picture of yourself in your mind’s eye of yourself lying in bed doing the exercise. You will actually feel the relief from being relaxed. Physical relaxation leads to mental relaxation. When practiced daily, it gives us that relaxed attitude that allows us to better control our actions.
3) Again, remember to pay attention to details. What is your theater like? How does the seat feel? Is the screen big or small? Are you sitting in the middle row or in an he aisle seat? Are there armrests on the chair? How do they feel under your arms? The details are very important.
Each time you practice this technique, when your body and mind are feeling completely relaxed, be sure to say to yourself mentally, “Calm body, calm mind.” This deepens the programming of your servomechanism. As you practice this technique, you will find the time that it takes you to become relaxed grows shorter and shorter. Eventually, you will be able to relax totally at any time, and in any situation, simply by saying to yourself mentally, “Calm body, calm mind.”
All my best,