Thread by @team3dstocks

Each time u look at your PNL during a trading session (doesnt matter if it's red, or green), which part of your brain automatically activates, becomes hyperactive, and pulls bloodflow/oxygen away from other brain regions, leading to an increase in impulsive behavior.

#ADFPopQuiz

Answer time.

If u chose C (the Amygdala), u're correct.

In layman terms, it is the part of ur brain responsible for fight or flight related emotions such as fear, aggression/anger etc. It is MUCH more powerful than ur frontal cortex (the part that keeps u logical, disciplined )

The 2 parts are always engaged in a tug of war for dominance.

When the amygdala (emotional you) activates, ur prefrontal cortex (logical you) weakens, & vice versa.

Both cannot be in total control at the same time, & since the amygdala is much older & primitive, it is STRONGER

What does that have to do with trading?

Simple.

As mentioned several times before, the market is DESIGNED to transfer money from the EMOTIONAL to the systematic.

Emotional traders provide easy liquidity. easy money.

The more emotional u are, the bigger the target on ur back.

and NOTHING makes a trader more emotional than using your PNL to dictate ur next move.

Since the amygdala has evolved to PROTECT YOU, it activates the moment it "thinks" u're about to lose (or miss out on) resources. It doesnt know wtf trading is. It only knows SURVIVAL.

So when it sees that RED PNL, it doesnt think "it's ok, losses are part of the game".

NO.

It thinks "we're losing resources. our survival is threatened. WE HAVE TO GET THOSE RESOURCES BACK at all costs".

The result? fuck ur rules, fuck ur plan. it's time to REVENGE TRADE.

You will then do everything in ur power to try to make that PNL green again.

You'll double size to try to make back the loss faster.

You'll force trades even if the setup is not there.

You'll refuse to stop out if the loss is unrealized etc.

Ur amygdala is now in control.

Some days, this strategy will work. u'll make back the loss, or get back to breakeven. or close green (developing a shitty habit in the process)

On other days, u'll end up even MORE red than u had planned to be. U'll give back weeks/months of gains. A total catastrophe.

Then, once the carnage is over and the blood finally returns to ur frontal cortex. u'll be filled with disgust, as u stare at the FAT loss and cant even recognize urself.

"what the fuck was I thinking?"

"what came over me?"

"im a pretty disciplined person. what happened??" etc

It's the same way the amygdala intervenes when u're angry and lash out at a loved one or a friend, and say things u shouldnt have said just to regret it later.

In short, u are NOT urself when the amygdala activates

as a trader, u HAVE to understand this!!

Dont underestimate it

So LEARN to wean urself off ur PNL. I call that fucking box "amygdala" bait.

if u're red, u'll try to force a green day.

if u're green (small), u'll try to force a bigger green day.

if u're green (big), u'll stop trading even if a great setup shows up.

HIDE THAT MOTHERFUCKER

Conclusion.

Plan ur trades BEFOREHAND.

Plan ur entries, exits, stops, max loss and size BEFOREHAND

Then trade the CHART.

Check ur PNL at market close.

Trading is not "hard". Trading using ur amygdala is.

Sorry not sorry for the long thread. Happy holidays

#BearTipOfTheDay