How to Create the Optimal State for Peak Trading Performance

In this Wiki, We are going to explore 14 different strategies that you can implement to achieve your optimal state for peak trading performance. Each individual trader will find some more useful than others to their own individual psychological makeup around the business of trading. Make sure to give each one a fair chance because, without a proper psychological and emotional balance, most traders will find it very difficult to succeed over the long run.

This Wiki is a part of our extensive Wiki on Trading Psychology ( HERE) which is filled with valuable knowledge about trading and emotions. It is also part of our Essential Forex Trading Guide. Be sure to check that out HERE.

Before we look at these individually we need to first understand that all emotional states are comprised of two key factors:

Physiology: These are elements such as heart rate, the way you’re breathing, your posture, your facial expressions, and the gestures you make.
Internal representations: These are things such as what and how you think, how you feel, and what you imagine in your mind.

By using this information we can start to take steps to take control of our states. As a trader, it’s absolutely critical to be aware of the states that allow you to trade with optimal performance. Obviously, you want to be in the best state when you are trading because, as we know, your state will directly impact the decisions you make which in turn will have a huge impact on your trading results.

We will now look at the 14 methods and strategies used by professional traders to manage and control their emotional state allowing them to trade in the zone. Keep in mind that these are not the only ideas that you can use to help you manage your states. For some people using a hybrid of a couple of ideas might work best. The important thing is that you find out what works for you.

Energy Management

Energy is the foundation of all emotional states and it is critical for sustaining focus and concentration.

There are 4 key factors in having a strong energy base:

Nutrition: This means having a balanced diet with plenty of water. You should eat healthy foods and stay hydrated.
Exercise: This could be having a balance of cardio and weights with maybe 3-4 x 30-minute sessions each week. Or maybe you can try taking up a new sport that gets your heart rate up for a sustained period of time.
Rest and Relaxation: This means that you should switch off and have some downtime. You can’t sustain being on 24 hours per day. Your mind and body need time to absorb the day’s events and recharge you for tomorrow.
Sleep: You should be getting a minimum of 7 hours per night on a consistent basis. Some people are able to function on more or less but the key is that you let your body tell you what works best for you.

To sustain your concentration throughout the day it’s important to take regular breaks. The reason for this is because our bodies work on something called ultradian rhythms. These rhythms are naturally occurring in 90-minute cycles of peak focus and energy followed by a natural recovery dip of around 20 minutes. The problem we have in modern society is that these natural rhythms are very often suppressed by the use of coffee or other stimulants such as Red Bull. This means that we never get the natural recovery time our mind needs.

This dip in energy is often signalled to us by things like hunger pains, daydreaming, and a general loss of concentration. This recovery time is the minds idling time and allows the unconscious mind to process information and integrate learning.

By denying your mind these breaks, even with a positive intention, we end up with subsequently lower and lower peaks of energy. This explains why most of us have the feeling of declining energy throughout the day.

To combat this you can use the following ritual:

Rest and relax. Get away from the computer screens, rest your eyes, and rest your mind and body together.
Eat something healthy.
Drink plenty of water.
Stretch by getting up and moving around, taking a walk, or anything that will get your muscles mildly active.

By keeping your energy levels up and maintaining your body’s natural recovery cycle you will be in a much better position to trade successfully if you are planning on trading for several hours.

Breathing Techniques

Breathing techniques are a very simple way to focus yourself throughout the day. Perhaps the most effective breathing technique is called centering. Centering is a very simple technique that traders can use to control stress and muscle tension, block out negative or distracting thoughts, and refocus their attention on things relevant to the task of trading.

Here is how you can practice the concept of centering:

Sit in a comfortable but upright position with your legs and arms unfolded and uncrossed.
Take a deep breath from your abdomen and imagine the air circulating in and around your entire body.
Exhale slowly and completely. As you do this feel your neck and shoulders relaxing, and let this relaxation spread through your entire body.
As you finish the breath think about the single most important component that you need to focus on right now.
Breathe in for a count of 5 in through the nose and 5 out through the mouth.
Focusing your breathing through the diaphragm or lower belly is highly effective at centering emotions and achieving mental states that are clear and focused.
Practicing this technique regularly will make it more and more automatic.

Centering is just one form of breathing technique. By doing a simple google search you are sure to find all kinds of breathing techniques that you can experiment with. The key is that you find one that you can incorporate into your daily routine.

The Process of Trading and Controlling the Controllables

When you arrive at your trading desk each morning, what is your goal? Is it to make a certain amount of money, make a certain amount of pips, or maximize the number of opportunities that you personally take today?

When considering these questions there are two types of goals that you should be aware of:

The outcome goal.
The process goal.

Outcome goals are focussed on the end results such as how much money you make or the number of pips you make.

Process goals are specifics such as things like behaviours, feelings, or processes required to achieve the desired outcome.

A good way to describe this is by referring to the outcome goals as a jigsaw puzzle and the process goal as the pieces of that puzzle. Only by putting the process pieces of the puzzle in their proper place do you complete the outcome goal. Both are very important but the key is knowing when to focus on outcome goals and when to switch to process goals.

Generally speaking, the time to think about outcome goals is in the run-up to or after the performance. The time to think about process goals is immediately before and during the performance.

Just like any plan, once you have clearly defined what your desired outcome is and the reason why you want it, the next logical question is how you will go about getting it.

Your process goals will be elements such as what you want to be doing and being. Doing goals will include areas such as preparation, how you are picking an entry, how you manage trades, how you exit trades, and how you are evaluating trades. Being goals include feelings and thoughts that are important to have.

Most of your process goals should be 100% under your own control. One of the most important aspects of your focus is remaining process focussed. This means focusing on the process to be done and not the overall outcome. The key to this is to stay in the now and present and take each trade by trade.

In trading, different tasks require slightly different types of focus. For example, monitoring or stalking a trade calls for a broader external focus because you are searching for a trade. In direct contrast to this, being in the actual position requires a more narrow internal focus because you are now focussing on something that you have. Once you are in a position you switch from external focus to internal focus.

As another example, evaluating or reviewing your entire trading day would require a broad external focus. Whereas mentally rehearsing for the day would require a narrow internal focus. The absolute key to this strategy is focusing on the process of controlling what you can control. This cannot be overstated.

To make this effective the best exercise you can perform is to literally write out your goals as if they are happening in the present tense. Make them positively phrased, then mentally rehearse them, and visualize yourself experiencing them.

Some examples could be:

“I am coming to the office today feeling energized, positive, and expecting to make money.”
“I am doing my daily research, preparation, updating my knowledge, and calculating my levels.”
“I am entering my trade in accordance with my well thought out strategy.”
“I am feeling calm, confident, and composed when I am in my trades.”
“I am objective and positive when evaluating my trades.”

Managing the Voice inside our Heads

Managing the little voice inside your head is something that psychologists refer to as self-talk.

When researchers interview top sports athletes most of these athletes report absolutely zero self-talk when they are performing in the zone. This means that performance is externally oriented with no internal dialogue. This reinforces the point that being in the zone is an externally focused experience.

If we engage in self-talk it should be very brief and extremely positive. These are known as performance cues which is a simple word or short phrase that is performance-based and linked to a specific positive action that you want to have. Using performance cues correctly can be used very effectively to maintain focus. They can also act as triggers for desired states or actions.

A performance que consists of 3 key elements:

It’s performance-focused.
It’s positive based on what you need to achieve.
It’s very short and simple.

Some examples of performance cues used by professional traders are:

“Patient and profit”
“Focus”
“I am calm and relaxed”
“Focus on the process”
“The how is in the now”
“Trade by trade”
“I am alert and prepared”
“Anything can happen”
“Anything is possible”
“Control the controllables”
“Tune in”

You can create your own performance cues using these examples as inspiration or you can just go with them directly.

It’s important to attach each performance que to a particular situation. For example, when entering a trade using the que saying “Anything can happen”will help you create a state that accepts losses and allows you to avoid hesitation on the next trade.

Identifying your Ideal Trading State and How to access it

Once you have mastered the strategy of identifying your ideal trading state your trading will be changed forever. This is obviously a personal thing and we can’t tell you what your ideal state is but we can help you see the importance of working on this and identifying it for your future success.

You need to really spend some time thinking about what your ideal trading state is, how you will create it, what you’re ideal physiology is for successful trading and the thoughts and focus that gets you into that zone.

These are the three very important items you need to be focussing on:

Your physiology.
Your thoughts and self-talk.
Your focus.

The reason we have included all the other strategies is so that you can go through them all and find the combinations that work best for you. Everyone will react slightly differently so it’s important that you experiment with these.

Tapping into your Awareness

Tapping into your awareness means that you are keeping tabs on your emotional state. You need to notice how you are feeling in this moment and then use the following 5 questions to help create the best states for yourself.

How resourceful of a state am I in?
Where is my energy level?
What is my physiology like?
What am I focused on right now?
What and how am I thinking?

As you answer these questions make any adjustments that may be necessary to create the state or the feeling that you desire right now. If during the trading day you experience negative emotions you need to stop and take a time out and review the above 5 questions or do whatever you need to do to get rid of all negative thinking.

As you go through the 5 questions pay attention to how you created the negative state for yourself. It’s a very interesting exercise to ask yourself what the meaning behind the negative emotion was. For example, a feeling of anxiety when entering a trade may mean that you are entering the trade for the wrong reasons and your unconscious mind is telling you this by creating the feeling of anxiety. Your unconscious mind knows when you are violating your own rules.

The process for tapping into your awareness is as follows:

Ask yourself the 5 questions.
Then ask yourself if you are in the right frame of mind to trade effectively.
Finally, give yourself a score from 1 to 10 for how close you are to your ideal state for trading. 1 being totally not resourceful and 10 being in your perfect trading state.

Over time this exercise will really help you to tune into your state and assess whether or not you need to change that state or simply avoid trading altogether.

The best part of doing this exercise is that over time, as with all of these strategies, the more you practice them the more automatic they will become.

Creating a Peak Performance Trigger

In trading, along with any performance-oriented activity, it’s quite possible to create something called “triggers”. These triggers will enable you to enter your ideal trading state on Que. This is done through something called neurolinguistic programming or NLP for short.

The concept of creating a trigger is known as anchoring. Anchoring is the process of stimulus-response conditioning or creating a very specific response to a pre-determined stimulus. The interesting thing about this strategy is that every one of us already has many varieties of anchors built into our minds. Some of these anchors are empowering while others work against us and our desires. These have all been developed unconsciously over time from the environments that you place yourself in regularly.

Trigger Example: To illustrate a trigger, think of the smell of certain perfumes, certain objects, the sound of a whistle, a school bell, or the sight of a red traffic light. A trigger could come from literally any stimulus from your environment. All of these are specific stimulus that triggers certain feelings or actions which occur automatically.

To create these triggers manually follow this 4-step process:

Remember a time that you had a feeling or state that you want to create now. Fully return to that time now. See what you saw, hear what you heard, and feel how good you felt. If you cannot remember such a time then simply imagine how much better you will trade if you were confident, focused, calm, and positive.
As you keep going through this memory make the colours bigger, brighter and richer, make the sounds louder, and the feelings stronger.
As you feel these good feelings squeeze your thumb and middle finger of either hand together.
Still holding your thumb and middle finger together think about a situation coming up hours from now during which you want to experience this state. Imagine the things that you are going to do working perfectly and exactly the way you want. See what you will see, hear what you will hear, and know how good it will feel.

Keep this routine up and remember the importance of practice and repetition for the whole process. Eventually, you will be able to recall this state at any time simply by pressing your thumb and your middle finger together which will allow the positive feelings to come flooding back.

There is a ton of material about anchoring and NLP on the internet. There are many great courses that are designed to create these things within you. If you are interested further then do a quick Google search and see if there is anything that interests you.

Asking Yourself Resourceful Questions

The reason asking yourself resourceful questions helps is that your experience and state are strongly affected by the quality of the questions you ask yourself. Imagine a trader having a tough time asking himself “Why am I trading like an idiot?” or “Why did I take that stupid trade?” What information do you think he will uncover from asking these negatively charged questions? What if instead, he asked “What do I need to do to trade more effectively?” or “How will I trade more effectively tomorrow?”

Asking quality questions on a regular basis can have a significant impact on your personal state.

Here are some examples of high-quality questions:

What am I grateful for today?
How will I trade well today?
What is going well for me?
What am I happy about today?
How will I develop my trading ability?

All of these questions begin with a how or what. In psychology, the most powerful questions always start with how or what. Asking yourself how or what questions stimulates your brain to look for answers. If the question is positive, then your brain is stimulated to look for positive things. You absolutely need to be in a positive state when trading otherwise you put yourself in a situation where you might not make the best decisions.

How Winners Handle Losing

To give us a good understanding of the attitude of winners we can look at a quote from a late 90’s baseball movie called Bull Durham.

“Sometimes you win, sometimes you lose, and sometimes it rains”

That’s just the way it is in trading. Winning traders accept losses as a perfectly normal part of trading. A trader with a winning attitude will generally go through a specific thought process after a loss. We will now quantify this thought process into a strategy that you can use to handle losses much more effectively.

Let’s start by looking at the thought process of a winner:

Winning traders fully accept the loss and the general nature of trading which involves losses from time to time.
They always keep the perspective of the bigger picture in mind.
They understand that there are valuable lessons to be learned from every trade. This means that there is no failure, there is only feedback.
They review their trade from a third-party perspective.
They put losing trades behind them and move on.
They do not equate losing trades to them being a losing trader.

So the next obvious question is; how do we create a strategy from this knowledge?

There is a 4 step plan of action that you can implement in order to specifically help you handle losing trades. This is called the ARIA method.

A Stands for acknowledge: You acknowledge that the trade did not turn out how you wanted or expected.
R Stands for release: You release it by noting the feedback from the trade and then throwing that trade away.
I Stands for Imprint: You imprint onto your brain the ideal outcome that you would have preferred to see by mentally rehearsing how this would have played out.
A Stands for Affirm: You do this by telling yourself this is what you will do next time.

This is a nice simple way to deal with a loss. It may not feel natural at first but with time it will become more automatic and easier to let go of losses.

Another good quote for new traders to internalize is from the world-famous basketball player Michal Jordan. He said:

“I’ve missed over 9,000 shots in my career, I’ve lost over 300 games, 26 times I’ve been trusted to make the game-winning shot and missed, I have failed over and over again in my life and that is why I succeed”

This quote sums up the entire principle behind a winner's success and a loser's failure. This is something that you must believe if you are going to become a successful trader. You will lose and you will fail but if you keep practicing and applying the correct training to your game then you will eventually become a great trader. This is also what separates traders that have been trading for ten years from the traders that give up and fail. The trader that has been trading successfully for a long time is still doing so because he was able to accept losses, learn from them, and not allow that previous loss to affect the next trade.

Regaining Focus

Up to this point, we have looked at how to create certain states that are ideal for peak performance. However, it’s a fact of life that even a successful winning trader will lose focus now and again. This strategy will show you how to regain your focus in these situations.

Everyone loses focus but what makes the winning trader great is that they can get their focus back quickly while minimizing disruption to their performance. As a trader, it's really important that you have a refocusing strategy.

The first step is to be self-aware. You need to be self-aware of when you have lost or are losing focus and concentration. A very useful thing to do is to monitor your performance level on a scale of 1 to 10. 10 is your ideal trading state while 1 is you are totally in the wrong frame of mind to even think about trading.

If you need a quick refocus then sometimes a simple performance que will do the trick. Other times you may be completely distracted or unfocussed and in an un-resourceful state. In these times a time out away from your trading platform is probably the best idea. There are times when you are emotionally compromised so much that you simply need to stop what you are doing and remove yourself from the situation entirely.

Using some of the strategies that we have already looked at try this refocussing routine:

First, get away from the computer and take a break.
Review your performance. What was the feedback, what did you learn, and what should you do differently next time? When you do this be objective by imagining what your trading coach would say if he or she was watching you.
Do a breathing exercise to center and refocus yourself.
Refocus by using a performance que or by thinking about your process goals.
Visualise yourself trading successfully by implementing your cues and carrying out your process.

This is actually a very good strategy even for already successful traders. The key is that you bring yourself to a self-aware state and regain control over your mind.

Managing Risks

Managing risk is probably one of the areas where new traders make the most mistakes and get totally burned on. What new traders fail to realize is the interrelationship between trading risks and their trading psychology.

An example of this and one of the quickest ways to create an un-resourceful state is by taking excessive amounts of risk that you are not comfortable with. This could be taking on a trade size with a tick value that is far more than your trading psychology is comfortable with. It takes plenty of time and practice to get up to higher trade sizes.

Earlier we looked at the concept of matching your challenge with your capabilities in order to ensure you can enter the zone effectively. What is really interesting is that taking on too much risk is the one thing that will directly stop you from entering the zone.

Taking on too much risk for your current trading abilities will alter your state negatively. This will in turn result in negative performance. This performance will be far lower than what your actual potential is because you forced yourself into a situation where you were not comfortable.

Risk Example:

Think about how you would feel if you had placed a trade where each pip is worth $0.10. Let’s say that your account balance is currently $10,000 in this example. Now imagine how you would feel if the price went against you 2 pips, then 5 pips, then 10 pips, as you wait for the trade to work out in your favour? Think about this for a second. For most people, this small amount of risk would not faze them too much because even a 100 pip move against their position would only result in a $10 loss on a $10,000 account. Taking a loss of 0.1% would be no problem for most people.

Now imagine the exact same trade scenario but this time each pip is worth $100. How are you feeling now? How would you feel if the price went against you 2 pips, then 5 pips, then 10 pips, as you wait for the trade to work out in your favour? How does this make you feel about the trade now? I’m willing to bet you would feel much more overwhelmed by the second example. If the price moved 100 pips against you this means that you would have a loss of $10,000 and would effectively blown out your entire account.

As you can see from this example the emotions are completely different. As the price runs against you in the second example you will most likely be more inclined to close the trade just in case it keeps going against you and wipes out your entire account. A move of 100 pips against your position would in fact wipe out your entire trading account. This is way too much negative pressure that you are forcing on yourself in this situation. But the sad fact is that a lot of retail traders tend to do exactly this kind of thing because they are trying to change their financial situation quickly.

In the first scenario, you were probably not even concerned about the small losses relative to your account balance. You are still process focused on the reasons you entered the trade in the first place which maintains your conviction in the position. This conviction will allow you to comfortably hold through the temporary drawdown and wait for the price to come back to a point where you can bank a nice profit.

This illustration sums up why and how risk influences your psychology. It also highlights how the further apart your challenge is from your current capabilities the less likely you are to perform well and make a profit. This is why it’s important to not hinder your performance by risking more than your current capability allows for.

If you just stick it out in the beginning and perform risk management responsibly you will be able to get to a point where you are capable of bumping up your size in a controlled and sustainable manner. That is how real professionals do it. trading is not about changing your financial situation instantly. It's about gradually increasing your skill and performance in a way that will comfortably allow you to bump up your trade sizes gradually.

Physiology

Think of your physiology as a set of clothes that you are wearing. You probably have clothes that you wear for certain situations such as going to the gym, chilling out at home, or looking good and going out for the evening with friends. Each of these outfits creates a certain feeling or intention when you put them on. Likewise, you also have specific physiological outfits that create certain intentions.

By recognizing which physiological outfits you need in order to achieve a specific state you can then adopt or wear that physiology in order to access your desired state.

Think in terms of the following items in order to understand how to change your physiology:

Your posture.
Your breathing.
The speed of your heart rate.
The kinds of gestures you make.
Positive or negative facial expressions.
Muscle tension and where that might manifest itself in your body.

Changing these from negative to positive will change your physiology and your mindset for the better. For example, if you are frowning, have your arms crossed and slouching over your keyboard while breathing shallowly there is no doubt that your physiology is not empowering you to perform at your peak potential. However, if you sit up straight, put a smile on your face, and breathe deeply and purposefully from your lower abdomen then this will be a much better physiological state for better trading performance.

This is one of the most effective ways to change your state especially when you make the changes positively charged. If you are slouched over at your desk then sit up straight and put a smile on your face. Make your physiology positive and it will filter through to your mind which in turn will allow you to perform better.

Beliefs, Attitudes and Perceptions

Your beliefs will directly allow you to or simply stop you from entering the zone. This is because your beliefs, attitudes, and perceptions have a direct impact on your state, and as an extension of this, the way you will behave in the markets as well.

If you are continuously experiencing negative states you could potentially be holding your trading performance back. This could be due to many things such as self-limiting beliefs that you may have, an un-resourceful attitude, or even a negative perception about trading because you are not happy with your performance.

Look at proven examples of people that have actually achieved what you are trying to achieve in order to positively change any potential self-limiting beliefs you may have. Do this to prove to yourself that your goals are possible and that you can achieve them if you follow the same training and the same focus as the proven successful person.

There are many great self-motivational programs or courses available from some very well-known self-help gurus. Anthony Robbins comes to mind and is a good place to start looking into motivational tactics that might help not only with trading but also with your life in general. If you have poor beliefs then it might be worth investing in some training to help with that. It never hurts to continue to try and improve in all facets of your life, not just in trading.

Regardless of the statistics that you may have heard there are successful traders and you can become one of them if you put in the work using the correct training.

The Power of Mental Rehearsal

Mental rehearsal is the process of imagining yourself trading well. This means that you are visualizing this over and over again until you actually see it as your normal self.

A good idea is to mentally rehearse your process goals. For example, seeing yourself trading well and implementing your trade plan works very powerfully because visualizing provides a much stronger focus for your mind instead of simply telling it something.

Mental rehearsal is one of the most common strategies used by successful performers in all types of sports and industries and has been proven in numerous scientific studies to be a vital factor when preparing for a successful outcome.

One thing to keep in mind is that science has proven that your brain cannot distinguish between something that has actually happened and something that you have vividly imagined over and over. Isn't that interesting? This is why the best sports athletes in the world use visualization and mental rehearsal exercises as a normal part of their training. It works, but like anything else, it takes time and practice to become really good at it.

The most powerful feature of mental rehearsal is that it allows you to literally program your desired behaviours right into your subconscious mind. You can do this because your subconscious mind operates best in visual imagery.

When you are mentally rehearsing try and see things with your own eyes as if it was happening for real in the present tense. See it, hear it, feel yourself trading well, let the images be big bright and colourful and always keep it positive.

When trying to master mental rehearsal keep in mind the 4 R's of mental imagery:

Relaxation: A relaxed mind and body will help you to experience any emotions generated. It can help to use relaxation techniques prior to imagery training.
Realism: Make your imagery realistic so you can actually believe you are executing your skills in real-time.
Regularity: Spending between 3 and 5 minutes on imagery per session seems to be most effective with 10-15 minutes each day.
Reinforcement: Writing imagery scripts will help you plan the content and timing of your imagery training. This can really help reinforce what you are trying to accomplish with the mental imagery.

Take some time to incorporate these items into your trading until it becomes an automatic process that your mind carries out.

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