Example of typical client equity curve

The Cocky Clanger | Mind Muscles™ Academy Practice Guide

Mind Muscles™ Academy Practice Guide

Mind Adventure: Create Your Personal “Cocky Clanger” to stay Confident and not Cocky
Problem: Hubris (Overconfidence)
Desired Outcome: Awareness and neutralization
Mind Muscles™: Hubris Tamer

Successful trading requires personal confidence that also is our downfall. Successful trading requires a strong drive to build the skills through the inevitable initial trading losses. Trading is one of the most challenging careers we can choose. And choose it we do, because it is an arena where we can put our intelligence and fortitude to the test. Trading allows us to excel without the drag of requiring others to approve of our decisions or even worse, sabotaging our success.

Trading also offers the potential to make our dreams come true. Since we can claim total responsibility for our profits we can also claim the total rewards. The rewards are indeed financial, but the more intense rewards are the fulfillment of our dreams both conscious and subconscious. Dreams can be powerfully attached to our deepest desires that resolve our deepest fears. Trading success can both alleviate the deepest fears and fulfill our deepest longing. Trading success is so powerful that it is dangerous.

Winning is an aphrodisiac. When we have a series of wins, all of the trials we endured, now seem to be worth it, because we have finally “got it.” This state of mind is triggered by the potential for our spoken and unspoken dreams. This feeling of euphoria is overwhelming. Even if we are aware of it, even if we know it is happening, it is so powerful that we have less access to our rational functions.

This is a typical chart of my clients’ equity curve when they come to me for help.

Example of typical client equity curve

The trader knows he can be profitable. The trader follows the system and makes consistent profits. Then something happens. Something terrible happens. They get cocky. And, they trade impulsively and start losing. This causes panic and they double down, revenge trade, cancel stops, over trade, make impulse trades, ignore their trading strategy, and trade bigger size…and the inevitable happens. Then inevitable not just happens, but over and over again.

Our brain chemistry changes. In the book, “The Hour Between Dog and Wolf,” John Coates noted a study of professional traders. Taking blood tests, they determined that our brain chemistry changes depending on our winning and losing streaks. Our brain actually changes how it operates when we have a series of winning trades. When we are in a losing context we are operating from a different brain than a winning context.

We become possessed. I have clients that I brought to their awareness their state of hubris after a lengthy period of trading success. They recognize it, say they are aware of it…and still let it rule their trading decisions. It is as if they become possessed by a force that they can’t control.

We can see cockiness in others. We read in the news about powerful politicians and business leaders who do incredibly self-destructive behaviors while in this state. It is indeed powerful. It is so powerful we lose contact with reality. The Greek word for this state is Hubris. The ancient Greeks considered hubris a personal flaw so dangerous it could provoke the wrath of gods. Hubris is like carbon monoxide…colorless, odorless, and tasteless. When we have it, we just feel great…we are unable to even recognize it. When we reach the Hubris tipping point, we think we are smarter than the markets and are ready for a fall.

In this fall we give back our hard-earned profits.

The Cocky Clanger Exercise


Here is how to break this destructive cycle. This is a self-guided exercise that will help build a break from prior neurochemical reactions.

Here is what you are going to do:

Find a comfortable quiet place. Take a few minutes to relax. Notice the noises and sounds around you. Notice your own body, feel how it is supported.

Relax and recall a time in your life when you were winning and on top of the world. It might be a moment in romance or business. It may be a moment when you experience a series of winning trades. Find an event where your overconfidence led to results that didn’t serve you.

Imagine the moment fully, recall all the vivid details. Relive the moment…hear the voices, see the sounds…now, notice your posture, the way you hold your head, your tone of voice. Anything that stands out. Notice your feelings and become aware of everything that rises to your consciousness. The more you imagine the details of this moment of hubris, the more effective this exercise will be.

Make a written list of those changes in your body and feelings and pick the three most significant. Now imagine being on top of the world again. Relive it fully and in detail. Review your mental list…and ring an alarm. Make up a sound that is an alarm that is special for this alert. Also, create a physical motion for an anchor. A good one is three tugs on an earlobe. Feel the three areas, hear the alarm, and do the physical action.

Take a breath, and come down from the victory mountain. Now, imagine the time when you were on top of the world again. Stand up, shake it off, take some deep breaths, and walk around for a few moments. Then, relive it in full detail. Notice the three responses on your list. Notice the alarm you created going off. Repeat this cycle three times.

From now on, when you are winning and feel so very confident, allow your internal alarm to sound. When it sounds, do your physical motion. Congratulate yourself on your victory. Imagine taking a victory lap or other form of recognition that works well for you. Give yourself recognition in ways that work for you. Feel all the good feelings. Exaggerate them as much as you can…then exaggerate them even more.

You have earned this feeling. Make it BIG! Pull that earlobe!

Take three deep breaths again.

Now REALLY or imagine taking the money out of your trading account and putting it in a savings account or retirement account. Imagine it there. Again, congratulate yourself. Ask a spouse or friend to create a ceremony around taking this money out.

The next day or trading session, acknowledge a job well done. Now, this is the punch line and value of the lesson.

Actually say this out loud.

“I have done well, now I am starting over. I am going back to basics. I am allowing the market to tell me what is going on. I am starting as a new trader. “

This exercise provides a “break state” from patterns that can be very expensive. You will notice that as you trade, if success continues, it will be easy to drift back into overconfidence. When you notice the “Cocky Alarm” going off, pull the earlobe, step back and repeat this exercise.

About the Author Rich Friesen

A veteran broker and floor trader, Rich went from the "worst trainee trader ever", to building one of the most consistently profitable options trading firms on the Pacific Exchange by training his traders using neuroscience. Rich also holds a Masters Degree in Clinical Psychology, a B.A. in Philosophy, and is a graduate of the Gestalt Institute in San Francisco along with Master’s training in Neuro Linguistic Programming (NLP).

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