Don’t let your negative thoughts get the better of you!

According to the National Science Foundation, every single one of us has an average of 12,000 thoughts per day. They form a never-ending stream of words, images and judgments. Eckhart Tolle calls this phenomenon “compulsive thinking”—and it fuels an internal dialogue that stops us from being present in the moment. Without realizing it, we’re torn between our past and our vision of the future. In this state of mind, it’s obviously difficult to become grounded in what’s actually happening.

How does this apply to trading? Let’s say, for example, that an active trader is planning to buy XYZ securities. Instead of focusing on their plan (the present moment), their attention might settle on some transactions they’ve recently made (the past) or drift towards scenarios that might not even come to pass (the future).

Here are just some examples of this kind of internal dialogue:

“I’ve lost money on my last three trades. I should probably change tactics and cash out sooner than I usually do.”

“Why did I sell those shares? They just keep on going up, and now I’m missing out!”

“I hope this decision pays off!”

“My friend was right. I’m never going to be able to make a living off trading stocks.”

This type of thinking will keep traders from doing their best. We need to learn to ignore these kinds of thoughts, since they can affect our ability to make the right decisions.

When a critical problem is at hand, it can certainly be hard to stay present in the moment. In these situations, it can help to “defuse” your thoughts—that means stepping back and creating some distance from them.

Therapist Russ Harris believes that we’re often in a state of “cognitive fusion” with our thoughts: when this happens, our thoughts feel like the absolute truth and of utmost importance. His advice? Take a moment to gain perspective and see these thoughts for what they really are: a collection of sounds, words and stories that pop into our brains uninvited. This can help us recognize that our thoughts aren’t necessarily true. They’re not words of wisdom, and they’re not always constructive. A thought isn’t an active threat, and they’re it’s not an order that has to be followed. This process is called defusing your thoughts, and in his book The Happiness Trap, Harris suggests several different exercises we can use to help us uncouple from destructive thoughts. Here are two that work well.

“I’m having the thought that…”

First, let’s come up with an example of an intrusive, damaging line of thinking: “I’m incompetent”. Concentrate on this thought and believe in it implicitly, as hard as you can, for 10 seconds. How do you feel?

Now, try putting some distance between you and that thought. Start the phrase with, “I’m having the thought that…” and you’ll end up telling yourself, “I’m having the thought that I’m incompetent”. Spend some time with this new wording. How do you feel now?

Did you notice a difference? Adding just a few extra words can help create a little space between you and your thoughts, lessening the impact that it can have on your mental state.

“Naming the story”

Often, our most damaging thoughts are nothing more than variations on a theme. Statements like I’m so bad at day trading, I should find a new job and I’m not smart enough for this can all fall under the same story: “The story of the bad day trader.”

Just like in the previous exercise, you can learn to unhook yourself from this destructive pattern, just by using this formula to define and categorize your thoughts. You can tell yourself, “Oh! I’ve heard this story before, about the bad day trader” or “Here my brain goes again, telling that same old story about the bad day trader!”

Give these exercises a try! Just make sure your expectations are realistic. According to Russ Harris, transformations take both time and work. So don’t get discouraged if the process seems long. Stay one step ahead of your thoughts and don’t be afraid to tell yourself what you’re thinking... but maybe don’t do it in public!

  • Eckhart Tolle, The Power of Now: A Guide to Spiritual Enlightenment, Namaste Publishing, 1997
  • Russ Harris, The Happiness Trap, Shambhala Publications, 2008.

The author

Michel Villa

Michel Villa

Speaker, stock market blogger and trading coach