Being the last in a line of 6 kids, my closest brother growing up (Mike) was 2.5yrs older. This translated into him being a lot bigger (and taller) than me.

In my early years, my parents would often go to the movies and leave us home. Back then, cable TV was not like what it is today. After 2pm, there was no more TV, and only 30 channels were available.

Movies were not as ubiquitous as they are today, so many of those would repeat. One such movie was ‘Rocky‘. Ever inspired by such flicks, my brother and I would take all the furniture in the living room, push it to the walls and create a ‘ring‘.

We didn’t have boxing equipment, so we’d dig into our winter gear – grabbing ski hats and two sets of snow gloves. Minutes later we were going 5-10 rounds.

The problem with this scenario was the massive height advantage my brother had. He could simply fire away at range before I could even make contact, let alone cause damage.

This translated into me getting hit first, taking punishment on the way in. I had to fight through before I could start to cash in.

I definitely got knocked down more than he did. But every time I got knocked down, something in me emerged more as the fights went on.

At first it was frustration. This then transformed into anger. However the next step wasn’t an escalation in this line of feeling (which would have been rage).

Instead, I started to embrace the challenge – embrace the fight. I would relish in my abilities to take punishment while keep fighting on. I had to get smarter, learn to endure, and fight through the obstacles.

Without a doubt, I lost many of those battles. But I was determined to get my damage in, and keep on fighting.

Afterwards we’d take off the ski gear, move the furniture back as if nothing had happened. Next in the routine was to look at our faces in the mirror – observing the damage.

None of us said much, we just appreciated these little battles, and whatever scars came with. Why do I share such personal sentiments?

Mental Toughness for Trading

From all the emails & comments I get: the questions, worries, and doubts from struggling traders, I think a strong dose of mental toughness would be a game changer.

This article is going to be a 250 cc shot to kickstart a change in your mindset, build up confidence, and help you see victory.

Before I give my key tips to helping you build mental toughness for trading (and life), I have to share this disclaimer:

I do not claim to be the pinnacle of mental toughness. I experience doubt, worry & fear. Sometimes in these moments, I crack, falter or fall. But I will get up & try again. Often times, my first reaction when things go badly, is to get frustrated. Next I get angry. Luckily, that fuse burns quick and transforms into a particular focus (which I’ll share later).

Disclaimers aside, let’s jump into building your own mental toughness gear to survive and thrive in trading and life.

#1 Coping Is Not the Endgame

There is one trade you can bet on being 100% accurate – that you will encounter obstacles, losses, and setbacks in life and trading.

Most of the trading psychology and mental strategies I see other ‘gurus‘ dish out like microwave psychology meals is to ‘cope‘ with such moments. And herein lies the problem.

“Coping by itself is not the endgame, nor an effective overall strategy for dealing with losses, obstacles & setbacks.”

It is a part of the strategy, but it is only one stage in dealing with mental, emotional or physical stress. You could equate it to treading water among crashing waves when you need to swim for shore.

This leads us to our next wilderness tool to survive and thrive in trading and life.

#2 Embracing the Challenge

The next part of building mental toughness is to embrace the challenge. This means expecting it as being a given, while preparing for it in advance.

Big piles of dog-shit will land right on the front door of our lives, often times when we least expect it. Being prepared will help you step over such moments.

Embracing the challenge = an understanding that discipline & hard work builds a successful mindset.

It means giving up any ‘victim mentality‘. It means the death of you saying such statements as ‘why me?‘, ‘if I only had this, I’d be successful…‘, or becoming religious during a losing trade.

It means not beating yourself down when you make a mistake or things go wrong, which only intensifies our negativity bias in trading, leading to more losses.

We have to be employing a positive mindset when our trades go south and life gives us a gut shot.

Embracing the challenge helps us bring a gun to a knife fight vs. those with a negativity bias. It also leads to the next key step in building mental toughness.

#3 Thriving on Adversity in the Face of Obstacles

Once we’ve embraced the challenges in front of us, we now have a steering wheel to turn this vehicle in the right direction. To complete the turn, we have to shift into a new gear, which means thriving on adversity in the face of obstacles.

I could have easily come up with excuses why I couldn’t beat up my brother. It would have been far more convenient to look for a way out instead of getting punched in the face.

But something inside me said ‘fuck this…I’m going to damn well land my share regardless of how much I take on the way in‘.

Thriving on adversity while facing obstacles flips the coin with our mindset and the blue-light specials peddled as ‘trading psychology‘.

It takes the situation and turns it on it’s head, meaning you now look for solutions instead of focusing on the problems. It eliminates any victim responses which only deflate your self-image, or ability to rally your forces when behind in the game.

What would happen if instead of saying ‘poor me‘, or making excuses in trading, you grabbed the charging bull by its sharp horns and said ‘I’m going to mount you on my wall when this is done‘?

What would that do to your mindset the next time an obstacle got in your way.

Every time you overcome an obstacle, you build trust & confidence in your self-image & abilities.

Every time you give an excuse for why you didn’t succeed, you deflate your self-image.

“Overcoming is the real currency of success.”

Start investing in that – of embracing your obstacles and using them to test yourself as you climb the mountain of success.

#4 Drop the Problem Focused Mindset

Our negativity bias is quite strong in our brains. How strong?

If we were to map out all the neural connections and real-estate in your brain, you’d have 500% more networks dedicated towards a negative bias vs. a positive one (on average).

You can read more about the negativity bias self-image and comfort zone here.

Focusing on the problems only activates this negativity bias even more. It does so via two predictable neurological responses:

1) Your brain will search it’s database for other problems that matched (or were similar) to the current experience

2) Your brain will become more likely to trigger the fight, flight or freeze response

Why does your brain do this?

Regarding the first problem (no pun intended), the brain is a pattern recognition machine. Every input it experiences will be referenced for similar data points in our memory banks.

Focusing on problems only re-activates these neural networks.

If you remember from my last article, I shared two key points about the brain and neuroplasticity:

1) Neurons that fire together, wire together

and

2) Passing mental states become lasting neural traits

What this means is if you continually reactivate the neural networks which stored your problems, you only make these stronger and more dominant (thus increasing our negativity bias).

This leads back to point 2 – whereby your brain becomes more likely to trigger the fight, flight or freeze response.

The primary part of the brain which activates this reaction is your amygdala, a little almond like structure of neural tissue near the middle of your brain, and part of the limbic system.

The amygdala is super fast to react to any ‘threat‘. The more you do this, the larger the grey-matter and brain tissue becomes. This only increases your propensity to react to said threats.

This is a major reason why every pip the markets moves against you creates a far greater psychological (& neurological) response vs. when the market moves in your favor.

It’s the basis behind every negative psychological bias you have, whether it be the recency bias, loss aversion bias, or pretty much any ‘bias‘ behind our bad trades.

Another problem with continually activating the amygdala is it actually reduces grey matter!

A triggered amydala takes us out of the PFC (pre-frontal cortex). The PFC is critical to analyzing the price action context, pulling the trigger when we need to, and making profitable trades.

Done enough times, and your hippocampus (helpful for regulating emotions and making calm/calculated decisions) will see a reduction in grey matter, thus making you more prone towards emotional (read: fearful, worrisome, doubtful) decisions.

In a few less words – set off the amygdala + fight or flight response, and you’ve lost about 10-20 IQ points. Good luck making profitable trades with that!

Hence drop the problem focused mindset as it will only increase your negativity bias and trading losses. The solution is the next tool in building mental toughness.

#5 Adopt A Solution Focused Mindset

Remember how I talked about your brain scanning the database for similar experiences when encountering a problem? A solution focused mindset by default bypasses the negativity bias.

This approach leads your brain to actively scan for solutions. It will look for either identical (or related) situations whereby you encountered the obstacle, yet found a solution.

This has the triple benefit of:

a) building up your neural networks for finding solutions,

b) reducing your negativity bias

c) adopting a positive mindset.

I’m guessing you can see the benefits of creating this trio above. One key thing to note is adopting a positive mindset means you are less likely to take a victim mentality in the face of adversity. It also helps to build up your self-image.

Focusing on problems only tells you what’s wrong with the situation – it doesn’t tell your brain what to do. Contrast this to a solution based mindset which specifically tells your brain what to do when you experience difficulties, losses or adversity.

Done enough times, you build a brain which is wired to solve, overcome and achieve. After many laps and repetitions here, you have laid the foundation for the sixth tool in building mental toughness.

#6 The No-Obstacle Mindset

NOTE: Before I jump into this next tool, grab a beverage + something to snack on as this is a juicy (but good sized) story.

In July this year, Aruna (my partner) and I taught the Singapore Seminar – Change the Way You Think, Trade & Perform at the Ritz-Carlton Millennia.

This was supposed to be a 2-day event. What ended up happening was a movie-like Us vs. the Volcano.

A week before the event we were in Bali, mostly relaxing and getting ready for the event.

The flight from Bali is only a few hours to Singapore.

The day of the flight was also the day before the seminar was to start, so we decided to fly out early, get to Singapore by lunch, and have plenty of time to do our final prep. Nature had other plans.

Getting to the airport early, we quickly find out our flight is delayed. The airline attendants said ‘you’re flying out today, there’s just a small delay‘.

I thought – Ok…2hrs gives us plenty of time to still get there well ahead of schedule.

While waiting, I started to notice during these 2 hours how the airport was getting more full by the moment. Pretty soon, the flight board was showing more and more flight delays (see below).

Bells going off in my head that something was wrong, I went back to the airline counter. What I found out was the worst news we could get.

Hundreds of kilometers west of us, there was a volcano. It wasn’t spewing lava, but it was ‘active‘ and puffing out huge plumes of smoke from the bowels of the earth. Although the skies looked fine, flights were still grounded as the smoke pillows ventured west…right towards our airport!

The real danger in flying with volcano smoke isn’t the visibility…it’s the ash getting sucked up into the engines, which then crystallize, and pretty much destroy the engine from the inside out.

The thing about it is – the airline attendants knew about the volcano the first time they told us of the delays, they just decided to not inform us of that fact.

When I came back the second time, I investigated what was really going on, and they finally told us why. Needless to say, I was furious as losing those 2hrs reduced my options tremendously. It was now the afternoon and no flights were likely getting out for the rest of the day, perhaps even a week.

My first response (like when I was a kid) was frustration…which led to anger…which led to me practically yelling at the guy (who was nice throughout the whole process, even though they f-d up in not telling us earlier IMO).

I was about to teach a 2-day seminar, with people coming from over 10 countries, one of them flying over 10,000 kilometers to be there.

This was more than just the money & reputation I’d potentially lose from cancelling the event.  It was about all those who spent their hard earned benji’s, taken off work, booked flights and hotels, which were now non-refundable.

How long was I frustrated, angry and feeling like I wanted to take someone out mafia style? About 1 minute. However, considering I’ve had an abundance of obstacles, problems and adversities in my life (some self-inflicted), I went into my general default mode – which is to look for solutions.

Because I’ve done this so many times, my mindset quickly resets and doesn’t see the obstacles, or get stuck. It works to go around, climb over, see through, or solve them…whatever it takes.  It is the same mentality Navy Seals have, and it is one you need to succeed in trading and life.

This is called the No-Obstacle Mindset. It means that no matter what the obstacle is, you see it for what it is – an illusion. It means you see the solution and all the steps in between that get you there right from the beginning. It means you actually see yourself solving the problem, and doing everything you have to to make it happen.

Back to the airport fiasco, the situation was quickly degenerating with the crowds growing by the second. There were literally news cameramen filming the situation inside the airport. So what did we do?

After quickly assessing the situation, we had to setup a better base camp. Through the tortuga paced internet, already strained by more users than it could handle, we booked a hotel room nearby.  Needless to say, rooms were going up fast (along with the price) by the second.

We then contacted our agent on the ground (Ivan Delgado) who works with FXstreet, and ironically, was going to the event. So now we were both in the same situation.

The reality was this – all flights east of the volcano were grounded. That means the nearest airport (which only flew domestic) had no flights as well. We simply couldn’t get out. The nearest airport was in Surabaya (Java), which was a 10+ hour drive by car.

I called the only local helicopter service, but he had a full book already, so no go there regardless of what price I offered him. There was only one other option – we’d have to wade through the Indonesian jungles, and jam-packed over-populated cities.

Ivan came up with a great plan and talked to his brother-in-law, a former truck driver who was part Jack Bauer-part Michael Schumacher. If the airlines told us at 6:30 am the next day all flights were grounded, we’d activate plan B and make the drive (which included a ferry to the island of Java).

Sure as sh!t, 6:30 am came, with the news all flights were grounded for the entire day. 30 minutes later, we had booked the last flight out of Surabaya to Singapore. However this was not the end of the adventure though.

To make the last flight out, we could only take 3 loo breaks, 2 of which had to be during gas refills. This plan B also meant we’d have to re-arrange the event with the attendees, catering and hotel till the next day since we’d only arrive at 2 am.

On top of this, we had to arrange for the hotel dry cleaning service ready to press our travel-wrinkled suits. At best, we’d have 3.5hrs of sleep for a 12 hour event. Somehow, we’d jumped over all the obstacles, and had an amazing event with the traders coming out completely different than how they came in.

Below is a photo of all the attendees (notice the blood shot eyes from no sleep with me – far left?)

Photo of Ritz Carlton in Singapore where we we were staying at.

Having a problem focused mindset would never have gotten us through this situation with flying colors (perhaps not even at all). It would have led to us being worried, fearful and complaining about what was wrong with the situation.

A solution based mindset was the only way we could have handled this, but there was one missing ingredient. We had to have the mindset of no-obstacle. We had to see the solution, and every step in between.

There was no space for doubt, which would only lead to delays, and we had no time to spare. Everything had to fall into place with dozens of small steps and decisions to make it work. It took everyone having a positive optimistic mindset that we could handle this situation.

The power of having a mindset of no-obstacle means you have the confidence, experience and belief there is nothing you can’t solve, figure out, or handle. Imagine how your trading process would be if you adopted this approach and made it the bedrock of your mindset.

In Closing

I’ve just shared with you what I’d consider to be a solid foundation in building mental toughness for life and trading.

This is certainly not meant to be the end of it, nor the last article I do on it.

However, the methods, strategies and models in here can completely change your brain, mindset and performance.

To recap, you learned how:

1) Coping is not the endgame, but just a small step in the process
2) To embrace the challenges which helps you expect, prepare and take them on
3) How thriving on adversity flips the equation on its head and helps you to look forward to obstacles
4) Why you need to drop the problem focused mindset as it increases your negativity bias
5) That the answer is to adopt a solution focused mindset so you only concentrate on what you need to do
6) How the no-obstacle mindset gives you a mentality which overcomes

Take on all the above, and you can re-wire your brain for success in trading and life. This is a very real thing.

Mental toughness can turn your mind, thoughts and actions from losing trades to making money.

It can give you strength, resilience and confidence to meet your challenges of trading head on, replacing your fears, doubts and worries.

It will put intangible weapons at your disposal, increase your confidence to take on greater challenges, and sharpen your mental edge to cut through almost any obstacle.

With that being said, have you been using coping as your only strategy?

How fully have you been embracing the challenges you meet in trading, and are you seeing obstacles as opportunities?

Do you focus more on problems or solutions?

Make sure to comment and share your thoughts below.

For those that want to discover the power of mental toughness, make sure to sign up for my Advanced Traders Mindset Course where we teach you how to specifically wire your brain for success and build a positive mindset.