You may be wondering how an entrepreneur and Financial Advisor ever became interested in the subconscious mind. I’ve told the story to friends a couple times and they generally find it amusing, although I can assure you, it was not. It was sweaty, heart pounding, stress-inducing torture. But it’s also informative and it was the singular event that launched my Monkey Brain journey (so by all means, enjoy this dark and soul-scarring story of my personal failure).
I will never forget that trade. I knew all the rules. I knew my set-up. I definitely knew a trade could go bad but if it did, it was alright as long as your rules protected you and you lived to trade another day. ………. (Excerpted)
Everybody was trading the Sugar contract at the time because sugar was being used more and more to make ethanol for gasoline and that was pushing the price up. By now, the price had gotten pretty high, but I was convinced it could go higher. I was going to trade a single Sugar contract, Long (meaning I wanted the price of Sugar to go up) and expected I could double my client’s money in a couple week’s time… maybe less. I actually had enough money to trade it bigger (two or three contracts), but I wanted to be cautious on my first-ever trade and not have a lot of pressure, so I decided to trade just the one contract. There was a technical pattern on the chart I liked, and if it broke above a nearby resistance level, I thought it was off to the races. I was waiting on an ethanol report that day, thinking that if it was favorable as I expected, that would be the thing that broke Sugar out and sent the price skyrocketing even further. When the report came out, it was sort of favorable, and Sugar starting inching higher, sort of breaking out, so I pulled the trigger on the trade.
Now, let’s pause for a moment here. There’s a whole lot of Monkey Brain going on just in that short description of how I entered the trade. The truth is, Monkey Brain was all jacked-up and excited about his first ever trade. Monkey Brain had decided he (I) was The Man! Monkey Brain was smarter than all the other monkeys (but also felt secure knowing he was trading the same thing all the other monkeys were trading)! In fact, MB had decided weeks ago that it was time for my own trade, it would be Sugar, and it would be Long. When it was time to decide “Is now really the time? Or maybe wait for later? Or maybe it’s not the right trade at all?” Monkey Brain was screaming… “Now! Now! DOOO IIIT!” All information was now being interpreted to support my already-made decision to make that trade. No information against the trade was being processed properly. Saying that Sugar has “sort of” broken out is the equivalent of saying “Sugar has NOT broken out”. But Monkey Brain was getting me moving, convincing me I should do what he’d already decided to do. My Intellect did try to creep in. The thought crossed that maybe I should wait for confirmation that it was breaking out. Intellect would have been cautious on the so-so report, but Intellect was totally in the control of Monkey Brain by this time and Monkey Brain wanted to GO! So MB convinced Intellect to see a so-so report as confirmation of what he had already decided to do. MB also got Intellect to believe that because the price on the chart was bumping the red resistance line, it was obviously about to break out, even though it hadn’t really done it yet. MB was pushing hard! He was excited, banging on that dopamine button in my head. Thoughts of how much money I would make filled my mind. This was going to be fun! But all those Monkey Brain Pushes (MBP’s) were not what taught me the lesson. I certainly didn’t notice them at the time and probably would never have noticed them had the trade gone well. It did not.
About 5 minutes after I pulled the trigger because the price nudged up to the trend-line I had drawn on the chart, it reversed and started down… hard. I didn’t freak out immediately. Prices were volatile all the time. This was normal. Besides, I had set my rule, my “Stop”, so that if the price broke down 15% from my entry point, I’d pull the trigger on a Sell, get out, and live to trade another day. I had a plan. Still… it sure was moving fast! ………. (Excerpted)
(Excerpted)……. I had to Sell! But I just knew it was going to reverse and go back up, just like it had after the last downturn. If I sold, I was going to be out of the trade with a ton of lost money, at just the wrong time. I needed to wait. So I waited… 8%, 10%. I was in agony. My heart was pounding and I was actually starting to sweat. I looked around, wondering if anyone could see the distress I was in. God, I hoped not! I was ashamed at how horrible it all was. How horrible I was! How could this be happening? Why hadn’t I just sold when it hit my Stop the first time? How could I be so dumb?! I finally pulled the trigger on the Sell order I had queued up two hours into the trade. With the leverage a Sugar contract has, I had lost 60% of my client’s funds. That was about twice what I had determined was the most money I would be willing to risk on the trade. I knew that anyone in the business could make an occasional bad trade, but this was a complete disaster!
I felt a massive sense of relief when the Sell order executed… the agony was finally over! And then I felt sick to my stomach realizing what I’d done. And then… I just went numb. I couldn’t understand what had just happened. It was like it had happened to somebody else, but I knew it was all me. All I had to do was Sell the minute it crossed my Stop. Why hadn’t I done it? All the other guys (they all happened to be guys at the time) were just going about their business and talking on the phone and yucking it up. None of them knew I was going through a personal, existential crises in my chair after having just lost 60% of my clients money in a little over two hours on my first-ever trade! I sat there feeling shell-shocked, not sure what to do with myself. I left early that day. I don’t even remember what I told the client or how they took it. What stayed with me was my own incompetence when I had been so confident. For the next couple weeks, I couldn’t shake what had happened. It seemed impossible that it had happened. I had known what to do. I had told myself to follow my rules and just execute the trade… and then I didn’t. How could that happen to me?! I thought about how emotional it all was. I started completely excited to be entering the trade, then became super nervous, then abject fear took over. But there was more. I was physically and mentally jacked-up! My heart was pounding. My mind was racing. I remember not wanting anyone to know what was happening as it all went against me… and I never told anyone later. I became incredibly indecisive in the moment, almost Selling multiple times only to stop myself again and again. I had a whole dialogue in my head where I kept telling myself reasons why I should do the wrong thing, even though I knew what the right thing was. The whole experience seemed crazy and overwhelming… and I was trading ONE Sugar Contract! I mean, I’m generally considered a fairly capable guy. And then I put on a Sugar trade for a single contract and I go nuts! It was clear there was more going on than I understood, so I determined I was going to figure it out. Thus began my long journey into the dark nether-regions of Monkey Brain.