Neuro-Associative Conditioning

I doubt that there is trading course that exists today

that discusses neuro-associations, neuro-associative
conditioning, and the neuron itself, but it is
this neuron that is responsible for transferring the
thought that eventually became the action which
resulted in every trading mistake that you have ever
made. Not only trading mistakes, but every mistake
you have ever made in your life was once a thought
that was in the form of an electrical impulsive
moving along one of the hundreds of billions of
neurons within the brain. It deserves our respect and
it is profitable for you to understand why traders
repeatedly do that which they know is damaging
to them.

Neuro-associative conditioning is a topic that has

been heavily studied in the past few decades as
scientist learn and discover more about the brain and
the way it functions. In this section, we will only focus
on how we can apply and benefit from understanding
the way our brain operates and our neuro-associations,
with regards to trading the financial markets.

As always, let us first define the term neuro-

association, which means to associate with
something, neurologically. This is the branch of
science that deals with the way the nervous system
operates; mainly the brain. The brain consists
of neurons, which are specialized cells whose primary
function is to transmit nerve impulses, or information.
Every thought you have ever conceived, was
transferred by these neurons. If you had a thought of
closing a trade early, or if you had the thought to risk
more than what is prudent for your account size, this
information was transferred and relayed through these
specialized cells called neurons; simply put, they are
the messengers of information in the brain.

A neuron; the cell responsible for transferring every

wrongful trading thought that you have ever
conceived.
Why is this important to understand?
Because the key to changing the way we think about
trading is to first understand “how” we think. Only
through a proper understanding of the way we think
and operate as humans can we begin to understand the
proper steps to take in changing for the better. Every
trading mistake you have ever made first originated as
a thought in the brain, and that thought was transferred
in the form of an electrical impulse to a series of
muscle groups, which then resulted in an action;
whether that be an action that you later regret or an
action that you later approve. Every single trading
error you have made was once passed through a neuron
in the form of an electrical impulse. This neuron is the
messenger of these thought impulses; whether they be
positive and constructive, or negative and destructive.

Some of you who have been trading for years may

have experienced a “mind-freeze” moment, as it is
called Amygdala Hijack,where a trader finds
themselves in a trade or in a series of trades in which
the trader is only able to recognize the trading
mistake after the mistake has occurred. It almost
seems to be a blur until the episode is over and we look
back at our account equity and realize the catastrophic
losses we have blindly accumulated.

It would not be much help if we only realized a trading

mistake after it occurred; we need to catch the
thought before it is transferred through our neurons and
manifests itself into a physical action. Some of you
may get the urge to risk more than what is safe for your
account size; some of you correctly disregard the
thought and some of you incorrectly act upon it. The
true problem lies in the fact that the thought impulse
was generated in the first place.
Imagine if we associated the idea of hitting the
gas whenever we witnessed a red light?
Imagine if we associated the idea of hitting the
brakes whenever we witnessed a green light?
These are examples of false neuro-associations and
they can be extremely deadly. The same type of
methodology applies when trading the financial
markets.

So what does the brain immediately associate with

when a certain event occurs as we trade the
financial markets? What does the brain associate
with, neurologically, when a trader experiences an
invalidated trade setup? What does the brain associate
with, neurologically, when a trader experiences a
retracement in the market against their current
positions? What kinds of thoughts come to mind when
such events occur? These are examples of neuro-
associations and they can be positive or negative, and
the difference between the two can be the difference
between success and failure.
Let us study some common false neuro-associations
with regards to trading.
An Invalidated Trade Setup
AKA Business Expenses
As we have discussed earlier, there is no such thing as
right or wrong in the financial markets. There is only
either properly following your trading system, or not
following your trading system. If you followed your
trading system flawlessly and implemented your profit
system, then you did the correct thing, regardless of the
outcome.
However, most traders do not associate positively with
an invalidated trade setup. This can be extremely
dangerous and very expensive. For example, some
traders may engage in revenge trading, because they
are angry at the markets for not fulfilling their
expectations. These are the same traders who take
everything that the market does as a personal insult,
against them as an individual, and they do not consider
trading strictly as a business. Taking any action the
market does personally is the quickest way to wipe
your account clean.

When you are handling large funds, a simple

invalidated trade setup can take you down a
treacherous path where the trader throws all rules out
the window and unleashes a barrage of trades that are
neither at a valid macro-zone nor are they using a valid
micro-signal. This trader neuro-
associates negatively with invalidated trade setups,
and this negative neuro-association must be resolved
before they can ever achieve consistent results that
produce a steadily rising equity curve.
Negative Neuro-Association:
a personal insult; an attack on the ego; being wrong
and mistaken; a loser with losses; the market is against
me personally; trading is not for me.

Positive Neuro-Association:
every invalidated setup gets me closer to a validated
setup; invalidated setups are the cost of doing
business, and every business incurs expenses, and I am
blessed to be in a business where my expenses
are completely under my own control.

A Retracement
A retracement in the market where the market retraces
against a traders current market positions may expose
some flaws in a traders thinking process. They may
magnify the fears of a trader and retracements are a
major cause of trading errors in the financial markets.
Understanding these natural occurrences in the markets
is key to avoiding classic trading mistakes that occur
when the market performs a retracement. As we know,
a retracement is a completely natural part of the way
price moves; they are a natural and inevitable part of
trading.

Negative Neuro-Association: the market is taking

away my profits; the market is reversing against me; I
must bail out of the settle with whatever profits remain.

Positive Neuro-Association: the market may be

presenting an opportunity to add to my position; I
understand that the market will not move towards my
target in one straight line; I understand how markets
move and I expect retracements as a perfectly normal
and natural part of price movements.

A Losing Streak
Every trader on the planet will experience a losing
streak. Yes, even the best traders on the planet. The
only difference between a professional trader and an
amateur trader is in how they handle them.

Negative Neuro-Association: I am a loser; I should

risk more on the next one in order to recover the
losses; my system is not working and should be
changed immediately; the next trade will not be a
winner.

Positive Neuro-Association: I understand that based

on the laws of probabilities, it inevitable to experience
a series of invalidated trade setups; I will not change
my system until I see the results of completing the
entire series of trades; every trading system
experiences losing streaks, and the important thing is
to end up net-positive in the long-run; I am going
through the invalidated trade setups in order to get to
the validated trade setups; I understand that increasing
my exposure is a sure way to increase the size of my
losses, so I will keep my exposure constant or I will
lower it until I close one or several winners.

A Winning Streak
Every trader will experience a winning streak, and
these can be much more dangerous and destructive
than a streak of losses. From my years of experience in
trading, I have found that a trader usually experiences
their worst losses, after their biggest winners. For the
average trader, a series of winning trades is so
unexpected that they have no proper method or system
of dealing with them. They experience the highest
highs and that is the point where it becomes easiest to
experience the lowest lows. Expect winning streaks,
but also understand them and what your brain neuro-
associates with them as they happen.

Negative Neuro-Association: I am invincible and I

am the king of the markets; Risk does not exist and I
cannot be wrong, so I will increase my risk
exponentially.

Positive Neuro-Association: I understand that this is

where the dangerous feeling of euphoria may set in; I
understand that with this winning streak, an invalidated
trade setup becomes more likely as the winning streak
continues, and thus I will not increase my exposure.
A Missed Trade Opportunity
Every trader on the planet will miss trade
opportunities. There is a never-ending opportunity
flow in the markets, and associating negatively with a
missed trade can have dire consequences and can make
a trader feel inadequate and begin to question
themselves and their trading system in general. Study
your own neuro-associations with this occurrence and
question them in order to rectify them.
Negative Neuro-Association: I need to change my
trading schedule again; I missed out on making X
amount of money; I could have paid for this or that if I
did not miss that opportunity; I need to spend countless
hours on trying to find the perfect time where I never
miss out.

Positive Neuro-Association: I understand that missing

trades is an inevitable trading experience, as I
understand it is impossible to take advantage of every
opportunity in the markets; I was not destined to be
there at that time, and my focus is solely on taking
advantage of those trade opportunities that present
themselves during my trading session.

Breaking The Neurological Cycles

Hopefully by now you are beginning to understand the
concept of neuro-associations, and how they are
primarily responsible for the position that we are in
today. These are extremely powerful neuronal cycles
that, if done repeatedly, form a subconscious habit and
a certain type of wiring in the brain. This makes
the thought-action cycle much easier to execute,
whether it be constructive or destructive. It would be of
no benefit if we did not conclude the section by giving
you a method to break these destructive cycles
and change our neuro-associations, from negative to
positive.

Step 1: The Decision

The first step is to decide what is that you want out of
the markets, and the majority will say that they want
to extract consistent profits from the financial
markets. They desire a steadily rising equity curve,
with only very minor healthy drawdowns that are
only the result of natural losses and invalidated
trade setups that will inevitably occur within a series
of trades as we wire ourselves to think in probabilities
and not in certainties.

Step 2: Identifying The Barriers

The next step is to identify exactly what is it that is
preventing you from achieving that which you desire.

Is it a lack of a clear and concise trading system?

Is it a lack of a pre-defined profit system?

Is it a lack of proper risk management?

The causes of a traders inconsistency can be many, and

it is your job to clearly identify your own unique
barriers to achieving consistent profit extraction from
the markets. Usually, if the trader is honest with
themselves, the source of the problem is quite clear
and evident, if the trader is not in denial. The only
person you cannot lie to AND GET AWAY WITH,
is yourself.

Step 3: Neuro-Associative Conditioning

The next step is to associate massive amounts of
psychological pain to these destructive barriers and
bad habits which are preventing them from reaching
that which they desire. The trader must associate pain
to these destructive actions to the point of disgust.
They must learn to find it repulsive to not only do the
old bad habit, but they must find it painful and be
disgusted by the thought alone.

The trader must associate massive pain to not

changing these bad habits, and massive pleasure to the
idea of being able to change them and the potential
powerful results that the trader will encounter if and
when they do begin changing for the better.
Associating With Pain and Pleasure
We are emotional creatures. As humans, we are
genetically designed to seek pleasure, and avoid
pain. There is no denying or changing this fact. All we
can do is change what we associate pain to, and change
what we associate pleasure to. Every single thing
people do revolve around this fundamental concept; we
are constantly seeking ways to minimize pain and
maximize pleasure, whether that be consciously or
subconsciously.

For example, those who are obese and

overweight tend to associate negatively with the idea
of exercise; a completely false neuro-association.
They tend to associate massive amounts of pain to
exercise and healthy eating, and massive amounts
of pleasure to overeating and a lack of exercise.
Compare this with the healthy and fit individual, who
associates massive amounts of pain to NOT exercising
and to overeating, and they have wired themselves
neurologically to associate massive amounts
of pleasure to the idea of exercising and eating
healthy.
The only difference between a fit individual and an
obese individual are their neuro-associations about
the concept of health and fitness.

The same applies to chronic smokers. They associate

massive amounts of pleasure to smoking and those
deep relaxing inhalations, and they associate massive
amounts of pain to quitting. They may even believe
that it is impossible to quit, because of the massive
amounts of pain they associate to giving it up.
Compare this to the non-smoker; they associate
massive amounts of pain to smoking, and are
disgusted by it. They have learned to associate massive
amounts of pleasure to NOT smoking and it is almost
impossible to convince them otherwise.

The only difference between a smoker and a non-

smoker is their neuro-associations about the
concept of smoking.
The Most Difficult Part Of Changing
The most difficult step in this neuro-associative
conditioning procedure is interrupting the limiting
habit when it is only a thought within the conscious
mind. This is the most difficult step; noticing the
destructive thought itself and realizing its
destructiveness, and consciously taking the step to
interrupt the pattern and stopping the thought in
its place from expressing itself into an outward
action. If the destructive thought is acted upon and
becomes an outward action, then it is too late and you
have engrained the habit even further. Every time you
act upon a destructive thought, you are digging for
yourself a deeper hole and you are re-enforcing the
destructive thought-action cycle.

However, when you notice the silly thought itself

before it becomes an action, you are disrupting the
neurological pathway and that makes it much more
difficult to conduct the action the next time. The next
time you have the thought, you will notice it even
quicker and more strongly, and you will immediately
recognize it as destructive, and now it becomes even
easier to prevent the action from manifesting itself in
the first place. The more you recognize these
destructive thoughts, and the more you act upon
them by NOT implementing the destructive action,
then the more difficult it becomes to repeat it.

The neurological pathways in the brain work in a very

unique way. Unfortunately, we are not able
to remove them. However, we are absolutely able
to replace them, and replacing them is the key to
changing them. There must be something to take its
place in order to override an existing habit. Obviously,
if a trader suffers from the destructive habit of
mismanaging their exposure, then the only solution is
to replace that habit with the constructive habit of
properly managing exposure.

There is no other way. The destructive habits

cannot be removed; but they can be replaced if you
interrupt the limiting pattern and notice the
destructive thought itself and questioning it
extensively, before it manifests itself into an
outwardly action.
This is hard work, but it must be done and you must
work towards wiring yourself in the proper way so as
to achieve those desires which you claim to want to
achieve.

Hopefully, you have realized by now that trading

the financial markets is an endeavor that will take
you into the deepest parts of your soul. Trading the
markets is the most difficult line of work on the planet
because it is mental work, not physical work; the kind
of work that few people on the planet engage in.

Trading is essentially like looking into a mirror; there

is nobody but you and you alone. You are solely
responsible for every decision you make, and as you
make those trading decisions, you will begin to learn
more about yourself as an individual. Sometimes,
what we discover about ourselves may scare us. As we
discussed earlier, the markets are designed to exploit
every weakness in your character and it will
exploit all your inefficiencies as an emotional
individual, until you learn to rectify them.

It is absolutely crucial that we confront the realities of

our weaknesses, accept them, understand them, and
work immediately on ridding ourselves of them and
strengthening our character so as to callous our minds
so that we may be mentally prepared for any scenario
that the market will inevitably throw our way. Change
begins first with changing what our neuro-
associations; from negative to positive.
Although this may take a great deal of mental
effort, the strength of your effort will be in direct
measure of your results. The same click that makes
us $1 can be the same click that makes us $1
million. We do not need to click harder. Rectify
yourself and understand your own unique neuro-
associations, so that you may be able to take
advantage of the powerful income potential of
trading.

THANK YOU