Are There Monsters Lurking in the Stock Market’s Closet?

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When I was a youngster, say around six to seven years old, like most of my friends, I had an active imagination.

When bedtime came, my mother would always tuck me in, kiss me, turn out the light, and then leave my room, closing the door behind her. Once that door closed, then everything changed. My familiar room, my mother’s touch, all dissolved like a scene in a movie.5151

Darkness covered the room like a blanket.  Shadows from lamps and furniture formed ghostly figures. I pulled the covers over my nose, just as I did every night, and stared at the closet door. I stared at it because I was sure monsters lurked in that closet . . .  monsters that were sharpening their claws and getting ready to burst through that door and “get” me.

When I mentioned my childhood experience to my colleague and neuroscientist specialist, Diane Alexander, she grinned and said, “Your thoughts weren’t really your fault. You were merely exercising your brain’s natural tendency for survival.

Recent advances in the study of neuroscience have revealed that the brain is wired to be negative as a survival process. So, your closed bedroom door, the sudden silence, and the darkness that you knew would stretch through the night, all created fear in your mind and signaled to your brain that you needed to survive the “closet monsters.”

How does fear actually form? Like this: Your senses collect data from our environment. All that you see, hear, smell, touch and taste journeys through your body in the form of electric signals until they reach your brain. Most of the time, these signals head for the lower part of your brain, or the limbic system, which houses your emotions.

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Once your limbic system senses new signals, it assigns emotions to them.  Since, as Diane just commented, our brains are wired to default to the negative, if the limbic system senses it views as negative, then it creates thoughts of fear or anxiety.

Those fearful thoughts sink into the reptilian complex, and thrash around this part of your brain to decide how you are going to “survive.” Trouble is, the only options your trapped thoughts can come up with are instincts relating to “fight or flight,” and these options are highly limiting. Thankfully, with a little effort on your part, you can redirect your thoughts to escape the limbic/reptilian complex via an alternate route.

Atop your brain’s limbic system resides your neocortex. Think of this as the “C-suite.” This part of your brain is where you make logical, rational, insightful decisions. Limitations of “fight or flight” are lifted and your options spread wide and deep.

No closet monsters lurk here. So, when you re-route your thoughts away from the lower part of your brain and lift them to this level, you can view your world in a relaxed and fear-free state of mind.  And, that ensures you make the best decisions possible.

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So, here’s the challenge:  When your senses signal your emotions to transform into negative and limited thoughts of fear and survival–and you don’t want them trapped there–what do you do? How do you re-direct your thoughts to your “C-Suite,” where logic, reason and clarity reside?

74643Try this quick, yet powerful, solution:  Calm your mind with a slow breathing technique.  (No, this isn’t a “woo woo” technique.  It’s used by Olympic athletes and Navy Seals.)    The strategy is to consciously move your thoughts away from your problem, and instead, focus on your breathing.

To do this, relax your shoulders and take ten deep breaths, breathing through your nose and down into your gut. Concentrate solely on your breathing and on making your exhales longer than your inhales. Example: count slowly to three on your inhales and then breathe out to the count of five on your exhales. This breathing technique naturally slows your heart beat and calms your mind.

Once you’ve calmed your mind, you can move your thoughts from a fearful “survival mode” up to your neocortex, where clarity and insight reign. Then you can make smart decisions and take confident actions that keep you aligned with your goals and objectives.

Right now, as traders and investors, the “closet door” that we stare at is the stock market.  It’s fair to say that in recent months, we market players have faced a host of “monsters,” from Brexit fears, Fed interest rate anxiety, and the most volatile election in modern history. And, of course, the market lurched and reeled through them all, causing more than one market player to reach for the Maalox bottle.

150213143514-fear-this-not-that-780x439“The market can certainly feel like a hostile universe,” Diane agrees. “But if you allow it to, all of that negativity can seep into your mindset, affect your emotions negatively, and have an adverse impact on your portfolio.”

But we can change that.  We need not be held hostage by imaginary monsters.  We need not fear what’s behind the stock market’s “door.”

During all times in the market, whether bullish or bearish or in-between, we can learn how to calm our mind, and then elevate our thoughts to a higher level where logic and insight prevail.

Until next time,

keep green on your screen!

Toni Turner

Toni Turner is the President of TrendStar Group, LLC, is an accomplished technical analyst as well as a popular educator and sought-after speaker in the financial arena.

She is also the author of best-selling books: A Beginner’s Guide to Short-Term Trading, Short-Term Trading in the New Stock Market and Invest to Win: Earn and Keep Profits Bull and Bear Markets With the GainsMaster Approach, co-authored with Gordon Scott, CMT.