Earlier this week, one of my clients with the title “Head of Equity Trading” wrote exactly this sentence copied and pasted from his email: “i had another one of those traading days where i let my loss just go to its fullest, and had a really bad day.”

SO… how does a trader of that level end up in the position that he did? Was it that he hadn’t practiced? Was it that he hadn’t visualized?

He has traded for about 20 years. He has been at his current company, a financial institution I am sure everyone would recognize, for a few years now. I think you would agree that it is unlikely he earned that title while being a lousy or even so-so trader.

So what gives? As it turns out, there was another seemingly totally unrelated situation going on. It had to do with his brother and father. He had talked to them in the morning and the net result was that he felt helpless to impact a situation they were involved in.

His comment about his mistake was: “I just don’t get it. I was like the deer in the headlights and just let it go”.

Can you see the parallel? He felt helpless in one situation and acted helpless in his trade-gone-wrong. Before we talked, he had NO idea how it happened. He was afraid he would never overcome this albeit occasional mistake. That is, he was worried until we connected the contexts. See as it turned out, he could trace the beginning of making this mistake to the timing of the beginning of the particular family dynamic in-play.

Research shows that totally unrelated and even innocuous contexts can influence judgment. There is this connection IN OUR BRAINS between situations that isn’t fully understood yet – but it most definitely exists. When analyzing trading behavior and results, it really does pay to go beyond replaying markets, moves and results. Sometimes the aforementioned will get you where you want to be. Plenty of times however the answer to a pattern of mistakes has a good chance of not being in that type of data.

Once my client and I pegged the source of his behavioral mistake, he felt a sense of relief and a renewed confidence through knowing he understood why he did what he did. I submit that learning to do these kind of analyses is the only way a trader will ever consistently reach his or her truest peak performance.