Why Great Traders Don’t Choke ‘n Go Broke

Article by: Matt Miller, FxST Certified Trader www.forexsuccessfultraders.com

What is the difference between choking and panicking?

Many struggling Forex traders have found an unusual solution, applying the lesson’s in  Malcom Gladwell’s best seller “What The Dog Saw” and “Outliers”.

Many traders may be more familiar with the “10,000 hour rule”, where Gladwell shattered the myth of natural born talent, and elevated the “power of action” as the key to real talent and success.


What many traders miss is applying the real lesson that defines successful traders – it is the difference between the “one hit wonder” and champion who can turn defeat into fuel for future glory.

At the FxST Certification School we call this failing forward, where mistakes become building-blocks for consistent and profitable success.

Unfortunately, the typical trader often does not have an effective learning strategy to guide their development.  The mistake is measuring success by only counting wins – this is called “one-dimensional” success.

A very slow and painful way to becoming a successful trader.

At FxST Certification School, graduate students learn the secret of classifying losing and winning trades as successful trades.

In other words, good trades can be both winning and losing trades. The first step for many traders is to understand the difference between choking and panicking to make this distinction.

How Typical Traders Panic

When we first begin learning processes, like trading Forex, we learn through simple repetitive motions.  Sometimes the trader talks himself through different strategies, or walks through all the signals and indicators and then takes a position, occasionally even doing the entire process audibly.

More and more the trader becomes quicker at deciding and executing trades.  Eventually almost the entire process becomes internalized.

This is what researchers call implicit learning.

Conversely, explicit learning starts with theory.  In explicit learning, the student or subject is told in advance what the material to be learned is, and then walks themselves through the process. So in other words the student gets the theory before the practice.

Unlike implicit learning, where the trader enjoys the activity of trading without theory, they discover patterns by themselves and practices it. This is what we call Level 3 Learning – Building Understanding vs. Memorizing the mechanics.

Flipping the Switch

Digging into the Forex analogy more, when we first learn to trade either we take the painful and expensive long drawn out process of learning by ourselves.

Alternatively we recommend traders to find a trading community or mastermind group to accelerate the learning process.

During the initial phase, as stated above, we are extremely slow and meticulous with all of our executions and positions.  Eventually most of these actions become internalized and the process time decreases exponentially: this is often known as muscle memory. So how can this ever work against the trader?

In times of high stress, people often flip flop unknowingly from the implicit to the explicit.  That is what it means to “choke.” Choking is thinking about it too much: it is a loss of instinct. In other words I like to call it “Trying to hard”.

Understanding how “choking” starts can provide a trader a huge learning opportunity. Specifically full-blown “choking” is preceded by a series of small mental activities or self-talk:

  • Second Guessing (ie. missing entry point)
  • Conscious Awareness (ie. over analyzing)
  • Trying To Hard (ie. over trading)

The actual skill here is knowing when to simply step away when you are falling into the “Choking Zone”.

Panic, however, is an entirely different scenario. In the moment, the Trader’s focus narrows.  People fall on their most basic instincts when they panic: stress wipes out short term memory.

Precursors to panic include:

  • Overwhelming Fear (ie. outside comfort zone)
  • Increased Confidence (ie increasing without explicit skill)
  • Projecting Wishes (ie hoping, wishing, praying…etc)

All 3 of the precursors to panic result in a very narrowed vision which results in self sabotage trading.

Panicking is what we consider conventional failing.  It makes sense to most people because we have all panicked at one time or another.

Choking is most difficult for the trader to overcome because it requires removing all extemporaneous factors.  The trader who chokes becomes inundated with stimuli not only from the current market movements, but from his desire to increase his returns to a certain level, or make enough pips that he can brag about it on his favorite Forex forum.  It is the ability though to overcome these factors that create the Total Trader.  To quote Gladwell:

“We have to learn that sometimes a poor performance reflects not the innate ability of the performer, but the complexion of the audience; and that sometimes a poor test score is the sign not of a poor student but of a good one.”


Distinction matters. Trading is a skill that needs to grow and develop. You can defy Malcolms’ “10,000 hour rule” with an effective learning strategy and well defined Forex business plan. If you haven’t already downloaded it I highly recommend you check it out in a Live Preview.


To Your Success,






p.s. If you are on Facebook, join the Forex trading conversation on our FxMastery Fan Page now with over 10,000 Fans!

facebook comments:

to “Why Great Traders Don’t Choke ‘n Go Broke”

  • Sam on November 6, 2011

    I can really associate with this article as I’m sure many other traders have experienced some of the same issues.
    Very well written piece, keep these articles coming.

    • Matt Miller on November 7, 2011

      Thanks Sam! Yea I think at some point traders of all skill level can associate themselves with these scenarios. The key is to recognize and distinguish what exactly the problem is and is it something you can learn and grow from or is it something that needs to fundamentally change in your trading. Had a lot of fun writing this and was influenced a great deal by other comments and feedback. Thanks for stopping by Sam!

  • jim d on November 7, 2011

    Interesting article Matt, keep them coming

    - Jim

    • Matt Miller on November 7, 2011

      Thanks Jim glad you found it intriguing! Had a lot of fun writing this one!

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