Turning your trading around (part 3)
Part Three: Changing Problem Patterns
In the first
article in this series, we took a look at the psychological difficulties
that beset traders and noticed one common ingredient: a perceived loss of
control.; The ability to feel in control of one’s fate–even as one is
struggling–is essential to making a comeback from adversity.; The Austrian
psychiatrist Viktor Frankl had started writing a book, “The Doctor and the
Soul“, in 1940, only to be imprisoned in a Nazi concentration camp in
1942.; He hid his manuscript by sewing it into his coat, but it was
discovered in Auschwitz and thrown away.; For three years Frankl survived
starvation, severe illness, brutality, and wrenching uncertainty by holding out
hope for his release (and his reunion with his wife) and by recreating his book
with scraps of paper.; Holding a goal firmly in mind and focusing on the
modest degree of control he possessed over reaching that goal, he proved
Nietzsche correct:; “He who has a why to live can bear almost any
how.”; The why–our sense of purpose–is a powerful tool in making the
most of the control we do have.
The second
article in the series pointed to an important element in gaining control:
the realization that our problems are patterned and that many seemingly diverse
problems boil down to a single pattern recurring across life situations.;
These patterns are typically acquired during difficult emotional times, as
attempted (and often initially successful) coping strategies.; Once
learned, however, they take on a life of their own and repeat themselves in new
circumstances where they are less appropriate.; Adopting perfectionist
self-expectations, for instance, as a way of avoiding conflict with an abusive
parent might have worked well during childhood years, but now interferes with
happiness in trading and career development.; Recognizing one’s patterns
and discovering the ways they manifest themselves in different circumstances is
the first step in the change process.; Very often, this recognition is
followed by an interruption of those patterns–a refusal to keep doing what
isn’t working.; While this in itself does not replace dysfunctional
patterns with more constructive ones, it does reduce distress and reinforce the
all-important sense of control.;
Accelerating The Change of Problem Patterns
Years ago, it was assumed that problem patterns would take a long time to
change, given that they had formed over a period of years.; More recently a
collection of methods known as brief therapies has shown that a wide range of
patterns can be changed in a matter of days or weeks.; One element common
to these therapies is that they rely on experience and learned skills rather
than talk with a therapist in the creation of change.; Indeed, one reason
that they can accelerate change is that they exploit hands-on techniques that
can be practiced from day to day.
Several elements of brief therapies are helpful to traders seeking to change
their cognitive, emotional, and behavioral patterns:
- Focus – Brief therapies seek change in one pattern at a time,
rather than trying to make multiple changes or overhaul entire aspects of
personality.; Very specific patterns are targeted for change; then the
process moves to other patterns if needed.; Thus, for example, traders
might work first on techniques for reducing anxiety and then later learn
skills for changing negative thought patterns. - Structured Learning – Change begins by learning and rehearsing
skills away from problem situations and then progresses through gradual
application to real-time stresses.; For instance, a trader might learn
and rehearse a cognitive method for identifying unrealistic worries,
challenging them, and replacing them with more realistic appraisals.;
First this method would be applied to imagined situations through the use of
guided imagery; then it would be applied to progressively more difficult
situations at home and in trading. - Use of Homework – Each skill learned is practiced between meetings
until it becomes familiar and automatic.; This practice begins with
imagined situations and progresses to challenges encountered in daily
life.; Very often, as part of the focus and structured learning,
homework assignments will target very specific aspects of patterns.;
For instance, a person who is trying to stop smoking might work on not
smoking after meals, using techniques to handle cravings that are unique to
those situations.;; - Mastery -; Traders don’t work on more difficult aspects of
patterns until they have mastered simpler ones.; The idea is to create
a sense of mastery, so that individuals can once again feel in control of
their lives.; A skill is first practiced and mastered in the office
before it is assigned as homework; it is first applied to situations in
imagery before being applied to real life.;
From the above, you can see that these are techniques for accelerated
learning.; Brief therapies are effective because they create powerful
learning experiences that are drilled and internalized.; By working on
problem patterns day after day in a structured learning environment, people can
change lifetime patterns with remarkable speed.
Bob, The Frustrated Trader
The beauty of these methods is that they readily lend themselves to direct
applications to trading.; Let’s take the example of Bob, a trader who has
made little money in the past year after a profitable 2004.; As the market
has become less volatile, he has found it difficult to adjust his expectations
accordingly.; Consequently, he finds himself overtrading, making money and
then giving it back when nothing is happening in the market.; This has led
to considerable frustration, which in turn has fueled further overtrading.;
By the time he seeks help, he feels completely out of control, ready to give up
entirely.
It turns out that Bob had a mixed relationship with his father, a highly
achievement-oriented athlete who encouraged Bob to excel in sports.; Bob
played a number of sports in high school, but never excelled.; He often
felt that he did not meet his father’s expectations, and he resented his
father’s efforts to motivate and improve him.; As a result, the latter part
of Bob’s high school career was marked by frequent arguments and one big blowup
in which Bob left home and lived with relatives for several weeks.
When I suggested that Bob was still fighting his father–only now it was a
“little father in your head”–my observation made sense to him.;
He realized that he was driving himself in his trading the way his father drove
him in sports.; His inability to meet his expectations in the past year led
him to talk to himself the way his father talked to him.; “Do you
really want to continue living out your problems with your father?” I asked
Bob.; “You left home for a reason.; Maybe now it’s time to leave
that little father in your head.”
We started with a simple exercise in which Bob simply identified all the
times during the day when his internal father took over.; This was our
focus.; It became clear that Bob’s negative self talk occurred primarily
when he was frustrated with his trading results.; As with sports, it
occurred during competitive situations in which Bob failed to win.; Our
structured learning began with mental rehearsals of frustrating situations in
trading: missing out on profitable trades, having the market reverse against
winning trades, taking losses, ending the day in the red, etc.; Each time
we vividly imagined the negative scenarios, Bob imagined his father berating
him–and then imagined himself refusing to accept the criticism and standing up
for himself.; We did not assign the mental scenarios as homework until he
mastered them in the meetings with me.; We also did not tackle
visualizations of highly frustrating situations until Bob could keep his cool
and control his negative thoughts while imagining less stressful events.;
Every meeting and each homework assignment was structured to generate
experiences of mastery.
Eventually, we took the techniques to real-time, when Bob used his methods
for interrupting negative thoughts and challenging his internal father while
trading.; Dozens of experiences with imagined situations and routine home
frustrations helped prepare him for the inevitable frustrations of
trading.; By the time he applied his new skills and outlook in real time,
he had already had many success experiences from our earlier work.; This
confidence was invaluable in tackling situations that formerly had seemed beyond
control.
Conclusion
All of us have learned to deal with life challenges, and some of the ways of
coping that we learned now interfere with our happiness and success.; This
doesn’t mean that we are mentally ill, and it doesn’t mean that we cannot regain
control over our lives.; Just as negative patterns can be learned–and
overlearned–we can create intensive learning situations to instill new, more
positive patterns.; What keeps negative patterns alive is our unwillingness
to confront our worst fears.; Bob overcame his pattern because he was
willing to face frustration again and again–in imagery and real life–until he
had completely silenced his father’s critical voice.; Facing our greatest
sources of fear and distress–but with new skills and a new perspective–is the
essence of brief therapy.; If Lance Armstrong can retain his sense of
purpose in the face of late-stage cancer and Viktor Frankl can retain control
over his life in a concentration camp, no trading situations need dominate our
lives.; We can learn problem patterns, we can unlearn them, and we can
learn new, positive patterns.; With the help of brief therapy innovations,
the unlearning and relearning can happen more quickly than ever.
Brett N. Steenbarger, Ph.D. is Associate Clinical
Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical
University in Syracuse, NY and author of The
Psychology of Trading (Wiley, 2003), which applies brief therapy
principles to the challenges of trading. Most recently, he has co-edited The
Art and Science of Brief Psychotherapies (American Psychiatric Press,
2005), an overview of short-term approaches to behavioral change.; As
Director of Trader Development for Kingstree Trading, LLC in Chicago, he has
mentored numerous professional traders and coordinated a training program for
traders. An active trader of the stock indexes, Brett utilizes
statistically-based pattern recognition for intraday trading. Brett does not
offer counseling or commercial services to private traders, but maintains an
archive of articles and a trading blog at www.brettsteenbarger.com
and a blog of market analytics at www.traderfeed.blogspot.com.;
He is currently writing a book on the topics of trader development and the
enhancement of trader performance.