FIND POSITIVE TRADING RELATIONSHIPS
Why do people hire a personal trainer to help them get into shape when they already know which exercises they should be doing? Why does a hedge fund hire a coach to work with experienced portfolio managers, when those managers know far more about the business than the coach? Why do elite athletes who have more skills than anyone they could possibly hire still rely on performance coaches?
An understanding of the psychodynamics of personal change makes the answers to these questions perfectly clear. In each case, hiring a coach or trainer takes an individual development process and turns it into an interpersonal process. This is one of the most powerful steps anyone can take toward accelerating their learning curves, but it is poorly understood. When you pursue a goal with other people, you add a new source of motivation to your efforts. We know from the research in psychology that the most important ingredient in counseling and therapy outcomes is the quality of the relationship between the client and the helper. This makes sense: when the helper is valued, the client wants to not only make changes for himself, but also for the counselor. You dont want to let down someone you value and whos working for you. If you decide to go to the gym every other day to work out and get into shape, its easy to skip a day here or there. But if you make that commitment with a close friend, you wont want to disappoint that person. Youre more likely to stick to your plans.
Making a commitment to change to others adds a layer of motivation and helps the other person motivate you.
Bring another person into change efforts and you will introduce a new source of mirroring. A good athletic trainer will provide you with feedback about how youre doing and will keep your motivation up, even as you seem to plateau in your efforts. One of the helpers at a diet center will help you track your weight loss, providing you with positive feedback when youre working the plan. Day after day, exposure to this encouragement makes it easier for you to generate your own encouraging self-talk. You become your own coach, in part, by internalizing the role of an actual helper.
To achieve this benefit, it is not necessary that your mentor be professionally trained or that your relationship with them be a commercial one. Alcoholics Anonymous is a great example of a peer organization in which experienced members aid newcomers. The group meetings provide a supportive environment for change; the slogans and readings provide a shared set of beliefs and commitments; and the relationship with a sponsor provides the motivation of working with someone who cares about your life. The net effect is to mirror a new identity for the participant: an identity as a recovering person, not simply that of a failed addict. As a trading coach, I work hard to take money out of the equation with the traders and portfolio managers I work with. I routinely receive phone calls and e-mail from traders who update me on their progress. I wouldnt think of billing for that. Thats not because Im an altruist; its because I want to emphasize that this isnt simply about the money. I want no impediments to a trader calling me, and I want the trader calling me because I care about what happens to them, not because I want to generate a billing. For me, its about the relationship and doing everything I can to aid the traders happiness and success, and my hope is that it becomes that way for the traders as well. Frequently, my motivation to see the trader succeed carries him through the rocky periods of self-doubt. Its easier for me to see his strengths than it is for him at such times.
A good coach is one who never loses sight of the best within you.
As your own trading coach, you dont need to hire someone like me in order to make meaningful change or to extend your change efforts to an interpersonal context. Rather, you can maximize your efforts at self-development by creating your own performance teama group of like-minded, mutually concerned peers who help each other. If I were going into full-time trading, one of my first steps would be to scour blog comments, forum postings, conference attendees, and similar gatherings of traders to find people who trade my markets and take trading seriously. I wouldnt need clones, just traders who are compatible with me in their trading instruments and time frames. I would then reach out to form what I call virtual trading groups: a group of peers who trade their own capital, but freely share ideas and help one another. The group would have to be chosen carefully, and all participants would have to share their trade ideas and trading results completely freely. In such an environment, the group members could cross-fertilize each others views, support one another during difficult periods, and learn from one another. A particularly valuable function within such a group would be peer mentoring, similar to the mutual assistance within Alcoholics Anonymous.
StockTickr has been active in facilitating trading groups and communities, with an eye toward improving performance.
Even if you just find one or two supportive peers to share ideas and results with, youve taken an important step to create a fresh, interpersonal context for the changes youre trying to make. If you choose your peers wisely, they will challenge you, support you, learn from you, and teach you. Because you value them and dont want to let them down, youll be more likely to stick to your preparation, discipline, and goals.
A little-appreciated piece of psychological wisdom is to find social contexts to be the person (trader) you want to be. Over time, the feedback and responses from others will mirror the best of you to you and that ideal self will become an increasing part of you. When youre your own trading coach, you dont need to do everything yourself. A cardinal principle underlying the psychodynamic framework is that the best changes are the result of powerful, emotional relationship experiences.
Your assignment is to find just one person to be part of your team: someone whose developmental efforts you can support, and someone who will support your own. Out of that relationship may spring many morea network of dedicated professionals mentoring and motivating each other. When you turn trading into a relationship experience, you gain role models, become a role model, learn from others, and benefit from teaching others. You add fresh ways to experience your strengths, even as you build on them.
Online trading rooms are excellent venues for meeting like-minded traders, and they can be powerful learning tools. Several long-standing ones are Linda Bradford Raschkes trading room, which emphasizes technical trading across multiple markets; the Market Profile-oriented Institute of Auction Market Theory room run by Bill Duryea; and the trading room run by John Carter and Hubert Senters. Also take a look at the Market Profile-related educational programs run by Jim Dalton and Terry Liberman as possible venues for connecting with like-minded traders. Two well-known trading forums are Elite Trader and Trade2Win. Both can be ways of sharing information with other traders and connecting with peers. For those developing trading systems, the community that has developed around the TradeStation platform is worth checking out. Indeed, if you have a favorite trading platform or application, connecting with others who are using the same tools can be quite valuable. Market Delta runs educational programs for users and maintains a Web presence for users, as does Trade Ideas; these are two trading applications Ive found useful.
An important insight from psychodynamic psychology is that our defensesthe ways we cope with the pain from past patterns of conflictcan take a physical manifestation. Consider a trader who is caught in a losing position. He watches, tick after tick, as the trade grinds against him. Gradually, he becomes tenser: he hunches over the screen, tightens his neck and forehead muscles, and grips his mouse tightly. This physical tension can be seen as a defensive strategy. This strategy cuts off other, threatening physical and emotional experiences. Perhaps the trader would love to yell and curse, but is afraid to lose control. Perhaps the trader just wants to cry, saddened by a series of needless losses. Not wanting to seem weak, he holds back the tears with his tension.
There are many other physical manifestations of defense. Consider the trader who is conflicted about acting on a well-researched trading signal. As his anxiety mounts, he tells himself that the market is too uncertain and he walks away from the screen, only to find that his signal was valid after all. His avoidant defenseleaving the situationtemporarily defuses his nervousness, but it also keeps him from figuring markets out and acting on opportunity.
Still another physical defense occurs when traders act out of frustration, pounding a table, throwing their mouse, or cursing loudly and blaming unseen others for their losses. By venting their feelings, they avoid introspection and self-responsibility. Their defense is against the guilt and the awareness that they have been hurting their portfolios.
Often we use our bodies to keep our feelings out of sight, out of mind.
One of my subtle defenses is that, when I sense a position isnt going my way, Ill begin a frantic scan of information to validate my idea. Of course, Im defending against the feeling of being wrong and Im looking desperately for reasons to stay in the trade and undo the loss. This reaction generally makes the situation much worse. Ive learned that if Im behaving frantically in a trade, theres usually good reason for my feelings and I need to listen to them.
Recall that in psychodynamic theory defenses are coping strategies that protect us from the emotional pain of past conflicts. One of the most basic defenses is repression: keeping thoughts, feelings, and memories out of conscious awareness so that they cannot trouble us. The problem with repression, of course, is that a conflict repressed is a conflict that remains unresolved. We cant overcome something if we remain unaware of its presence. Many traders use their bodies to repress their minds: their physical tension binds them, restricting the physical and emotional expression of feelings. Ive met traders who were quite tight physically and yet who had no insight into the degree and nature of their emotional stresses. In an odd way, getting tense was their way of coping: they were always mobilized for danger, tightly keeping themselves in control. It is difficult to stay in touch with the subtle cues of trading hunchesthe implicit knowledge we derive from years of pattern recognitionwhen our bodies are screaming with tension and even pain.
In your self-coaching, it takes more than a willingness to interrupt these defensive patterns to make the most of them. What is also needed is the ability to focus on the feelings being defended against. The questions you want to ask yourself are: What feelings am I holding off when Im tensing my muscles? and What am I trying to avoid by blaming others or by walking away from the screen? The idea is to hold off on that defensepurposely relax the muscles, turn the focus inward, stay in front of the screenand simply experience the feelings that are threatening.
In psychodynamic work this is known as facing or confronting ones defenses. In counseling, for example, a client might begin talking about her painful relationship experiences and then suddenly change the topic and begin talking about her children and how they are doing in school. I might gently point out the change of topic to the client, explaining that its perhaps easier for her to talk about her children than about herself. She then resumes discussing her relationship, and new informationand a flood of feelingscomes forth, followed by memories of her bad relationship with her father. Breaking through the defenses leads to an emotional breakthrough: she becomes aware of suppressed and repressed feelings and their depth.
Psychodynamic therapists are quite familiar with this phenomenon: when you get in touch with repressed thoughts, feelings, and impulses, the result is a fresh emotional awareness of your situation. Your perspective changes when your emotional state and awareness change.
This shift often leads to new insights and new inspirations for dealing with difficult conflicts.
When you feel in new ways, you often see in new ways as well.
This emotional work can be conducted effectively through guided imagery. If you vividly imagine a market situation that leads you to tense up or lash out in frustration, you can reenter your frame of mind at that time and see what it feels like to not engage in those defenses. Very often a different set of feelings will emerge in the situation: ones that you hadnt been aware of. For example, when you refuse to shout and blame others, you may find that you feel saddened for yourself, pained at your losses. This frees you to address the pain and support yourself, rather than bury the feelings beneath a show of anger.
Enhanced emotional awareness can lead to a feeling of empowerment, not greater distress. A good psychodynamic counselor or therapist will challenge our defenses, not letting us get away with the various strategies we use to keep difficult feelings at bay. What results is awareness that the feelings weve been avoiding are not so devastating after all. Perhaps at one time in life, when we were young and more vulnerable, we couldnt cope with those feelings and had to do our best to erase them. Now, as mature adults, we dont have to run. Feeling our most threatening emotions and seeing, at the end of it all, that we had nothing so terrible to fear after all is a tremendously powerful and empowering experience.
So what are you running from? Think of your worst trading patterns as defensive maneuvers: actions youre taking to ward off emotional pain. Then, when you refuse to act on those patterns, just sit with the experience and see what you feel. See if you can find a different way to handle that feeling. Very, very often, beneath our impulsive trading, our anxious avoidance of risk, our outbursts, and our mismanagement of risk are efforts to protect us from a painful emotional experience. Once you find that experience and contact those feelings, you find theres nothing to run from. You can handle loss, fears of failure, and disappointment. As your coach, you only need to prove that to you.
Massage can be an excellent tool for reducing physical tension, but also for learning about your bodys pattern of tension. When you become more aware of your body, you can catch yourself tensing muscles and restricting your breathing and then make conscious efforts to relax. When you relax in this manner by loosening muscles and deepening breathing, you are opening yourself to emotional experienceand new ways of handling your feelings.