FIVE BEST PRACTICES FOR EFFECTING AND SUSTAINING CHANGE

The first two years of my career as a psychologist, I worked in a community mental health center, helping individuals, couples, and families with the full array of emotional disorders, from depression to drug abuse. The following year I shifted my practice to student counseling at Cornell University, which afforded my first opportunity to work with a relatively healthy population dealing with normal, developmental issues. I then took the community and student experiences to Upstate Medical University in Syracuse, New York, where I coordinated the counseling and therapy for medical, nursing, and other health sciences students and professionals for 19 years. It was in this latter setting that I learned to apply brief therapy methods to the challenges of young people who were in high-stress, high-achievement occupations. That experience would prove invaluable to my work with traders in the financial markets.

During my time in Syracuse, I met on average about 150 students a year for about eight sessions each. Multiply that times 19 and you have a sense for the changes Ive seen happen and not happen. The shining successes, the disappointing failures: all stand out in my mind as if they occurred last week.

When youve worked with that many people over the course of a career, you develop a good sense for change processes and what makes them click or stall. It doesnt matter if youre working with a victim of abuse in the community, a student with test anxiety at an Ivy League school, or a medical student dealing with the first loss of a patient. Change has a particular structure and sequence; there are factors that speed it up and those that impede it. Below I share five of the most important change elements that affect my work as a trading coach. When you harness those elements, you will be well positioned to succeed in your self-coaching:

1. Timing and Readiness. Timing is everything, in psychology as in trading. The research of Prochaska and DiClemente suggests that people are most likely to make changes when theyre ready to make changes. Many times were conflicted about change; were not really sure that we want to abandon old ways. I talked with a trader recently who lost much more money than he should have (and than his plan called for) because he simultaneously traded three positions with full size when those positions were highly correlated. He was wrong and he blew out. But when we reviewed the unit sizing by trade idea rather than simply by position, it was clear that he wasnt sure he wanted to make smaller bets. He was upset because he was wrong on the idea, not because he had violated risk-management discipline. My job was then to help him become more ready for the change he needed to make, just as an alcohol counselor must help an alcoholic become more ready to commit to sobriety. You will change when youre ready to change, and youll be ready to change when you recognize that you need to change. As we saw earlier, by becoming more emotionally connected to the consequences of our behavior, we cultivate that need to change.

2. Ready, Steady, Go. One of the traps that eager traders fall into when

they start coaching is that they want to make many changes all at once. As a result, traders overload themselves with too many goals, water down their focus, and never adequately follow through with any of them. If you have a list of five changes to make, select the one that youre most ready to make (as noted above): the one that youre most committed to taking action on. Work on that one goal intensively and daily until you make and sustain significant progress; then move to the next change. The momentum from your success with the first effort will carry over and help your work with the others. If you begin with a goal that you should work on, but arent fully committed to, youll stall out on your entire coaching effort. Keep your work doable, but keep it steady. Build momentum and success, and that will help with your later change efforts

When you coach yourself, focus your efforts and let one success fuel others.

3. Double Down. When you first make a desired change, dont let up.

Rather, focus on what you did to make that change and redouble your efforts. Make your goal to sustain that change. All too often, traders let up once they make an initial improvement. Thats like hurting your opponent in a boxing ring and then not moving in to finish him off. You want progress to double your motivation, not let your bad habits off the hook. Weve seen that the enemy of change is relapse: all of us too easily fall back into old patterns if were not making conscious and sustained efforts to build new ones. The key to change is relapse prevention: repeating new patterns so often that they become natural to us. Any change worthy of pursuit is worth repeating 30 times in 30 days. In Alcoholics Anonymous, a committed new member will attend 90 meetings in 90 days; bring the body in and the mind will follow is the slogan. Make the change consistently enough and it will be your change.

Successful coaching means working as hard at maintaining changes as initiating them.

4. Stay Active. The research literature in psychology finds that change

is most likely to occur when we are active in its pursuit. That is, we change by enacting new patternsby doing new thingsnot simply by talking about change or thinking about it. I often joke that traders approach coaching like many people treat church: they go once a week to feel virtuous and forget about it for the next six days. A truly religious person wants to live their beliefs every day; if youre going to get the religion of virtuous trading, its no different. That is why each goal should be accompanied by specific daily activities that help you make progress. If your goal is better risk management, then you want to work on managing the risk of every trade. If your goal is a better mindset, then you want to perform specific exercises each day to keep calm and focused. You wont change your behavior by changing your mind; youll start thinking differently once you enact new behavior patterns.

5. Stay Positive. If it aint broke, dont fix it, is the philosophy of those

who fail to work on trading until theyre broke. If youre trading well, thats one of the best times to coach yourself . Your goal isnt to change whats working; its to become even more consistent in your efforts. Doing more of what works is a valuable goal that helps you press your advantage when youre doing well. The alternative, sitting back on your laurels when youre making money, will bring comfort, but not elite levels of success. I recently met with a prop trader who was trading very well on relatively small size. A quick look at his Sharpe Ratio and trading results suggested that he could be making much more money simply by running more risk in his portfolio and sticking to his breadand-butter setups and markets. We developed a plan for doing that and he turned good success into outstanding success. By formulating positive goalsfocusing on changes that involve doing more of the right thingshe made the most of his strengths. Its for that reason that I often tell people that the best time for coaching is when youre doing really well and really poorly.

The best traders, I find, are those who have made self-improvement a way of life. Such traders are driven in their work lives, their physical fitness, and their recreations. They derive great meaning and satisfaction from being the best they can be. The same is true of great athletes: they love working out; they constantly challenge themselves. Its when change is a lifestyle that we see exemplary performance. At that point, self-coaching becomes a life philosophyan organizing principlenot just a discrete activity among many during the day or week.

What is the one change you most want to make outside of trading? Develop a daily plan for action on the goal that will help your trading efforts. Its all about strengthening the coach within you, whether youre working on your finances, your relationships, your physical conditioning, or your chess game. The goal is to become a change agent, a master of change across all spheres of life. Working on your nontrading life is a way of building your self-coaching as a trader.