A Powerful Technique for Changing Your Trading Psychology

Discussion in 'Trading news and analysis (syndicated content)' started by Brett Steenbarger PH.D, Feb 19, 2018.

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  1. Brett Steenbarger PH.D

    Brett Steenbarger PH.D New Member Official Contributor

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    From an evolutionary perspective, it makes sense that we make complex behaviors automatic. Once we can perform tasks mindlessly, we can direct our mind to more immediate, pressing matters. This is how we can drive a car and hold a meaningful conversation. It's also how we can carry out morning routines without effort, allowing us to focus on plans for the day ahead. Our ability to automatize activity greatly expands our scope of thought and action.

    What happens, however, when our automatic routines no longer serve a useful purpose? They remain as habit patterns and they are the activities, patterns, and behaviors we're most comfortable with. Many of the problems we face in life today reflect the fact that we're living patterns in the present that, at one time, had an adaptive value. Now they bring negative consequences.

    Consider the trader who hesitates before acting on a signal and, when he acts, does so in small size. That pattern of behavior was part of prudence during the trader's early learning period. It guaranteed that he didn't act rashly and impulsively, and it kept losses small. Now that the trader has learned and is showing profitability, the old prudent behaviors make him risk averse. Yesterday's solutions, carried forward to a new reality, become today's problems.

    To change an old pattern of thought, feeling, or action, we have to be willing to exit our comfort zone. That means standing outside our patterns and actively viewing them as problems. At one time in the alcoholic's life, drinking was a means of socializing and a tool for feeling better. Fast forward to the point of alcohol abuse, and now drinking is bringing negative consequences for work, health, and relationships. Alcoholics who change view drinking as their problem, their enemy: they take the automatic pattern and use guilt, disgust, and anger to regain choice over how they think and what they do. Change begins when we view our problems as our problems.

    One of the most powerful change techniques in psychology is to take a pattern that is interfering with your happiness, fulfillment, and/or success and actively rehearse that pattern in your mind--visualize it, feel it--while you remind yourself of all the ways that it has hurt you. Literally, you're bringing that pattern to mind--maybe it's overtrading or trading too small--and imagining how many times you've flushed money down the toilet, how many ways this problem has stood in the way of your success.

    Can you imagine how angry you would become if someone hijacked your keyboard and screens and started placing random trades, losing you money? Well, that is happening to you every time your negative thought and behavior patterns hijack your trading psychology. Getting angry at those patterns is the first step in refusing to identify with them. It's a way of standing up for the healthy parts of ourselves and saying, "I'm not letting you hijack me!"

    Visualizing old ways of thinking, feeling, and acting that now bring us pain and allowing ourselves to fully feel all the disgust, guilt, remorse, and anger associated with the consequences of those patterns completely changes our trading psychology. We no longer fall into comfortable habits, because we no longer feel comfortable with those habits. We have turned them into enemies. That is powerful.

    This visualization and reframing is just one example of a broader psychological strategy of mental rehearsal. There are many other ways to use mental rehearsal to build new, positive habit patterns and to reprogram emotional responses to situations. This week's Forbes article looks at the science behind mental rehearsal and ways in which we use this method to change our lives. It's amazing how, when we change our mind about our problems, we truly change our minds.

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    Last edited by a moderator: Feb 20, 2018
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