FXGirl

Theory of recollection?

Hi, Zdo: I think that people's interests change and/or their time is needed elsewhere. I know for myself that I can't always keep abreast of what is being posted - I lead a busy life, just like everyone else. If the market is slow, I'm more likely to look at what has been posted.

Dear Zdo: I'm still here. Did you have something you wanted help with? It seems like you have a rather negative opinion of psychologists. Let's talk about your questions: First, "....you're basic power in the helping professions' trips don't work very well with traders.??" Any psychologist worth his/her salt, loves to have involved, motivated clients. Those are the ones who make progress. In general, traders are motivated and have clear measurable goals (equity curve increase). That's refreshing! Second, "They are really on forum to recruit clients..." I can't speak for other psychologists, but I'm here to be a resource for others, share my opinion, learn from others and have a little fun. Third, "Their general and individual models are inadequate and incomplete for ‘helping’ traders..." Now this is an interesting contention. I do think that it is more difficult to help traders if you aren't a trader yourself - after all, trading is a unique experience - however, I think that how people learn to manage ambiguity and risk in trading is very similar to how they learn to do it in life. Fourth, "They are ‘wounded healers’ and once they work through their own issue(s), they just don’t need to help anymore ??" This one made me laugh. Of course there are therapist out there that haven't done their own work (very unfortunate for their clients), but I'm not sure that participating in this forum would make a difference to those therapists. Fifth, "Thoughts ?" Yes, I do have some thoughts. Most people who post on the psychology of trading threads seem to think that the answer to all psychological issues is to 'get some discipline'. Most can't articulate how to do that, nor are they aware of how they did it. They make no allowance for individual psychological makeup and how that might effect someone's efforts to become a successful trader. The basic advice that traders give each other is some version of "just suck it up and do it". I wish that worked. Trading would be much simpler and we wouldn't need to discuss trading psychology. Yours, Dr. FxGirl

Dear Shy Guy: All the advice given here, reduce your lot size, recognize that losses are a part of trading, develop faith in the probabilities of your system, and ‘just do it’, are all good suggestions. But what I heard you say was that you are afraid that you might be wrong and that would mean you are stupid and you would feel like a fool. If you had a way to deal with the internal dialogue telling you that the market might prove that you are stupid, and you would hate feeling that way, any of the above suggestions would work for you – and you never would have started this thread. But until you deal with what is generating the internal dialogue, you will probably struggle with implementing any of this good advice. Right now, your strategy for dealing with the emotions you feel is to avoid taking a trade. That is a strategy that works – emotionally. If you don’t take a trade, you won’t feel like a fool, and the market can’t give you any evidence that you are stupid. But this strategy doesn’t work if you want to become a successful trader. You have to develop a new strategy for dealing with your internal dialogue and the emotions it generates. First, talk out loud. Get what you are saying internally out in the open where you can examine it. Writing it down will work too. You may be surprised to find that there is quite a lot you’ve been saying to yourself. You need this information to understand what is happening in your trading. Once you know what you are saying to yourself, ask, “Have I heard those words before?” “Is it my voice I’m hearing or is it someone else’s voice?” If this dialogue is something you haven’t heard before and it is in your own voice, then most likely it is trading specific and you can deal with it fairly easily. This is the place where we need feedback from you. Tell us what you found out about your dialogue. But in any case, be sure you ask yourself these questions: “Is there something about my strategy that I’m not fully comfortable with?” and “Do I, and the people who depend on me, have realistic expectations about how long it takes to become a successful trader?” If the dialogue is something you have heard yourself say before, ask, “What is it about trading that triggers this dialogue?” and “Is it true?” Then give us your feedback and we’ll go from there. If the dialogue is something you have heard before, especially if you have heard it all your life, and it isn’t in your voice, then you have a bigger issue and will need to deal with it before for you can reasonably expect to be a successful trader. If you don’t, it will continue to interfere with your trading in surprisingly negative ways. Although it is certainly possible to deal with this on your own, generally, you can make much faster progress with a little help. Look for a psychologist, someone with a PhD who specializes in brief therapy or cognitive behavioral therapy – there are a few good ones out there. Feel free to interview them before deciding whom to work with. In the meantime, while we are waiting for your feedback, I want you to know these things: The market makes fools of us all - we are all wrong on occasion. We were wrong a lot in the beginning; now it's better. Though smart helps, trading the market is more about persistence than it is about being smart. Trading is the grandest game out there – but that’s what it is, it’s a game. It isn’t who you are. Yours, Dr. FxGirl

I've observed a profitable trader trade live for a month (more actually) and it made me a profitable trader. There is nothing like watching a master trade to help you develop the perceptual lens to see what the market is doing. I'd kiss his toes any day of the week for the opportunity to learn that he gave me. I count myself truly blessed to have a mentor. I wish the same for anyone who is just starting out.

Hi, MightyMouse: Or perhaps Yale undergrads could develop another energy source.

Hi, MightyMouse: Great accomplishment! And nice strategy to deal with emotions. We developed a device called the Mindful Trader that monitored the level of physiological arousal while trading using variable heart rate and displayed that information on the computer screen. When a trader got too emotional (mirrored in increasing arousal), he was alerted. He could then do something to reduce the physiological arousal, such as rhythmic deep breathing, which is similar to what you did. When the body is calm, the intensity of the emotion abates. With practice, a trader could move to a state of calmness simply by establishing the correct breathing pattern for a few moments. You're right, too, about the fact that after awhile, if a strategy works, it becomes second nature and we aren't bothered by the emotional pull we felt before, or at least, not as much.

Hi, MightyMouse: This debate has never been about the need for trader discipline - I think we all agree that it is an essential part of being a successful trader (or a success in any other profession). The discussion is about how do you deal with emotions so that you can act in a disciplined way. As you said, "...somewhere in your life, you must have experienced or learned.." That is what we are talking about. How you learn to deal with the emotional fallout of trading in a way that makes it possible for you to do what you know you should do. How did you become a disciplined trader?

Hi, Thales: It's Oceanside, California. I didn't know there was an Oceanside, NY - is it nice? How do you force yourself to continue - that's the question I'm trying to get at (although I probably wouldn't use the word 'force'). Obviously, some people can't do it, or don't do it well, even it they have a comprehensive plan. Somewhere along the line, you learned how to do that. I believe that this is the question that is at the heart of trading psychology.

Thales, I agree that having a precisely defined strategy is absolutely essential to successful trading. However, having a strategy gives you a behavioral goal, but unfortunately, it doesn’t tell you how to “get” discipline.

Well, DugDug, the most recent research seems to show that we feel before we act. And this is certainly true about anything we perceive as a threat…like a losing trade. You may think that you are limiting “your emotions and hence require less behavioural controls” but more likely, you have found a way to process them effectively. Certainly, if you have seen a particular set of circumstances (such as having your stop hit) a number of times and have survived to trade another day, your emotional reaction may be diminished because you don’t see the same level of threat in it as the first time. Yes, people do have differently emotional responses to different things (and different degrees of reactions). Thank goodness! I certainly wouldn’t expect my husband to have the same I-just-have-to-have-them reaction to the new pair of red high-heel shoes I bought yesterday. Some of these differences in emotional responsiveness seem to be an innate level of physiological reactivity, but most have to do with our past experience, how we have evaluated it, and the strategies we have adopted to deal with out emotions. So your observation “so clearly different controls work for different people…” is accurate (if you substitute the word strategy for the word control), and the real question is what works for each trader? And that is what I was getting at when I asked what you did to become a disciplined trader. I’m sorry if my previous post sounded like a Q&A. It just seemed to me that you have probably developed a fair amount of trading discipline, and was interested in the strategies you use to deal with the emotional stress of trading.

Hi, DugDug: Close, but no cigar. No, my suggestions aren’t about controlling emotion. They are about controlling behavior. Your currency trader friend is a great example. He expressed his emotion by standing up and screaming. This can be a great tactic, good trade, or bad, as long as when you stop vocalizing, you DO the right thing – which your friend did. Discipline happens when you are able to process your emotions in the context of your goals and control your behavior. Interestingly, neuro-psychologists have determined that people who don’t have emotions (due to brain injury) can’t make decisions. So, yes, emotions seem to be a key force in our ability to act. But we also have an analytical, evaluative process that we bring to bear in decision-making. Self-discipline largely comes when we find a way to process our emotions (express them, experience them, identify the pertinent data in them), and then allow our analytical part to decide what to do with the data. If you skip the first part of this process, it’s hard to do a good job with the second part. Since you have been trading successfully for 17 years (Congratulations), you have developed self-discipline. In other words, you have developed a way to process your emotions effectively, so that your behavior serves your trading goals. At this point, trading may not evoke the strong emotions that it probably did in the beginning of your trading career. After all, we do develop a different response to events if we have seen them a number of times. But if you can remember back to when you started to trade, you may be able to identify what strategies you used to become disciplined. Won’t you share them with us? About your girlfriend, all women want love and respect. I'm sure you respect her and feel lots of love for her. So, just let it out, Honey.

Dear DugDug: “You said that Discipline is not about getting grid of emotions, but rather more about limiting the inbuilt human emotions that cause many traders to have the “wrong” highs and from trading.” I’m not sure how “getting rid of emotions” and “Limiting the inbuilt human emotions” are two different things. As a clinical psychologist (and a Forex trader), I know that there is no such thing as getting rid of human emotions. They are part of who we are. For traders, the problem is not that we have emotions; the problem is what we do when we experience our emotions. The call to discipline is really a call to learning how to process and manage our emotions so that our resultant behavior supports our trading goals. It is not a call to “control” emotions by pretending they don’t exist or trying to “limit” emotions. If that worked, we wouldn’t be having this conversation. Everyone would just exert a little will power and trade like a machine. Obviously, it doesn’t happen that way. Kiwi had an interesting idea in the post above. He suggested that the process of dealing with emotions might be similar to the successful cognitive-behavioral strategy for dealing with Obsessive Compulsive Disorder. In this strategy, OCD patients are encouraged to recognize their feelings and then say to themselves “It’s not me; it’s my OCD”. For traders, the mantra would be, “It’s not the market; it’s me” – actually, it is more like: “It’s not the market, it is my emotional response as a result of how my brain experiences threat.” Just as the caudate nucleus high jacks the normal functioning of the brain in OCD patients, for the trader the amigdala and other parts of the brain do the same in the face of the perceived threat of a loss. The strategy that you use to manage your emotions in the face of the perceived threat of a loss is the difference between a failure and success. (Please note that I am assuming that you have a trading system that actually works.) A strategy is the behavior we use to get what we want and need – in this case, deal with our emotions during trading. A revenge trade is a strategy to reduce the anger and anguish we feel at a loss. It’s the adult equivalent of a child saying, “I’ll going to hold my breath until I get what I want.” If you get lucky, a successful revenge trade might make you feel better for a while… until the next loss. But more likely, your revenge trade was ill considered and you lost more money and now feel even worse. Other strategies such moving stops, increasing lot size (or reducing lot size), all serve a similar purpose: to reduce emotional pain and anxiety. These strategies sabotage our trading. And often if a strategy doesn’t work, the first thing that people do is to try it harder. In trading, that can mean taking a revenge trade with even more lots. I’m sure you get the idea. What would a better strategy look like? That’s different for each one of us because we all have a different psychology makeup. But here are some suggestions that can move us in the direction of better trading decisions: 1. Anything that puts a little time between the urgent feeling of needing to take action and the action itself is good. Emotions are constantly changing; their intensity fades if they aren’t reinforced. So look away from the charts, get a cup of coffee, do something that focuses your attention elsewhere for a while. 2. Employ a different part of the brain by analyzing your feelings. Ask yourself these questions: “What am I saying to myself when I have a losing trade?” “Have I heard those words before?” “Is it my voice I’m hearing or is it someone else’s voice?” “Is it true?” Once you have worked through these questions, ask, “What could I say to myself that would result in a different feeling?” 3. Keep your hand away from that mouse. Unplug it. Put a piece of paper on top of it that says, “Is that feeling accurate?” or “Think!” Breathe. Breathe. Breathe. Deeply. Think about the last time you kissed someone you loved, or anything else that was a truly happy experience. Get your body to relax and allow your perspective on life to reemerge. Then take a look at that trade again. Can you stick to your trading plan now? Remember, it’s about controlling behavior, not controlling emotions.

The trading pundits say that to be a successful trader, you must control your emotions. The general consensus seems to be that on the road to trading profitability, your emotions are your biggest enemy. The advice these experts give is to become more disciplined, to put all emotion aside. The problem is none of the trading experts can tell you how to get rid of emotions. That's because the experts are all missing a basic concept about emotions: emotions are not the enemy; emotions are information. Most of the time, say 95%, the information is about you...not about the market. But you treat is as though it is about the market. Big mistake. Really big mistake. Why do we misinterpret this emotional data? Ambiguity. The thing about the market is its ambiguity: We don't know what the market is going to do next. Sure, we have indicators and systems that help predict market movement, but none of these can tell us with certainty what the market is going to do each and every time. When we are faced with this ambiguity, we feel uncomfortable and unsure. Not knowing what is going to happen next makes us feel out of control -- this is the perfect scenario for our emotions to run wild. Whatever is going on inside of us gets projected on the market. If you feel scared because your last trade was a loser, you may hesitate to get in the next trade even though your system clearly says to enter. What’s changed? The trade set-up hasn’t changed; the risk to reward ratio hasn’t changed; the percentage of wins hasn’t changed, the market is the same old market. But you missed a great trade because your feelings changed. We have all made the mistake of acting as though what we are feeling is a reflection of what’s going on in the market. There is a lot of talk about the two emotions of fear and greed, but it is really a lot more complicated than that. We can feel inadequate (I'll never learn how to do this); angry at the market (I'll show you I can trade, I'll double my lots); angry at self (How could I be so stupid? I moved my stop again.); despair (I just can't take another loss, what is my wife going to say?); elated (I'm so hot today I can trade anything!), and so on. In all of these examples, the emotion is information about the trader, not about the market. So, the first step to becoming a more profitable trader is to get the emotions you are feeling up to a consciousness level where you can deal with them. One of the best ways to do this is to talk out loud. Whenever you are aware of being anxious, angry, hesitant etc., say what you are feeling. Speak out loud what you are saying to yourself internally... about the market, about your ability to trade, about the money, about what others are going to think, and so on. Remember that all feelings are acceptable; it's what you do with them that is the important part. What you are now saying out loud is the raw data, the information you need, to change your behavior patterns. Ask first "What is the emotion I'm feeling?" Then ask, "What am I saying to myself that makes me feel that way?" Next, ask "Is it true?" Just going through this process will put you in a different emotional state, one in which you have more conscious control over your actions. You’ll come to recognize that you emotions are more about you than about the market. Now you’ll want to ask, "Is the strategy I'm using to handle my emotions working to make me profitable?" In other words, when I feel this way, how does it play out in my trading?