Learning to Manage an Emotional Meltdown While Trading

[Rande Howell 10]

2nd part of a 3-Part Series

 

 

This is the second in a series of articles about interrupting mindless sabotage and building mindful emotional intelligence into your trading. In the first article in this series, Ken had just watched himself on video in disbelief (like many traders), viewing his own emotional hijacking. If he had not seen it with his own eyes, Ken would never have believed what he saw. (Click here to go back to that article for review.) Before viewing the video, Ken thought that his emotional meltdown came out of the blue. But with the video as a dispassionate recorder of the event, he discovered that the emotional hijacking was an unanticipated ambush only because it came out of his lack of awareness.

 

His comment was, “I never realized how soon I fall into fear and act from fear. No wonder I’m having trouble. It was like not seeing an avalanche coming at you until it consumes you.” (I encourage you to go back and read that article so that you have the continuity to appreciate this article.)

 

With the light of awareness that the video gave him, what he saw surprised him. With the aid of external observation of his body, he was able to see that he had been unaware of a process that was right in front of his eyes – hidden in plain sight. Only he did not have the eyes to see it. His eyes, not being trained to observe his body as part of an emotion, did not detect the ambush. There had been plenty of signs that it was coming. But because he did not know to look for the signs, it appeared to him (in his compromised state of mind) as an emotional hijacking.

 

Learning to Observe the Body to Spot the Arousal and Feeling Components of an Emotion

 

When we reviewed the video of the trade where Ken lost emotional control, here is what he saw:

 

1.Eyes fixated on his screens. Also he was hunched over his screen.

2.His eyes were bulging.

3.He was holding his breath initially.

4.His jaw was clenched.

5.He was rocking in his chair.

6.He was tapping a pen fervently on his desk as he watched the screen.

7.He began breathing heavily.

 

Ken had not been aware of any of these observable phenomena. Yet all of them are parts of an emotion in its arousing stage. This is when an emotion is preparing for action. The emotion is revving up for fight or flight, anger or fear. Because he was mindless to it, it was able to continue to build over a period of 15-20 minutes – a long time for an emotion to build. Next, he saw and heard himself alternately both pleading and cursing as he lost control of his state of mind to an emotional hijacking where fear chemistry was now coursing through his bloodstream and collapsing his rational thinking into fear-based thinking. This is called the feeling component of the emotion. It is too late at this point to stop the emotion from happening – it is already in the bloodstream and corrupting the mind that trades. At this point the feeling component of the emotion is causing him to believe with certainty that bad things are going to happen. At this point the best thing that Ken could have done is to have stepped away from his computer and let the emotional chemistry burn out.

 

Next Ken sees the third part of the emotion of fear called emotional motivation (i.e. avoid, attack, approach) direct the energy of the emotion to get out of the trade so that no more harm can be done. “I need to bail before this thing goes against me,” he thought. This explanation of his situation makes sense to his thinking mind in the heat of this moment and while he is consumed by fear. At this point Ken believes he is powerless to manage the trade. On an emotional level, the operating meaning is that he believes he is incapable of managing uncertainty while in the heat of the trade. This is the meaning component of the emotion.

 

However, if Ken had caught the emotion at or before the point where it began arousing, he could have prevented this emotional hijacking. And he could have had a much better probability of maintaining the mind that could stay emotionally sober during the management of the trade. But because he did not have the awareness to manage his emotions, he never even saw the hijacking coming.

 

Interrupting the Arousal of an Emotion

 

Because emotions are biological, they have a physical signature that is observable. This signature is observable as described by Paul Eckman is his discovery that emotions have consistent encoded expressions embedded in the human face that cuts across all cultures – and Herbert Benson's discovery that each emotion has a unique breathing and tension signature. Fear and joy will have the same encoded expressions in the muscles of the eyes (in particular) and mouth (in general) no matter what part of the world or what culture you come from.

 

Similarly, fear will produce a particular style of breathing and muscular tension required to arouse and maintain the emotion of fear and its impact on thinking. If you disrupt the breathing pattern and the muscular tension associated with the emotion, the associated emotion cannot maintain itself and it cannot ambush and take over the mind.

 

With Ken’s video of himself, he could see his particular signature in action once he began to watch for the signs. For fear to arouse and take over the mind, it has to arouse physically through his muscle tension, breathing style, and his locked-on fixation. This became the focus of where he was going to learn to disrupt the emotion of the fear of missing out on profit from corrupting his mind and causing him to become an irrational human being.

 

Ken was trained to breathe diaphragmatically in moments of stress, rather than to stop breathing or shift to rapid breathing. Fear required the holding of breath or the rapid shallow breathing (that he described as heavy breathing) to ramp up. He also was taught to relax the tension in the body as he entered trades rather than to allow the tension to build up or to ignore it.

 

By volitionally maintaining breathing focused on moving air into the abdomen first and then allowing the breath to expand into the upper chest in a rhythmic manner, Ken is not only disrupting the emotion of fear – he is also calling forward a state of calm. Calm, as an emotional state, requires bellows breathing rather than shallow breathing to call it forward and maintain it. And by relaxing the tension in the body, Ken is doing the same thing. He is physically creating the conditions necessary for the emotional state of calm to produce the mind that "thinks".

 

No longer is Ken mindless of his body. He is able to observe his body as a way to look into his emotional state and to the state of mind that emerges from the emotion. And by training himself to observe breathing and tension in his body as he trades, he is a step ahead of the emotional hijacking pattern of the past. The key here is that he is training himself in both self-awareness and emotional awareness in the context of his trading.

 

Now, not only does he monitor his body with emotional awareness, he also anticipates the times he has a tendency to have problems. He pre-empts waiting for the triggering to happen by calming himself as he moves into the zone where he has had trouble in the past. He is prepared now.

 

Ken is now developing the skill of emotional regulation. He can manage the intensity of the emotion so that it no longer sweeps him away into regrettable emotional vortexes and compromised thinking. (Remember, it made sense to Ken to get out of the trade in the heat of the moment – his thinking was compromised by fear). The problem with most emotional regulation training programs is that they do not focus on managing the emotion in the context of stress. Ken literally was trained to manage his stress by learning how to manage his breathing and muscle tension AS HE IS TRADING. Otherwise, the skills do not transfer from learning in the classroom to learning in the environment that they are to be used.

 

This is why any student of mine spends 3 weeks habituating the emotional regulation skill while he is trading. It takes this long to train the body. There are no other ways to effectively learn this skill. The big factor is that the learning has to be contextual. I often get traders who practice meditation or yoga and wonder why the breathing and relaxation skills learned in these pursuits fail when they apply them to trading.

 

Remaining calm under pressure is not the goal of most breathing and relaxation programs. Trading demands this skill and it must be taught in the pressures found in trading. Otherwise the skill does not generalize from one domain (like the Yoga studio or your calm and quiet place) to the emotional flux of trading. Remember, all thinking is emotional state dependent. You have to train within context.

 

Does Emotional Regulation Solve the Problem?

 

No. Emotional regulation of your emotional nature gives you the skill to manage the intensity of the emotion – not to discover its underlying meaning. Regulating emotions gets you to the "door" of the mind. Without emotional regulation you never get to the door – so it is a necessary element in the design of the trading mind. But once calm, you can look into the mind and begin to observe the hidden beliefs that are at the core of the problem of your performance in trading.

 

Next month we will be looking into the hidden beliefs that keep sabotaging Ken’s trading performance - although he is trying really hard to trade effectively. If you think of hidden beliefs as a submerged submarine armed with torpedoes, you begin to see how your beliefs about your capacity to manage uncertainty that you have pushed out of awareness come back to haunt you in the heat of the moment. These are primitive beliefs that you must come face to face with, acknowledge, and transform to become the trader you know to be possible. Out of the depths either comes the awareness of these submerged beliefs or your mindlessness of these hidden beliefs. If mindless, you meet the torpedoes after it's too late – again. Stay tuned.

 

Rande Howell

[zdo 20]

Thanks Rande.

 

I sure wish I could write good like you.

I have some insights into this that are even less voltairee than yours...:missy:

[Rande Howell 10]

Thanks Rande.

 

I sure wish I could write good like you.

I have some insights into this that are even less voltairee than yours...:missy:

 

thank you zdo

 

Spell check has been a blessing. Would love to hear about your observations about this topic.

 

Rande Howell

[sergso 10]

Good stuff! Looking forward to the next one.

[Tripk 10]

Rande,

 

Could you please point me to the 1st article of the series, thanks.

[Rande Howell 10]

Rande,

 

Could you please point me to the 1st article of the series, thanks.

 

I thought I had posted the first part on this website last month, but I didn't see when I looked. Here is the link. Both also have video accompanying the article.

 

Managing the Fear of Trading (article)

 

Sorry about that. The first article looks at what is happening physically, this one drills down another layer, and the next drills down to the meaning attached to the reactiveness.

 

I also need to learn how to correlate the articles and the video so they work together. Any help with that would be appreciated.

 

Rande Howell

[SIUYA 11]

Hi Rande,

I was just watching an interesting program showing all the new apps around for smart phones etc that allowed people to self monitor for their health.

Things like heart rate, steps per day, how they sleep. Even the ipad can read your breathing and heart rate from looking at you in a video. etc.

Fascinating futuristic ideas about how we can more tailor make our health monitoring.

 

I was wondering if you were aware of apps similar designed for trading? (I assume the medical ones would be a start)

 

maybe there is a market for apps.

[Rande Howell 10]

Hi Rande,

I was just watching an interesting program showing all the new apps around for smart phones etc that allowed people to self monitor for their health.

Things like heart rate, steps per day, how they sleep. Even the ipad can read your breathing and heart rate from looking at you in a video. etc.

Fascinating futuristic ideas about how we can more tailor make our health monitoring.

 

I was wondering if you were aware of apps similar designed for trading? (I assume the medical ones would be a start)

 

maybe there is a market for apps.

 

Hi SIUYA

 

I am being forced step by grudging step to work toward this. In the world that I teach, I want folks to be self aware and not depend on technology to do their awareness for them. But from a teacher's perspective, I need to get over MY desire for people to develop awareness in the beginning and be able to use a crutch like you speak of as an intermediate step on the way to a greater whole.

 

I'd be interested in learning more about the smart phone apps you were talking about. A Russian software company approached me about this very thing a little while back as a cross development project. The advice given to me was why on earth would you do that? Listening to you, maybe what I need is already there.

 

And, not withstanding to those who read this, is that the biology of emotion is only one part of my training. It's important though. You don't get to mind until you can manage emotion enough to calm the furies. Much of my writing is focused on this. It's harder to talk about the organization of mind before there is a ground from which to build.

 

Thanks

Rande

[SIUYA 11]

Hi SIUYA

 

I am being forced step by grudging step to work toward this. In the world that I teach, I want folks to be self aware and not depend on technology to do their awareness for them. But from a teacher's perspective, I need to get over MY desire for people to develop awareness in the beginning and be able to use a crutch like you speak of as an intermediate step on the way to a greater whole.

 

I'd be interested in learning more about the smart phone apps you were talking about. A Russian software company approached me about this very thing a little while back as a cross development project. The advice given to me was why on earth would you do that? Listening to you, maybe what I need is already there.

 

And, not withstanding to those who read this, is that the biology of emotion is only one part of my training. It's important though. You don't get to mind until you can manage emotion enough to calm the furies. Much of my writing is focused on this. It's harder to talk about the organization of mind before there is a ground from which to build.

 

Thanks

Rande

 

I would not view these as crutches - they are like the video you used for your subject. A tool to help people view themselves. Some might argue a pencil and paper makes our minds lazy

 

I would imagine that even if some relied on it then its better than the alternative.

 

The TV program actually revealed a couple of interesting points as well.

 

1....the numbers dont lie. We might lie to ourselves about how we feel, but the body was often saying something else. This I would imagine help self awareness. In one example the sports doctors were able to pick up injuries and sickness before the players did.

 

2...the numbers gave people a focus and a goal, and their spirit of competition meant they were more likely to take note of their results.

 

3...the importance of this being tailor made to the individual as not everyone is the same.

 

I think its the real time monitoring that makes the difference. Not an occasional weigh in, or heart rate measure, or blood test. I would think these could certainly be of use in high stress occupations - combined with techniques to reduce/calm the responses.

You might have a new business venture Rande, well worth pursuing.

[Rande Howell 10]

I would not view these as crutches - they are like the video you used for your subject. A tool to help people view themselves. Some might argue a pencil and paper makes our minds lazy

 

I would imagine that even if some relied on it then its better than the alternative.

 

The TV program actually revealed a couple of interesting points as well.

 

1....the numbers dont lie. We might lie to ourselves about how we feel, but the body was often saying something else. This I would imagine help self awareness. In one example the sports doctors were able to pick up injuries and sickness before the players did.

 

2...the numbers gave people a focus and a goal, and their spirit of competition meant they were more likely to take note of their results.

 

3...the importance of this being tailor made to the individual as not everyone is the same.

 

I think its the real time monitoring that makes the difference. Not an occasional weigh in, or heart rate measure, or blood test. I would think these could certainly be of use in high stress occupations - combined with techniques to reduce/calm the responses.

You might have a new business venture Rande, well worth pursuing.

 

The "crutch" way of viewing bio-feedback technology is clearly a limitation of my thinking on this subject. It does give real time info into the triggering and arousal timeframes of an emotion, so it's useful. I use video recording of clients to help them gain awareness of their emotional states -- and this is similar. The first part of my training is focused on this aspect, so as a student of the mind that trades, I need to get over my comfortable biases.

 

Is anyone here familiar with apps or reasonably priced bio-feedback devices?

 

Rande Howell

[Rande Howell 10]

SIUYA

 

What do you know about the pressures that fund managers, analysts, and hedge fund managers face in their work? I've been asked to speak at the CLSA Forum in Hong Kong and train a number of these people for a client throughout Asia and I'm tailoring my work with active traders to their. I know how to work with the micro management of psychology of active traders, but I understand these guys seem to have a constant dull pressure from numerous sides for performance -- and that they MUST be right.

 

Any insight.

 

Rande

[SIUYA 11]

SIUYA

 

What do you know about the pressures that fund managers, analysts, and hedge fund managers face in their work? I've been asked to speak at the CLSA Forum in Hong Kong and train a number of these people for a client throughout Asia and I'm tailoring my work with active traders to their. I know how to work with the micro management of psychology of active traders, but I understand these guys seem to have a constant dull pressure from numerous sides for performance -- and that they MUST be right.

 

Any insight.

 

Rande

 

first and foremost the pressure on a retail trader v an employed prop trader (or an unconstrained prop trader ) v a fund manager with a mandate is very different.

So each will have different pressures, even though their responses to actual positions may be similar, I think you will find the pressure from the outcome of a trade v the pressures and motivations for implementing that trade will provide different results.

 

The pressure for a portfolio manager meeting a mandate is infuriating often as they always talk about tracking error, under or over performance, beta and alpha and often give scant regards to actually making money. There is also the added pressure of marketing.....and a lot of this type of job role is marketing and sales.

 

Prop traders might have manager pressures - or the feeling they need to do something pressures, where as the retail trader really only has his own pressure and this is largely dependent on expectations and ability to survive.

 

All this makes a one stop shop/solution impossible to compare IMHO.

 

One reason why i thought these apps - tailored to the individual make sense.

 

.................

 

I would think that maybe a survey of the clients for where their pressure - or assumed pressure comes from might tell you more. A review and feedback to reveal why lies below the surface might be the best approach.

 

My wife is a PM and we stopped talking/arguing about this as its a different mindset, and while i get frustrated as i am more price orientated and absolute return focused, she is more fundamental and relative focused. (all talk about getting in the top percentile of comparable managers etc) Often many of these managers dont know what a buy or sell button is or care much after their analysis and how it tracks in their portfolio of 20-60 stocks. (I am being a little harsh and cheeky but internal corporate politics or keeping AUM is a bigger pressure on any fund managers I know.)

 

As your focus is on a particular area once that area is targeted as a problem than you could certainly add more insight.

You might need more info from CLSA otherwise a generic forum workshop might get discussions happening whereby pressure is relieved not from the trading but from operational procedures, or you ideally generate business from both types.

 

Hope this helps.

Edited August 13, 2013 by SIUYA

[captmilkdud 10]

Is anyone here familiar with apps or reasonably priced bio-feedback devices?

 

I still have my Mood Ring from back in the 70's. Cost me about a buck and a quarter I think.

:rofl:

 

Seriously. Great stuff as usual Rande!

Thanks.

[Rande Howell 10]

I still have my Mood Ring from back in the 70's. Cost me about a buck and a quarter I think.

:rofl:

 

Seriously. Great stuff as usual Rande!

Thanks.

 

I remember those! My memory was they were about if you were in the mood for party and thought, "Is anybody that stupid?"

 

Seriously though, I am interested in learning more about affordable and sensible applications of bio-feedback that can be applied to trading. Much of the stuff I'm aware of is either too clumsy or too expensive to be a real option. I also believe that if applied within the context of a more complete emotional management program, then it can become an indicator of emotional arousal before the emotion becomes an freight train.

 

Rande

[bobcollett 10]

Hi Rande,

As a Retail Trader,I cant offer the wise words of Siuya, but I know how you can end your lecture.......

"If you want sleep a bit easier, and reduce the stress levels, DONT spend last years $Million bonus."

kind regards

bobc

[Guest OILFXPRO]

2nd part of a 3-Part Series

 

 

 

Does Emotional Regulation Solve the Problem?

 

No. Emotional regulation of your emotional nature gives you the skill to manage the intensity of the emotion – not to discover its underlying meaning. Regulating emotions gets you to the "door" of the mind. Without emotional regulation you never get to the door – so it is a necessary element in the design of the trading mind. But once calm, you can look into the mind and begin to observe the hidden beliefs that are at the core of the problem of your performance in trading.

 

Next month we will be looking into the hidden beliefs that keep sabotaging Ken’s trading performance - although he is trying really hard to trade effectively. If you think of hidden beliefs as a submerged submarine armed with torpedoes, you begin to see how your beliefs about your capacity to manage uncertainty that you have pushed out of awareness come back to haunt you in the heat of the moment. These are primitive beliefs that you must come face to face with, acknowledge, and transform to become the trader you know to be possible. Out of the depths either comes the awareness of these submerged beliefs or your mindlessness of these hidden beliefs. If mindless, you meet the torpedoes after it's too late – again. Stay tuned.

 

Rande Howell

 

Can emotional regulation training under trading pressures alone solve the problem , without changing the belief system?There are other issues which may need to be solved like the need to be right , loss aversion reactions , fear , greed , need to feel good about the account performance , stress responses , rewiring of the poor trading brain(which is hereditary) , rewiring our responses to fear , our reward stimulations and many other phsychological trading constraints of humans like the need to look good.

 

An example of this is reward stimulation:

 

To make money from trading ,one has to run their profits when the market is giving them , and to cut losses .Trading can be quite profitable , as per example two weeks of trading.Out of 34 trades ,two or three trades made the most of the profits , but for almost 12 days the trader was making no money.This makes it mentally difficult to trade , because it doesn't fit in with the human psyche.Our psyche requires pleasure and reward , and trading does not offer it consistently.

 

 

In plain language, this means that we have to get a certain amount of pleasure and stimulation or rewards from our daily activities and what we put into our bodies. If we don't, then we create a pleasure deficit or what is known as "reward deficiency," and are subject to trading stresthat leads to trading depression, anxiety and poor performance. Each day we have to stimulate our reward pathways adequately if we are to function well emotionally, mentally and physically.

 

 

Do you seriously believe solving one or two issues will solve the entire issue? Is this not like solving one leak or two leaks in a brain , only to find a multitude of other leaks in the human brain.?

[Rande Howell 10]

Can emotional regulation training under trading pressures alone solve the problem , without changing the belief system?There are other issues which may need to be solved like the need to be right , loss aversion reactions , fear , greed , need to feel good about the account performance , stress responses , rewiring of the poor trading brain(which is hereditary) , rewiring our responses to fear , our reward stimulations and many other phsychological trading constraints of humans like the need to look good.

 

An example of this is reward stimulation:

 

To make money from trading ,one has to run their profits when the market is giving them , and to cut losses .Trading can be quite profitable , as per example two weeks of trading.Out of 34 trades ,two or three trades made the most of the profits , but for almost 12 days the trader was making no money.This makes it mentally difficult to trade , because it doesn't fit in with the human psyche.Our psyche requires pleasure and reward , and trading does not offer it consistently.

 

 

In plain language, this means that we have to get a certain amount of pleasure and stimulation or rewards from our daily activities and what we put into our bodies. If we don't, then we create a pleasure deficit or what is known as "reward deficiency," and are subject to trading stresthat leads to trading depression, anxiety and poor performance. Each day we have to stimulate our reward pathways adequately if we are to function well emotionally, mentally and physically.

 

 

Do you seriously believe solving one or two issues will solve the entire issue? Is this not like solving one leak or two leaks in a brain , only to find a multitude of other leaks in the human brain.?

 

OILFXPRO

 

On several occasions I have run across traders that clicked into high gear after learning the emotional regulation portion of my training. They had okay-enough beliefs about their ability to manage uncertainty and they were blessed with a patience that most weren't. They simply did not know how to regulate the primitive emotional circuitry so that they could maintain impartial mind in the midst of pressure. These folks are rare and most have been females.

 

In training the brain/mind for trading in my way of thinking, it is necessary to build in habits of intentionality and vigilance. Our emotional social brain is wired to "have to be right" for survival's sake. It's really more about the avoidance of uncertainty. The problem is that "being right" only gives the trader the illusion of control in the short term. The acceptance of loss runs against this ingrained trait, but it must be developed as part of developing a mind that can trade effectively. This is where practices of intentionality and vigilance really pay off for the trader.

 

I'm skeptical about the reward center part of the brain. Euphoria is dangerous for the trader trying to become consistently profitable. They tend to be brain stem (Reptilian Brain) functions and do not discriminate between external reward (drugs), behavior reward (compulsive behaviors), and internal self generated states. My focus is getting the trader to no get sucked into reward or avoidance stimulation WHILE THEY ARE TRADING. For me, this is dangerous stuff. Reward, be it dopamine or opioids or testosterone, all lead to skewed thinking in the heat of the moment. It is calm, disciplined impartiality that I stress while they are in the performance of trading. After the trade day is over, they can revert back to reward. It's a good thing then. Just not while trading.

 

Rande Howell