Friday, November 10, 2006

Brief Therapy Techniques: How Traders Can Become Their Own Trading Coaches - Part One

Beginning with a review article that I published in 1992, I focused my career on brief therapy: techniques for accelerating emotional, cognitive, and behavioral change. My co-edited textbook on the topic has become a standard training text for residents in psychiatry, and I've written articles for traders to teach them some brief change techniques. Most recently, my book on Enhancing Trader Performance contains two chapters with self-help manuals to help traders become their own short-term cognitive and behavioral therapists.

Many trading problems related to emotional disruptions can benefit from short-term work, but not all of them. How you trade affects your emotions just as much as emotions affect trading. This is why it is important to distinguish when frustrations are the cause of trading problems and when they are the result.

When I tried to summarize my reasons for writing my first book for traders, The Psychology of Trading, I emphasized the neurophysiology of risk and reward. Quite simply, when we encounter conditions of uncertainty and risk, the blood flow patterns in our brain facilitate our "flight or fight" response patterns. Blood flows away from the frontal cortex, our executive center, and toward motor areas and lower brain structures. That means that we are least likely to activate our judgment, planning, reasoning, and analysis when we most need it.

Brief therapy techniques help people remain grounded in their executive cognitive functions under conditions of high emotional arousal. Stated otherwise, these short-term methods help you stay calm and focused during situations that normally evoke anxiety, impulsivity, negative thinking, or greed.

This series of posts will introduce some of the basics of brief therapy in hopes that you can become your own trading coach. I often stress to traders I work with: my goal is to get fired. I want you to be your own counselor, not to become reliant on me. With practice, any trader can learn techniques for short-term change that have been validated by scores of outcome research studies. My hope is that this series of posts can begin the process for interested market participants.

2 comments:

Adam said...

For those who embrace "learning to trade by trading" or in other words, improving from experience, I strongly recommend recording software which records your trading (if using charts - see my blog for recs).
When you review your trades, it's beneficial to identify the mistakes and compare the profit results had you not taken them (this motivates you to make change while also dealing with the feeling of being a "loser")
Also, try to categorise mistakes and tally the results of your mistakes per category. This way, you can see which mistake you are repeating the most - this would be the logical mistake/behaviour to change first.

joesedik said...

Hi Brett,
I enjoy your information so much. Thank you for all you do. I am working on the idea of trading affirmations to create some new (better) habits. Do you have a list of affirmations? Any suggestions to help this idea to be more successful?
I would very much appreciate your input.
Thanks again,
Joe