Tuesday, September 18, 2007

Climbing Our Own Walls Of Worry

Every trader knows what it's like to be paralyzed by worry.

Sometimes it takes the form of catastrophizing "what-ifs": What if the market moves against me? What if I've lost my ability to trade?

Other times, worry manifests itself as perfectionism, as we become so concerned about getting all indicators to line up, so invested in catching exact tops and bottoms, that we miss out on opportunities.

On yet other occasions, worry can become so intrusive that we will exit positions at the worst times just to achieve some degree of relief.

Many people equate worry and anxiety, but the psychological research suggests otherwise. Worry is a ruminative cognitive process, whereas anxiety is the physiological experience of fear. In a very informative research review, Thomas Borkovec, Ph.D. of Penn State University and colleagues find that worry actually decreases the experience of anxiety in the short run.

In other words, worry is what people do to avoid anxiety; it is a defense against more fundamental fears. Worrying over catching an exact top or bottom, for example, may bind the much greater anxiety over losing money--or losing a trading career.

The problem with worry as a coping strategy is that it does not permit resolution of that more fundamental fear. By turning our attention to the negative aspect of details in our environment, worry does not allow us to engage in the facing of fears that is needed for anxiety reduction. In that sense, worry is the opposite of disclosure: openly acknowledging and talking/writing about one's concerns.

This is because we rarely worry over what we most find anxiety-provoking.

Interestingly, one of Borkovec's techniques for reducing worry is to establish a 30 minute period each day in which a person does nothing but worry! His research finds that shorter periods of worry serve an avoidant function, keeping us away from what we're really anxious about. When people engage in purposeful, extended worry, however, they cannot avoid and end up facing what's really on their minds.

Another technique helpful for worry is desensitization: using imagery to evoke underlying anxieties and normalizing our responses to those. In one variant, called flooding, extended exposure to images and actual experiences of anxiety-provoking situations lead to anxiety reduction.

Worry perpetuates anxiety by deflecting attention from what we find threatening. By getting at the root of our fears and facing them squarely--Pennebaker's research finds that writing openly about them for an extended time leads to emotional relief--we allow ourselves to move beyond them--and we reducing worrying.

So often, when we're worried about the next trade, the real source of our anxiety is Our Trading. It's an important distinction.


Stress, Coping, and Trading

Self-Confidence and Self Talk


Brandon Wilhite said...

A very appropriate post for today!

Personally, I try to plan for every contingency I can think of, which tends to reduce my anxiety. But this is an uncertain business, so I still experience anxiety and I worry. Maybe I should try the 30-minute worry session :)


The Financial Philosopher said...

Certainly all of us will worry to some degree from time to time but some of us simply are more prone to anxiety. I fundamentally disagree that "emotional exercises" are the answer. I suggest that traders, and all of us, go back to the 2500-year old wisdom of "know thyself."

Socrates, himself, would suggest looking inward and determine if you are doing what is suitable for you to begin with before trying to force yourself to "change."


Brandon Wilhite said...


I think if you became familiar with Dr. Brett's work, you would see that he very much advocates the same thing.


Brett Steenbarger, Ph.D. said...

Hi Brandon,

Yes, facing worst case scenarios and creating "what if" coping strategies is a great way to dispel anxiety. Avoidance is the strategy that seems to work worst, and-ironically-worry is a form of avoidance.


Brett Steenbarger, Ph.D. said...

Hi Philosopher,

I have to agree with Brandon here: looking inward can be a powerful "emotional exercise". I see no necessary dichotomy between a psychological and philosophical approach.