Friday, September 07, 2007

The Heart of Trader Coaching: Creating Powerful Emotional Experiences

In my post yesterday, I described the case of Pete and the idea that what we consider to be our problems are often coping efforts that once might have been successful, but now no longer fit our situations. Pete prided himself on being a master analyst of the markets, but in fact was dogged by feelings of inadequacy whenever he couldn't figure out market moves. He looked toward success in trading as a way of vindicating himself for prior failures, particularly in college. The feelings of inadequacy were thus quite threatening to him. He avoided them by backing away from working at his analysis and planning during difficult market times, later blaming his "loss of discipline" as the reason for his drawdowns. In reality, his lack of discipline was his coping: instead of trying and failing--his worst nightmare--he simply went on psychological strike and stopped trying.

When I was in therapy myself as a graduate student at the University of Kansas, the most impactful comment my therapist made was that I should "pursue my anxiety". She explained that everyone is afraid of the unknown. But we can only grow and develop as people by going beyond the known. Our anxiety often points the way toward our greatest growth.

In my case, I had a recurring dream of going down a very large and fast slide. It was very anxiety-provoking: I was afraid of losing control and falling. (Other dreams similarly featured a fear of heights). In guided imagery work during the therapy, I had to place myself on the giant slide and release myself downward. An important therapeutic moment occurred when I transformed the rapid fall down the slide into an image of flying (another recurring, but positive dream). In many aspects of life, I was afraid of falling; by facing that fear directly, I could replace it with the joy of soaring.

The important principle is that we overcome fears by experiencing them directly and finding a new, more positive emotional experience.

Pete was hoping to change his behavior with simple advice or positive thinking. In essence, he was hoping that he could bolster his own (maladaptive) coping so that he could preserve his image of himself. What we had to do to create real change, however, was to actually face times of great market uncertainty and use those to double his efforts at analysis and planning. This was the slide he needed to go down.

Of course, this was greatly anxiety-provoking for Pete, and it triggered many thoughts and feelings such as, "What if I'm wrong?" My stance was, "Of course you'll be wrong at times! What trader isn't? The good traders aren't the ones who are always right. The good ones are the ones who survive the periods of being wrong. If you're wrong, let's see if we can learn from it, so that we can become better."

By requiring Pete to make small trades based on his analysis during a period in which he felt uncertain, I created a win-win for him. If his analysis was correct, it would reinforce the notion that he did, indeed, have skills. If his analysis was faulty, it would provide us with the even more helpful experience that he could survive "failure", learn from it, and use it to improve in those areas where he was not yet expert.

The real heart of the work with Pete was seeing him through this facing of his worst fears, helping him rework the anxiety into opportunity. He needed to learn to face his inadequacies without being swamped with the feeling of being inadequate.

All of us are deeper and far more complex than we realize. It's human nature to seek the easy path, the short cut. We look for solutions to our problems that keep us comfortable, that keep us coping in the same ways that haven't been working. What I learned from my own experience in Kansas was that, if you haven't had a powerful emotional experience, you haven't changed.

In facing our demons, we become their master.


Controlling Emotions Is Not The Goal of Trading Psychology

Five Principles of Growth and Development

Techniques for Dealing With Emotional Disruptions of Trading