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


The Financial Philosopher said...

Personally, I've always said that the mistake is a philosopher's greatest tool for growth...

"Your enemy is your greatest teacher." -- Buddhist saying

"When we meet real tragedy in life, we can react in two ways -- either by losing hope and falling into self-destructive habits, or by using the challenge to find our inner strength." -- Dalai Lama

"When the pupil is ready, the teacher will appear." -- Zen saying


Trader Musings said...

Most of my younger life, I hated speaking in public. It could be a group of just 5 people, it did not matter. I hated talking in front of a group of any size.

I then decided to become a lecture at an Ohio Catholic Church. A lecture during the middle of the Mass stands up and reads two readings from scripture in front of the entire congregation.

I have no idea why I did that. On my first attempt, my knees were shaking and my hands wet with sweat. My voice was weak and quivering. But I did not give up. I lectured for 10 years and became known as one of the better lectures.

I was then asked to give an hour long presentation on Religious Education. On my first presentation, I wrote out the entire speech and read it word for word from the paper. I did this for another 5 years. In the last few years of giving these presentations on different religious subjects, I was delivering the presentations without any notes, and straight from my head, with a firm and commanding voice and no indication of nervousness - no wet palms and no shaking knees.

With determination, change is possible.

I still do not know why I signed up to become a lecture, but I am glad that I did.


Trader Musings said...

Sorry for the spelling.

Replace "lecture" with "lector".

Maybe there is a psychological condition for the brain thinking about one word, and the fngers typing another.


Glen Bowman, Ph.D. said...

When I was younger, I struggled with social anxiety. I stuttered on occasion, and was so afraid of being mocked, I avoided social interaction to the extreme. This continued during college, as I was terrified of participating in classroom discussion even though I was a honors program who graduated summa cum laude at the very top of my class. Nevertheless, I was so afraid of stuttering and looking the fool that I would sometimes spend twenty minutes working up enough courage just to knock on a professor's door.

As I began my graduate career, I fought back against my social anxiety. Paxil helped, but what really helped was my desire to confront my fear, one day at a time. The old me would sometimes hang up the phone when calling someone if the moment did not feel quite right. The new me would go out of my way to ask a question, any question, just to get in the habit of NOT giving in to my fears. The first day in front of a college class, my left leg could not stop shaking, but I kept at it, knowing that I had talent and would one day be a great public speaker.

Now I have no fear at all. And I LOVE public speaking, and talking on the phone, and confronting strangers.

How does this apply to trading? When I first started trading the S&P e-mini, I hesitated pulling the trigger, a bad habit, considering all the years I had spent getting ready for the moment--spending hours at the microfilm machine studying charts when I got bored with the dissertation, checking out hundreds of books on the markets at the university libraries, backtesting strategies, analyzing spreadsheets, and such.

Then I remember back to how I beat my social anxiety. So I started trading super small, NOT missing signals because of my irrational fears. 100 shares of SPY might not sound much compared to 50 ES contracts, but those small trades helped me, once again, to eliminate a fear.

Small victories add up. Professor Steenbarger is absolutely right.

High Probability Trader said...

Hey Dr. Brett,
Your example of Pete, pretty much describes me and my trading. Trading has now got to a point to where I don't care anymore. The dreams of making money and becoming rich have pretty much disappeared. I will have to settle for mediocre and just be happy with the person I am. There you go, another depressive response coming from me.

Brett Steenbarger, Ph.D. said...

Hi Philosopher,

Great quotes; I especially like that last one. Thanks for the insights!


Brett Steenbarger, Ph.D. said...

Hi Charles,

Great example. I also overcame a discomfort with public speaking by teaching a class 3 days a week. Whew! Now it all feels natural. So much of success is a function of facing fears and shortcomings. Thanks for the comment--


Brett Steenbarger, Ph.D. said...

Very insightful, Glen; thanks much. You inspired my next post. I appreciate your willingness to share the personal insights--


Brett Steenbarger, Ph.D. said...

Hi High Probability,

I'm going to post something related to your comment; it's a very worthwhile topic. I don't necessarily see your response as depressive. It may be a realistic (albeit disappointing) awareness that can eventually lead you in more fruitful directions. More on that in my post; thanks!