Friday, August 29, 2008

The Fundamental Error of Trading Coaches

My last post suggested that we learn trading problems in much the same way that we learn market patterns: through implicit learning, accelerated by novelty and emotional impact. One implication of this view is that the problems that affect trading--from performance anxiety to frustration and impulsivity--are not verbally mediated. Because they are the result of repeated negative experiences in markets, they are conditioned responses that occur without prior thought.

The fundamental error that trading coaches make is to assume that, because such problems interfere with trading discipline, they can be solved by imposing stricter discipline. If the anxieties and frustrations that disrupt decision-making are implicitly encoded, however, they cannot be modified by creating more and different trading rules, by talking oneself into discipline, by discussing discipline with coaches, or by establishing trading plans. All of these are conscious, verbal, explicit attempts to deal with phenomena that are not encoded in conscious, verbal, explicit ways.

This is why, for example, talk therapies tend to be relatively ineffective in dealing with post-traumatic stresses. Suppose a soldier has been traumatized in wartime and now finds his work in civilian life disrupted by memories and images from his time on the battlefield. Would he be helped by reviewing and writing down rules for the workplace? Would he be helped by talking to someone who encouraged him to stay disciplined in his work? Would creating plans for greater productivity even begin to touch the problem? Of course not.

Psychological problems created by repeated negative emotional experience can only be solved through experiential means. That is why conditioning therapies work so well with traumatic stresses; it's also why anxiety can be dealt with more effectively through relaxation and imagery than through talking about one's fears. About 60 years ago, two psychoanalysts, Alexander and French, challenged Freudian orthodoxy by insisting that change occurs through "corrective emotional experiences", not from intellectual insight. That perspective has greatly shaped the approaches to helping known as brief therapies. Sadly, it has yet to permeate coaching practice with traders.


Brief Therapy for Traders

Therapy for the Mentally Well


JMJAtlanta said...

Great post. And your links to your previous posts about brief therapy hit the spot.

When a problem appears, I must see it as a problem, identify it correctly, diagnose the cause correctly, and then (the hardest part for me) find the proper method to solve it.

That's a tall order for someone who often "can't see the forest for the trees." Recalling all the possible methods that apply is another hurdle.

Perhaps I need a decision tree in an easy-to-find document (or book, hint-hint).

itrade4real said...

Excellent post! I feel the goal is to make the discipline actually feel good. Interestingly, it takes a leap of faith in the beginning, but a swelling P+L will eventually reinforce trading in a discplined manner.

Aman Mehari said...

You post interesting material that nobody is currently addressing. To me this is at the very heart of trading. The rest are details.

I’m a long time meditation practitioner and I can only speak from my experiences which may be at odds with other approaches.

Clarity and exact thinking is very important. When one thinks inexactly you allow your emotions and fears to control you, so you end up doing things without even knowing you’re doing them.

Clarity evaporates fear. Where there is total clarity anxieties and frustrations have no place. There is no active thinker in search of an answer. Discipline is not something that you impose, its something that happens to you naturally as a result of clarity and insight. I, and many others, find rules that emerge from absolute clarity eliminate emotions(what I'm suggesting here is insight then analysis, not the other way around.) That’s control; just not absolute control. Thought is a beautiful tool but it’s imperative that it realizes its limitations. Or else, it can get lost in its own hyperactivities.

Only clarity can access your implicit awareness. It’s only such a mind that sees the whole of a situation as a unit, because it acts out of complete stillness, without thinking, which is awareness. Then in this place of awareness the past and its negative experiences have no place. It’s only when you habitually judge a current situation and implicitly relate it to the pressures of the past that you lose awareness. Which is humanities common and frequent state.

Clarity and insight comes not from intellectualizing or talking oneself into it but through ones ability to live with, and experience negative emotions and thoughts that dim ones awareness. Merely trying to understand an actuality through thinking, an abstraction, won’t do it. Going into this requires a deep burning passion for seeing things whole.

A lot of good can be said about western psychological therapy methods. Namely it provides quick pain relief but the changes do not transform the individual permanently. The approach does not get at the root of the whole problem - the individuals total identification with his thoughts. So when you get rid of one problem another one takes its place instantaneously. The goal of the meditation practitioner is not so much to get rid of emotions, or change their patterns, but to learn to relate and live with them through personal feeling from movement to movement in the mirror of the relationship. When you stop trying to do something about them these negative emotions transform into something positive and evaporate.

Just my usually $0.02.


P.s. I have always believed that psychological therapy methods are immensely useful tools in assisting one to accelerate the speed and depth of ones meditation practice.

IDkit aka Ana said...


I quote this which you said in your last night in Singa-pura:
I'm in Singapore now, where the durian is a renowned fruit. It has an extremely powerful odor, which some find appealing and others find offensive. A single exposure to the durian for those who find it overpowering will result in a permanent impression: it is unlikely to be forgotten!UNQUOTE

On our first night out at The Esplanade, designed in the shape of two 'durians', I recalled discussing this 'heavenly king of fruits' which overwhelms you both ways - heavenly or distastefully!

If you love cheese, you may love the durian fruit, Brett.

Next trip, when you stay longer, will introduce you to the King of Fruits!

Glad that you had a smooth flight home on Friday.