Saturday, October 03, 2009

A Solution-Focused Approach to Overcoming Trading Frustration

My first post in this series explained why frustration is perhaps the most destructive force affecting active traders. The second post outlined cognitive strategies for preventing and overcoming trading frustration. This final post will explain a solution-focused approach for dealing with the frustrations that can generate overtrading, missed opportunities, and impulsive decision-making.

Whereas cognitive techniques for dealing with trading problems focus on changing negative patterns of thinking about ourselves and markets, solution-focused approaches start from the premise that--at times--we are already enacting the positive patterns ("solutions") that we desire. Instead of focusing on what we're doing wrong and trying to prevent ourselves from doing it (which only keeps us problem-focused), we instead craft solution patterns out of our best trading.

There was a period in which I found myself trading too much and losing money needlessly. I recognized that I was in a frustrated state when I was putting the trades on. In the back of my mind, I sensed that they were poor trades from their inception.

I also recognized that there were times in which I traded in a very harmonious state of mind. I had clarity about what I was doing and it felt as though the market was coming to me. I wasn't trying to make things happen.

From the solution-focused vantage point, I began to dissect those harmonious periods. The idea was that, if I could figure out what I was doing right at those times, I could turn those "best practices" into routines--and ultimately into habit patterns.

One of the clearest conclusions that emerged from this analysis was that, during my harmonious trading, I had an explicit "top-down" perspective on the markets. I focused clearly on what was happening at larger time frames and aligned myself with the market's broader structure (trending/non-trending) and themes. During my frustrated trading, I worked from "bottoms-up", looking for short-term setups regardless of the market's broader picture.

Little wonder that I would get run over on those bottoms-up trades, catching the next ticks, but missing the next points. My frustration stemmed, not just from my losses, but also from my feelings about what I was doing. At some level, I was frustrated with myself for not trading the way I know how to trade. In short-circuiting my decision-making process, I felt that I was losing a part of myself, my integrity.

From the solution-focused frame, I found music that--for me--captured a bit of the harmonious feeling that I experienced when I traded well, with integrity. Before I started trading, I engaged in my market preparation, listened to the music, and established a clear, written large-picture view of the market. That became as much a part of my morning routine as washing up, making my coffee, and doing my stretching exercises.

The solution part was shifting myself to the harmonious frame of mind, while reminding myself of integrity. I didn't try to analyze or fight frustration; rather, I became better at sustaining a mode in which frustration could not flourish.

As I stressed in a recent post, at times we are already the traders we desire to be. Solution-focused methods are structured techniques for more consistently accessing the person we already are at our best.

For those interested in a detailed presentation of solution-focused methods, my chapter in the training text The Art and Science of Brief Psychotherapies is a good overview. Trading perspectives devoted to the solution-focused perspective can also be found in this post and its links, as well as Chapter Four of The Daily Trading Coach.