Tuesday, January 06, 2015

Best Practices in Trading: Using Visualization as Emotional Preparation

The next best practice in our series is using imagery and visualization to change our thoughts, feelings, and actions as traders.  Imagery can be a powerful method for reprogramming our minds and reframing challenging trading situations.  Reader David Spengler offers this best practice from his own trading:

"In German, the phrase 'to jump into cold water' refers to a situation that is new and unknown and therefore risky.  Before entering a trade, I am visualizing exactly that situation to overcome fear and procrastination.  I close my eyes for a few seconds and imagine it is summer.  The sky is blue, it is very hot, and I am sweating.  I am standing by a pool.  Then I jump into the water headfirst.  It is a shock, but only for a second.  Then it feels unbelievably good, as I sense every cell in my body and the blood pulses through my veins, my heart pumping fast.  

This image reminds me that jumping into the cold water/taking risk can actually feel good.  More technically speaking, I reframe the situation.  Since I have made it a habit imagining this scene, problems executing my trading systems have been greatly diminished."

Notice here how a situation that could be experienced as unpleasant (risk taking) is transformed into something that is refreshing (diving into cold water on a hot day).   By making the visualization habitual, the exercise becomes a kind of self-hypnotic suggestion.  David uses the exercise to enter trades, but a very similar exercise could be used to reframe taking losses--or any desired trading behavior that might otherwise be avoided.  

I have found that visualization can also be used very effectively prior to the start of the trading day as a way to mentally rehearse one's trading plans.  By walking ourselves through various scenarios via imagery, we can mentally prepare ourselves to take the right actions.  What makes David's technique especially effective is that the imagery *emotionally* reframes the trading situation.  If we were to prepare ourselves at the start of the day by imagining ourselves stopping out of losing trades and refreshing ourselves for the next opportunities, the act of stopping out would become far less onerous.  

Replacing negative self-talk with positive imagery is a great way to retrain our thought process and channel our efforts in constructive directions.  The emotional preparation to act may be as important as the trading plan itself.

Further Reading:  Directing the Movies in Your Head