Friday, May 30, 2008

Psychological Change and the Power of Discrepancy

In my post on constructivism, I described change as a revision of the mental maps we construct to make sense of the world. We provide coherence to our experience by shaping it into narratives; when we tell the story of our lives, we literally tell a story. We include and emphasize certain events, exclude others. The story line is our personal drama, one in which we play leading roles. (See my earlier post on the roles we play and the importance of shifting roles).

Discrepancy--encountering new experiences that don't fit our mental maps--is the source of all change. We change by thinking new things, behaving in new ways, and feeling differently. If we stay in the same roles, engaging in the same activities, thinking the same things, nothing in our mental maps will require revision. We do not change.

When we enter new roles, we are forced to think and behave in new ways. This is how we adapt to new careers, new relationships, and new responsibilities such as parenthood. As we play the new role, it increasingly becomes a part of us, integrated into our mental maps.

But that is not easy. When we encounter discrepant events and situations, we will naturally feel uncomfortable. We are outside the familiar realm of our maps. A certain anxiety and discomfort precedes all change; without it, we are too stuck in existing roles and maps to shift the ways we think and act. It is only human nature to avoid such discomfort, so we tend to stay with the known, the existing set of maps. We resist change.

My earlier post emphasized that we bring our life dramas--the scripts from our accumulated roles--to our trading. If you find yourself making the same mistakes in trading repeatedly, the odds are good that you are reprising a role in the markets. Maybe you're caught in a success fantasy or a story line of high expectations that are never met. Perhaps your drama is one of fighting larger forces or encountering risky thrills.

It is impossible to adapt to changing markets when we are rigidly bound to scripts from the past.

There are so many ways of changing how you trade and thereby revising your mental maps. You can trade in a more structured, rule-based way. You can trade larger; you can trade different markets or time frames. Each change shifts our experience of markets and our experience of ourselves in markets, and that alters the viewing, making it easier to continue altering the doing.

At one time a trader I work with thought of himself as a promising beginner. With success under his belt and a network of successful peers, he now experiences himself as an established professional. Another trader I've seen for a while used to view himself as undisciplined. He took on roles in his physical fitness and development, carried those over to his trading, and now sees himself as a trader with excellent risk-adjusted returns. When I first met him, I'm not even sure he had thoughts about risk-adjusted returns. Now it's how he keeps score.

You can't talk yourself into change. Only encountering new situations and placing yourself in new roles will provide the discrepancies that prod you to revise those maps and change your ways of viewing and doing.

If you get that, then you can see that the changes you most want to make as a trader are those that will enable you to experience yourself as the trader you want to become. The links below might just help you get started on that adventure.


Becoming Your Own Coach

How to Change Yourself