Thursday, December 18, 2008

Trading Coach Basics: Changing the Viewing and Doing

I'm in the process of indexing the new book, The Daily Trading Coach, which will be coming out in the first quarter of 2009. The following quote from the book nicely summarizes an important point in trading psychology:

"As your own trading coach, you want to use your most extreme feelings to figure out your most distorted ways of viewing yourself and your trading. If you're managing risk properly, there should be nothing overly threatening about any single trade or any single day's trading...If you are trading well--with plans built on demonstrated edges, with proper risk control--trading will have its stresses, but should not be filled with distress. Markets cannot make us feel anxious, depressed, or angry; the threat lies in how we view our market outcomes" (p. 168).

All of us, in our perception and thought, see the world through the lenses of personal experience, just as a person might see things through a set of glasses. When we react extremely to trading, the problem is often in the lenses, not the markets themselves. We become too attached to winning, too afraid of losing, too insistent that markets behave the way we want; all of these impose distortions in our views of our performance. In such situations, what we need is a new set of lenses, a change of prescription--not a frantic search for ever more perfect indicators and systems.

So often, changing our doing begins with changing our viewing. But the reverse is equally common: we engage in new doing and that leads to fresh views. The latter is a big part of what self-coaching is all about: challenging old ways of thinking and opening yourself to new experiences, new ways of experiencing yourself. Too often, we hope to change the mind in hopes that it will change our behavior. In reality, the arrow of causation is reversed: in generating new experiences, we change how we see self and world. You don't just become more confident and then trade better; you learn to trade better, and that brings confidence.