Thursday, April 29, 2010

Core Ideas in Trading Psychology: Changing Our Problem Patterns With Brief Therapy Methods

One of the key themes running through the TraderFeed blog, as well as my books on trading psychology, is that changes in our behavior, thought, and emotion can be effected by relatively brief, targeted change methods.

All of our behavior--from our ways of thinking to our typical modes of responding to situations--is patterned. The sum of our patterns is what gives us our personalities. Many of our patterns begin as coping responses to challenges that we face early in life. For instance, if I find myself repeatedly hurt by others, I may learn to maintain a high degree of privacy and guardedness. Keeping to myself, I can't get hurt.

Such patterns may be adaptive for the situations that we are in, but they become maladaptive once we enter different environments. Thus, the withdrawal that worked when growing up now becomes a liability in forming new, romantic relationships. By then, however, the pattern has been overlearned; it has been internalized as part of the self. As a result, I can find myself repeating patterns that bring unwanted consequences. Worse still, I can be unaware that I'm repeating those patterns.

The process of changing our patterns of thought, behavior, and feeling begins with becoming aware of our repetitive patterns and the consequences of those patterns. While such awareness will not, in itself, change us, it is a necessary step: once we clearly recognize what we're doing, why we're doing it, and how it is hurting us, we can step back and try to do things differently. If I see that I am hiding behind a wall of guardedness in relationships because of previous problems in relationships--and if I clearly perceive how that is holding me back from cultivating new, meaningful relationships--then I can try, little by little, to take down that wall. Many times, that breaking of the wall (the changing of our patterns) starts in the relationship with a therapist.

When problem patterns do not overwhelm a person's life and prevent them from functioning in the world--and especially when those problems have been relatively recent and situational, not chronic and pervasive--it is usually the case that short-term, highly active and focused approaches to change can be effective in generating and sustaining change. These approaches fall under the category of brief therapy. Illustrations of how people can change problem patterns through such short-term approaches can be found in my Psychology of Trading book. A description of specific techniques drawn from the brief therapy literature, including behavioral, cognitive restructuring, and psychodynamic approaches, can be found in the Daily Trading Coach book. A more thorough coverage of brief therapy methods and research can be found in my co-edited volume on the topic.

Very often, repetitive patterns in behavior and relationships interfere with trading. At a simple level, they can interfere with our concentration and market focus. More broadly, however, those patterns have a subtle, destructive way of playing themselves out in our trading. The person who felt unappreciated by parents now takes on too much risk in markets to become successful and attract the desired admiration; the trader who experienced painful losses as a child now freezes up when markets move against him; the person who rebelled against authority and control in his early years now finds himself breaking his own trading rules.

When problems from your personal life are interfering with your trading, it is always the right strategy to stop trading and pour yourself into resolving those problems. This does not have to be with a trading coach: any competent psychologist schooled in brief therapy methods can help you understand your patterns, interrupt those, and replace them with more constructive ways of dealing with the world.

Then you can return to trading as a free person with full focus, ready to acquire and utilize a lifetime of skills.

For more on the topic of brief therapy, check out this post and its links on therapy for the mentally well. See also this post on coaching traders in real time.