Thursday, January 24, 2019

Finding Psychological Techniques for Traders That Actually Work

It is common that I hear traders describe techniques they are using to make changes that sound good on the surface but that, in fact, are not effective.  A great example of this would be the use of trading journals to review the day.  Such review might be helpful for learning and, if focused, could help with goal-setting.  But the process of making personal changes is not going to be fulfilled by doing some writing.  Change requires a different focus and a very different mindset and emotional state.  Writing down an intention to be more disciplined in trading is worlds apart from using psychological methods to rehearse that discipline and create a sense of emotional urgency around the rules and practices.

In the most recent Forbes post, I lay out an important principle:  the challenges that impact our trading are closely related to the personal challenges that bring people to counseling and psychotherapy.  We first encountered this notion in the Psychology of Trading book, but the idea of a continuum linking all of our challenges is broader.  As the Forbes post lays out, an important implication is that the techniques that help people with anxiety, depression, anger, and the like are effective for parallel problems in the performance domain:  stress, negative thinking, frustration, etc.

This is huge.

There are evidence-based psychological methods known to help people with diagnosable emotional disorders.  Every one of them can be adapted to help us with normal, developmental challenges and with the unique problems associated with the quest for peak performance.  Moreover, all those techniques accomplish their goals relatively quickly, as the most recent research review of brief therapies lays out.  

We would never consider turning to unproven home remedies when research-backed medical help was available.  Similarly, it makes no sense to turn to pop-psych, feel-good solutions when there are reliable methods for lasting change readily at hand.  In upcoming posts, I will review some of these methods and their application.