Sunday, July 21, 2019

How Do We Make Changes In Our Trading?

There are many different approaches to change in the world of psychology.  A fascinating body of research suggests that these work surprisingly similarly, with similar results.  Although the theories underlying these approaches (psychodynamic, behavioral, cognitive, systems, humanistic, etc.) are quite different, their common effective ingredients account for much of their success.  When I reviewed short-term approaches to change, one fascinating common ingredient stood out:  all the successful therapies begin by shifting the cognitive, physical, and emotional states that we are in.

As I emphasize in my new book, which will be out in August, in our usual states of mind and body, we think and do usual things.  If we want to make meaningful changes in our lives, we have to exit our routines and experience our lives in fresh ways.  This is why newlywed couples go to new, inspiring places for their honeymoons; it's also why we find value in meditation, arts, travel, and celebration.  When we want our lives to feel special, we seek special experiences, not everyday routine.

So often, it is the pull of habit that keeps us from making changes.  Yes, we all need trading routines, but if all our trading is nothing more than routine, we'll achieve routine results.  It is important to follow robust, proven processes, and it is equally important to exit those routines when we want to make meaningful changes in our trading.  That's the tricky thing: we need habit to stick to what we do well, but we need to break habits when what we're doing no longer works.

So how do we break out of our routines and make changes in our trading?

In the most recent Forbes article, I explore a most unlikely topic:  forgiveness and repentance.  What do we mean when we say we repent for something?  It means we recognize that we've done something wrong and want to make amends for it.  It's no coincidence that every major religion embraces formal services for the purpose of forgiveness and repentance.  It's when we stand outside ourselves, look at our selves from a fresh perspective, and feel really crappy about what we see, that we can become filled with a desire to change.  Many life changes occur because we can no longer tolerate the status quo.  At that point, change feels like a need--an imperative--not merely a desire.  That's what happens when an alcoholic hits bottom.  Looking at the consequences of his drinking, he feels tremendous remorse.  In that new state of consciousness, he cannot go back to his old ways.

The article explains how this is relevant to trading.  When we make mistakes in trading--when we overtrade, when we fail to act on our ideas, when we take imprudent risks--we end up betraying the best within us.  We are most likely to make real changes in our trading if we own up to what we have done wrong, feel the pain of that betrayal, and find the courage and motivation to be better than we've been.  It's a kind of hitting bottom, and it's a great purpose for a trading journal.

No pain, no gain is a common slogan.  This is true emotionally as well as physically.  Great things were never achieved inside comfort zones.  It's the trader who can tap into the pain of f***ing up and find a way to forgive--but never forget--that finds the energy to make lasting changes.  Our successes and our failures are there to teach us something, in trading and in life.  Sometimes it's the pain of the failures that brings us back to what we're meant to be doing and to what brings us that success.