Friday, November 18, 2022

Relapse Prevention: A Neglected Topic In Trading Psychology


A savvy trader at SMB Capital reached out with a dilemma.  Each month he creates a new goal to work on, but to his dismay he has found that, once he moves on to a new goal, a previous problem resurfaces!  Psychologists refer to this as the problem of relapse.  Old patterns of thought, action, and feeling become ingrained habits.  They are not only learned, but overlearned.  It is relatively easy to change a habit pattern when we put full attention to doing things differently.  It is also easy to fall back into that pattern when our attention is turned elsewhere.

This is a neglected topic in trading psychology.  We talk about making changes, but not so much about maintaining those changes.

It is discouraging to make a change and feel that you're making progress, only to fall back into old ways and re-experience negative consequences.  But relapse is an intrinsic part of the change process.  We will always relapse until we have turned our new, constructive patterns into positive habit patterns.  That means that we have to rehearse and rehearse and repeat and repeat our positive changes day after day until they become automatic, natural parts of us.  If we need to muster motivation and effort every time we want to do things constructively, we'll never be able to direct our willpower toward new goals. 

This is where psychological resilience is important.  When we relapse, we want to summon our determination to change and say that "This is not how my story will end!"  If I relapse after three weeks of positive change, that's progress compared with relapsing every week.  Relapse is a detour, not a failure.  If we're truly learning and growing, we make special efforts to learn from our relapses.  That enables us to respond differently and constructively to the situations that may have triggered our old ways.

What I emphasized to the smart trader who raised the question is that you never want to let go of Goal #1 when you formulate Goal #2.  Change is never a straight line.  We always need to be working on our old patterns, even as we tackle new ones.  As I emphasize in The Daily Trading Coach, we defeat relapse through repetition.

Further Reading:

The Power of Regret in the Change Process

The Secret to Changing Our Selves