DROWING IN DENIAL
Janice Dorn, M.D., Ph.D.
The Trading Doctor
Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true . . . Demosthenes (statesman and orator of ancient Athens)
Why do we run from our own truth? What makes us close our eyes and bury our heads in the sand rather than confront what appears to be a harsh reality? Why are we compelled to cling to dysfunctional relationships and losing stock positions in the midst of increasing drawdown of our mental, emotional, physical, financial and spiritual capital?
We do this because we are driven by hope. We behave in a certain manner because we want to believe that, somehow, somewhere, sometime, things will get better. We refuse to cut losses in our personal lives and portfolios because it is an admission that we are wrong; that we can't make good decisions; and that we will have to say goodbye again. The final saying “goodbye” to someone or something for which we yearned, lusted and made our own is painful. We cherished this as a possession, believed that everything would be fine if we were a little more patient, held on just a little bit longer and kept doing everything we could to make it right. With each passing day, we were dying, slowly, inside.
As a psychiatrist and trading coach, people have been coming to me with "problems" for nearly 30 years. They have many challenges, including bad jobs, hideous and abusive relationships, childhoods from hell, depression, self-destructive behaviors, addictions, compulsions, anxieties, phobias and the devastating consequences of undisciplined, risky and inconsistent trading. It's always about what's wrong. After all, why go to a shrink or a trading coach if things are wonderful? Why celebrate the positive aspects of one's life when there is so much misery and despair? Why bother to take personal responsibility when it is easier to remain in victim mode?
My writings about the market were born out of these experiences, strengths and hopes -- both yours and mine. No matter what, we are always determined to "fix" the problem; to make the pain go away; to stay with the losing relationship or the underwater position because we "know" that everything is going to be fine if we just keep working on it. It will be OK. The person we love will change and the stock will come back. Forget about the fact that it is ruining our lives, so that we can't eat, sleep or exercise properly and can't remember the last time we felt any semblance of serenity or joy. Just deny that the whole thing is happening and everything will, like some magic trick, turn out just fine. Won't it?
One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. The bamboozle has captured us. Once you give a charlatan power over you, you almost never get it back . . . Carl Sagan, (American Astronomer and Astrobiologist)
Years ago, I bought many thousands of shares of a low-priced stock because I became convinced that it was the next best thing to sliced bread. I paid no attention to anything I read or heard because the stock was being touted continually by a trader guru whose opinion I respected. It made no difference to me whatsoever that the company had less than competent management, massive debt, no revenues and one of the ugliest charts on the planet. I had grown, fostered and nourished a belief that this was going to be the big win for me. I truly believed that I would get in on the ground floor and then watch with delight as Wall Street finally noticed what a groundbreaking product this company had and that the stock would start going up and up. Visions of a ten or twenty bagger infiltrated my brain and made themselves perfectly at home in my limbic system. I started having personal feelings about this four-letter stock.
I loved it; knew it was going to live up to every expectation I had about it; read every piece of news I could about it; told friends that this was the next biggest and best winner and it was only a matter of time before everyone would see the beauty and power that I knew. I was there first, so no worries at all. My belief system was so skewed and distorted that I could not see the truth. I did not want to read or hear anything negative about the stock, since I was now in love with it to the tune of tens of thousands of dollars. I owned it. It was my prized possession and I felt like, in some way, I needed to defend it against all naysayers. Like a marriage or a new relationship, I didn't want to hear anything bad about it. My brain was filled with the neurochemistry of new love and attachment, so please don't bother me with reality. Just like every other new relationship, stocks are entered into on hope.
I will spare you the details of the emotional roller coaster I rode with these stocks for over two years. Not only did I break every rule of investing and trading, but my mood swings were seemingly out of control. Graphically, it felt something like this:
The worst lies are the lies we tell ourselves. We live in denial of what we do, even what we think. We do this because we're afraid. We fear we will not find love, and when we find it we fear we’ll lose it. We fear that if we do not have love we will be unhappy . . . Richard Bach
I have omitted the moaning, wailing, gnashing of teeth, pulling of hair, screaming at the computer screen, and blinding migraine headaches, but you get the idea. In retrospect, it was two years of sheer madness. What started out as adoration morphed into desperation, disbelief and sheer disgust.
The last week of this sordid affair, I sat in disbelief as the stock lost nearly 30% of its value. That was it. I simply could not take it any more. I was sick and tired of being sick and tired. I refused to endure one more minute of this. I was too good to suffer any more. I could no longer sit in misery and hope and wait for the market to throw me a bone so that I could get all excited and happy again. It was just simply too much torment and I was no longer taking responsibility. I was letting the markets dictate to me how I would feel that day. I was allowing the markets to exploit every aspect of my personality that would cause me to be weak, tricked and off balance.
Denial ain’t just a river in Egypt…attributed to Mark Twain
I had to get my head out of the sand, get out of denial and SELL. Tens of thousands of dollars vanished into the market abyss. Two years of mental machinations and emotions which covered the entire range of any "feelings" chart I had ever seen also vanished. I bought with hopes and dreams and sold with despair and defeat. I ran screaming into the other room; then, suddenly, I felt a sense of utter calm and tranquility. I was free from the daily suffering, from the agony of thinking I knew something when it was really about how much I did not know. I was no longer a prisoner of brain scramble, endless tormenting of self, and the depletion of personal energy. By taking action, I stripped through the denial and magical thinking. I took personal responsibility, empowered myself and gained great courage. Yes, I have scars and wounds which I cherish because they are there to remind me of hard fought times and lessons learned. It is idiocy to hold and hope, and bravery to admit you are wrong and get out before it's just gone too far. This experience is etched in my brain and written on my soul. I shall never forget so as not to repeat it.
I committed every one of the mistakes a trader could possibly make! I drove myself into a state of almost complete mental, emotional, physical and spiritual drawdown. I broke my cardinal rule of "Don't Lose Money, Cut Losses Quickly!” I held on because for some reason I could not get myself out of denial. It was only when the denial lifted that I felt both courageous and free. I faced the truth and got out of hope and fear. Through this brutal experience I learned lessons which I teach to others daily. I know what it feels like because I have been there. I know what courage it takes to play this great game and to rid yourself of false evidence; to stop playing ostrich and to deal with the absolute truth which is staring you in the face.
In the markets, as in life, the only way to grow and preserve yourself is to get rid of what is not working for you. It doesn't matter if it's your relationship, your house, your car or your position in the markets. If you do not have the courage to cut your losses, they will fester and take you down with them. To see and know in your heart what is right, but to not do it, is a complete lack of courage. To be courageous is to do, in the face of seemingly overwhelming obstacles, what must be done. Courage is getting out of denial, admitting you made a mistake, and taking personal responsibility. Courage is freeing one’s self from the shackles of lies, hopes, dreams and white picket fences which are built upon shifting sands. Courage is listening to the voice inside of you and following your heart, which never lies to you. Only in knowing what is false does one come closer to the truth. Courage is the eternal and heroic struggle to find and face your authentic self. Look it squarely in the eyes and know that you are now becoming the person you want to be.
Many of you spend your entire life running from the mistaken belief that you cannot bear the pain. But you have already borne the pain. What you have not done is feel and see everything you are beyond that pain...Kahlil Gibran (artist, writer and poet)
Until next time
Good Trading and Brain On!
Janice Dorn, M.D., Ph.D
The Trading Doctor
© Copyright 2007 – Janice Dorn, M.D., Ph.D. – Ocean Ivory LLC.
Dr. Dorn is a psychiatrist and futures trader since 1996. She has written over 400 articles on Behavioral Trading and has coached over 600 traders. She will answer questions about trading neuropsychology. She may be reached through her website:
The Trading Doctor