[idaxtrader]

A goal that is not tied to immediate plans and feedback leaves a trader with no clearly perceived path toward goal attainment. Burton and colleagues make the excellent point that performers with lower levels of confidence and efficacy will especially benefit from goals that create experiences of success and control. 189

Because imagery is functionally equivalent to actual experience, performers can benefit from skill building via imagery as a supplement to deliberative practice. 190

1. Mental practice improves performance.
2. Mental practice added to physical practice improves performance
3. Mental practice improves cognitive skills more than motor ones.
4. Mental practice benefits expert performers more than novices.
5. The benefits of mental practice decrease quickly with time.


An additional, interesting finding is that imagery-based practice is most effective when it is vivid and when it is positive. People differ in their abilities to produce vivid imagery, and it appears that highly vivid images best serve as rehearsals for live performance. 190

Employed properly, imagery enhances goal setting by making goals real. 190

It is not enough to read books and articles, attend workshops, and review charts. Performance development is planful, systematic work on oneself. 191

An objective observer of the human race would conclude that people lack self-control. 193

Why would a trader who has written one rule after another in a journal lurch into a large position—and then hold it
as it goes against him? It almost seems like self-sabotage, but in fact it is much worse than that.It is the result of an absence of a unified self. 193

Quite simply, the “me” in us—our sense of who we are—is stronger than our “I”—our ability to intentionally guide our actions. 194

you cannot achieve unity of self unless you work on it while you are fragmented. This is the essence of realtime self-therapy. 194

What I’m doing is—metaphorically—shak ing traders by the shoulders, holding up a mirror, and saying, “Look at yourself! You’re worked up! Do you really want to be putting on trades now?” The goal is to help people stand outside themselves as observers, even as they are experiencing moment-to-moment state shifts. That observing capacity is the
glue holding the self together, allowing us to act with intention. “You’re frustrated; don’t go there” is the message from the therapist in us to our trader self. 195

The first step of progress in cognitive work is seeing that we have more control over our reactions than we thought we had: It’s our way of looking at things—and not things themselves—that maintain our problem patterns. 201

Cognitive therapy is most powerful when it provides us with direct experiences that undermine our most negative beliefs. 202

My own experience is that cognitive work is especially effective in situations like James’s, in which loss of confidence,
worry, and negative thinking are major elements. By framing these as part of our self-talk—our conversations with ourselves—traders can make rapid progress in distancing themselves from old patterns and beginning new ones. The value of this is that, without the negative self-talk, traders no longer experience the high levels of distress that trigger old coping patterns and generate further problems. 203

Research tells us that involvement in the therapy—practicing techniques on a daily basis, engaging in them emotionally, and applying them to actual life situations—accelerates change and improves the likelihood of success. 204

The goal of cognitive therapy is to help you become expert at thinking about your thinking: to become aware of your automatic thought patterns so that you can critically evaluate and change them. In a sense, cognitive therapy is an unlearning process. 204

The idea of the cognitive journal is to interrupt ourselves when we’re experiencing one of our characteristic problems—negative thinking or impulsive behavior—and identify the thoughts and beliefs that are associated with these problems. The journal forces us to become observers of ourselves rather than getting wrapped up in the problems of the moment. 204

Albert Ellis suggested a useful format for journals that he described as
an A-B-C sequence:
• Activating event. The situation that is occurring at the time we are experiencing our problem pattern.
• Beliefs. The thoughts and perceptions that are triggered by the event.
• Consequences. What we are feeling and how we are behaving as a result of the triggered beliefs.

Time and again I have seen people make remarkable changes, including ending long-term addictions, when they start viewing their problem patterns as personal enemies. The cognitive journal keeps the trader focused on the message “I am not a loser; it’s my negative way of thinking that’s making me feel like a loser.” By reinforcing this message
again and again, the journal helps traders sustain the momentum of their change efforts. 205

First, the journaling should be conducted every day until traders can clearly identify the one or two core beliefs or distortions that are most interfering with their performance. It is important for traders to recognize their own patterns and appreciate the degree to which their thinking is patterned. Second, the journal is just a learning tool. The ultimate goal is to recognize our cognitive patterns as they are occurring.Once traders can catch themselves in the act of distorting events and falling into old, automatic thoughts, it is time to move to the next phase of cognitive work. In general, I have found that at least two weeks of daily work with the journal are necessary before patterns become clear and people are able to catch those patterns in real time. 205

When people catch themselves falling into an automatic thought pattern, they purposely interrupt the negative thinking process by saying (out loud or to themselves): Stop! The purpose of this technique is to become more mindful: to not only recognize negative thoughts as they occur, but to actively interrupt them and decide to not run with them. 206

The idea of the fourth column is to question the negative assumptions and beliefs, rather than automatically identify with them. By playing devil’s advocate with your automatic thoughts, you reinforce the mindful part of you that does not want to fall into the old traps. The interesting part is that, as you repeat this devil’s advocacy day after day through the journal, the disputation process itself starts to become automatic: You are much more likely to catch negative thought patterns as they occur and reject them. 206

By translating self-talk into a conversation and vividly imaging the talk coming from another person, we become an observer of the distorted thoughts—much more able to view them critically and reject them. 208

Speaking our thoughts aloud gives them objectivity, allowing us to adopt the role of listener as well as speaker. It is not at all unusual for traders to reject their negative thoughts before they’ve even finished verbalizing them—that’s how silly they sound when they are given voice. 208

The common element in all of these approaches is that you are telling yourself, “The situation is not what’s making me feel this way; it’s how I’m processing the situation.” Once you realize this, it gives you room to stand apart from your processing and try to look at things from different perspectives. 210

The most important step to winning is learning that losses are part of the game. Every successful person has failed many times before succeeding.” Cognitive techniques reframe our perceptions of winning and losing, focusing us on learning and improving. 210

Should you find that you are not benefiting from the cognitive work, one of several factors may be the problem:


• Lack of focus. Sometimes people try to change too much all at once and bog down. It is usually not effective to work on multiple patterns at once. More promising is prioritizing patterns and tackling one at a time.

• Lack of repetition. Many times, you will be trying to unlearn patterns that have been present—and reinforced—over a period of years. This does not occur overnight. A daily focus over a sustained period provides an opportunity to internalize learning.

• Lack of emotional intensity. This is perhaps the most common mistake people make in cognitive therapy. Keeping a journal can become a routine, unemotional affair that never challenges old thinking patterns with passion and immediacy. Active methods such as talking about patterns aloud and utilizing imagery can yield greater emotional involvement.

• Incorrect diagnosis. Perhaps the problem is not what you think. Ifyour negative thinking is grounded in a biologically based depression, cognitive work might help, but it should be guided by a professional. It may also need to be supplemented with pharmacotherapy. Alternatively, emotional patterns of frustration may result from trading problems,
such as changing markets that have greatly reduced the edge of a particular strategy.


Behavior therapy works by reversing this process. It consists of a variety of techniques that allow us to process undigested events consciously, in essence reprogramming memory. It unconditions certain responses and helps us condition others. 217

What we typically call behavior therapy is really a collection of techniques for unlearning harmful conditioned responses and instilling new, positive ones. In becoming your own behavior therapist, it will be necessary for you to learn and implement the more basic techniques before progressing to more advanced ones. 222

Let’s start with the very most basic behavioral intervention: relaxation training. This is a method that is quite effective in dampening anxiety and frustration. The first step in relaxation training is learning how to breathe diaphragmatically. Deep, slow, controlled breathing is one of the simplest but also most effective ways of checking your physical and cognitive arousal. To breathe diaphragmatically, you begin by seating yourself in a comfortable position and closing your eyes to remove distractions. You then take deep, slow breaths from your abdomen. In the beginning, it is helpful to place your hand on your stomach as you breathe, making sure that your belly expands as you inhale and contracts as you exhale. Breaths should be deep, smooth, and slow; you want to avoid hyperventilating. As you breathe in, count your number of breaths aloud. As you breathe out, say the word “Relax.” As much as possible, just focus your mind on the counting of breaths and the word “Relax.” In the beginning, you may be distracted and find the breathing from the abdomen difficult. With practice, it becomes quite easy and natural. After 10 to 15 minutes, one can typically achieve a highly relaxed state. 223

Note that this, in itself, is not a treatment for trauma; it does not prevent cues from being triggered in the first place, nor does it reprogram those cues. It does, however, allow us to undo the effects of conditioning quite quickly, providing
rapid relief. This is very helpful to traders who find themselves getting worked up while a position is on 223

The second step in your behavior therapy is to conduct a cataloging. We want to find out everything that is happening leading up to a disruption of trading. This means cataloging emotional reactions, events surrounding these reactions, and all thoughts and sensations occurring at those times. The more complete your catalog is, the more likely it will be
that you will discover your specific triggers. 224

A Catalog of Cues for Trading Disruptions Common Triggers

• Euphoria. Highly excited, positive feelings trigger overconfidence and overtrading.
• Anxiety. Intense fear triggers impulsive actions to relieve the state.
• Boredom. Lack of activity and feelings of emptiness trigger stimulation seeking activity to relieve the state.
• Sudden market movements. These become associated with particular emotional states and trigger fear, greed, overconfidence, or frustration.
• Large and/or sudden losses. These trigger feelings of loss/depression, frustration/anger, or fear, which, in turn, trigger coping responses to dampen these.
• Strings of wins or losses. These also trigger overconfidence and frustration and result in overtrading and distorted trade management

The idea is that you use the power of imagery to create a mild form of the traumatic trigger, keep yourself under control with the abdominal breathing, and then rehearse the coping behaviors you would like to utilize in the situation. Ideally, this is repeated with a variety of imagined scenarios, each reinforcing desired coping responses. For instance, if you wanted to ensure that you honor your stop-loss points during adverse market movement, you could vividly imagine markets moving against you while you sustain your slow, deep breathing. You would then envision yourself exiting
your position at your chosen point, even as you focus on the adverse market movement 225

This basic exercise accomplishes the two ends of behavior therapy. First, it allows you to face a threatening situation while you are rehearsing self-control. With repetition, you loosen the associative link between the trigger event (adverse market movement) and your conditioned response. A major reason for this is that you are requiring yourself to process the trigger event consciously, with full awareness.

As you might imagine, repetition is crucial to the success of such reprocessing. Vivid imagery, emotional involvement in the scenario, and frequent repetition increase the likelihood of altering existing conditioned responses and creating new ones. 226


A cornerstone of systematic desensitization is that you do not move to higher levels of the hierarchy until you have completely eliminated distress at the lower levels.

some traders I’ve worked with have used noise-canceling headphones while closing their eyes and focusing on a repeated phrase to fix their attention— and heightened focus facilitates enhanced conscious processing. The key to the success of this method is sticking with it long enough to adapt to the altered sensory conditions. If you find yourself bored with the exercise, you haven’t stuck with it long enough for the adaptation to take hold. Over time, given sufficient practice, the enhanced state can be reached rapidly—usually within seconds 229