FXGirl

Castle: Okay, I take back the word “silly” – how about “chicken or egg”? I’m glad we agree that successful traders have to have both edge and psychological savvy. Can we also agree that those two component some together in different ways for different people? You said: “My mindset slowly shifted from one dominated by the thoughts of a losing trader to those of a winning trader. I dont know what else to say except that once I started trading from a winning mindset...thinking, acting and feeling like a winning trader did I start to do the things that winning traders do.” I’m very interested in what you mean by a “winning mindset” and “I start to do the things that winning traders do”. Could you tell me more about what you mean and what your experience was? I do believe that if traders started their careers with a winning edge, either by subscribing to a reliable signal service or learning a reliable system from a mentor, they could avoid a lot of the emotional anguish that comes from loosing again and again while they are attempting to find an edge. Perhaps these traders-with-an-edge would be starting from a very different place than most of us started from and would have a much different experience of becoming successful. What do you think? Is that possible? In what ways would the path to profitability be different?

Hi, Castle: Yes, I can’t agree with you more that if you don’t have an edge, you can’t be a profitable trader. And understanding where that edge comes from, “the underlying reasons beneath the surface…” is essential. Where we probably disagree is how you get to profitability. Because you are an experienced trader, you understand that there are different levels of understanding market movement – the novice’s grasp is much different from that of the trading veteran of many years. The novice trader who learns a trading strategy (let’s assume that it is a valid edge) from a class or mentor can trade that strategy without having an understanding of the underlying market principles from which it is derived. All he has to do is follow the rules. Of course, he is going to encounter psychological issues that make it tough for him to stay true to the rules of the strategy. The more cut and dry the rules are and the greater the win/loss ratio of the strategy, the easier it is going to be for him to navigate the psychological issues. Can he be successful? Yes, if he manages the psychological part of trading, after all, he has an edge that works. Does he really get what is going on in the market? Only to a very limited extent. After a several years and many, many hours in front of the charts, our trader will begin to develop a more intuitive grasp of market movement. His subconscious mind has seen various patterns in the market over and over again. He has a “gut” feeling about what is happening. When he is able to move this implicit subconscious learning to a conscious, explicit level, he’ll be able to develop and test additional trading strategies. And, of course, a greater appreciation and understanding of risk is part of this process. While our trader has been growing in technical expertise, he has also had to face his psychological demons. If he has not done some of this successfully, he will no longer be trading – his losses will have wiped out his account, despite refunding many times, and he will be demoralized and will quit. If our trader survives this intermediate stage and continues to accumulate implicit learning and translate it to explicit market knowledge, he will be come a master trader. In the process, his greater win/loss ratio will make it easier to deal with psychological issues. There is nothing like consistent profitability to give you calm and confidence. But you’ll never get to consistent profitability without psychological mastery. Let’s look at your formula: “Having and understanding an edge = Acceptance of risk = beginning to think, act, trade like a successful trader.” Acceptance of risk – a psychological issue if every there was one. You could argue that greater market knowledge give you a cognitive underpinning for greater acceptance of risk, but unless you also recognize that becoming comfortable (emotional component) with risk is a psychological process, you are missing the boat. “Beginning to think, act, trade like a successful trader” – also has significant emotional components. Even at the most basic level, acting like a successful trader requires that you have developed a way to manage the brain’s emotional/physiological response to threat. Never mind all the cognitive and emotional structures on top of that. It’s easy to use our own experience in moving through the process of becoming a successful trader as a template for others. Perhaps you came to trading with a well-developed set of strategies for managing emotions. If so, your journey may best have been undertaken by concentrating on finding your edge. That isn’t necessarily the case for others. For some, the emotional components of trading are a real stumbling block that will prevent them from being successful even if they develop a great edge. Anyway, the whole issue of edge versus trading psychology is a silly argument. Any careful observer can see that you can’t become a consistently profitable trader without mastering both. The important discussion is about how you make them work together so you get to mastery.

Sometimes life gets in the way of posting. It’s been a gray, cold spring and early summer here on the coast of Southern California and my family has needed a lot of attention – youngest son going through a major health and career challenge. Last week the sun finally came out and it seems that we’ll have a summer after all, if a short one. Now it’s time to get the taxes done – I hate this part of running your own business. Rande, I dropped by your booth at the Trader’s Expo in Las Vegas last May. It was good to make your acquaintance and be able to match a face with your posts. I found your grasp of traders’ psychology impressive and your program looks like a good one. I’m looking forward to your presentation in September in Vegas. I’ll come up after your talk and maybe we can chat for a while. If any of the people on this thread are going to be in Las Vegas at the Trader’s Expo, it might be fun to get together as a group. Shall we organize that? MadMarketScientist, you bring up an interesting point about expertise when you said, “I wouldn’t take advice from someone who hasn’t walked the walk. No matter what their training.” My gut wants to agree with you: If I were selecting a trading coach to work with, I’d want to know that he/she had gone through the process of becoming a successful trader. This would help me feel that the coach really understood the challenges I was facing. On the other hand, I know as a psychologist that it’s possible to help someone who has been abused, raped, suffers from addiction, is depressed, anxious, can’t stop washing their hands and checking the locks on the doors, is cutting themselves, going through a divorce or any of a number of other difficulties without having experienced those difficulties myself. So, I’m not really sure where I stand on this issue. Lots of studies have shown that the quality of the connection between the therapist and the client is more important than the type of therapeutic intervention used. I guess that the most important criteria for me in selecting a trading coach would be whether I thought we were on the same wave length (gut level feeling) and whether they were competent to help me (knowledge and expertise). Perhaps others have some thoughts about this issue. While we are talking, MadMarketScientist, I do want to question another of your statements: “…each persons psyche and overwhelming need for some reason to blow up the trade plan.” Although I have a healthy respect for the unconscious and its ability to interfere with our conscious intent, I don’t think that many people have an overwhelming need to blow up their trade plan. That seems like a catchall phrase that can prevent you from digging deeper and identifying the real issues. Just like a “fear of success” is not about fearing success, but about fearing you won’t be liked, or fearing that you won’t be loved by you father if you do better than he has, or a myriad of other possible reasons, if you don’t get down to the real issue(s), therapy isn’t going to go anywhere. Or it could just be that the trader in question just doesn’t have the strategies he/she needs to handle his emotions/physiological arousal during trading – no big underlying issue.

Hi, Mule1976 Lots of family things happening for me lately – sorry for the delay in responding to your post. I’m back from “Chicago” now. Thanks for taking the time to answer all my questions. 1. I’m sure you know that the first thing I’m going to suggest is that you write down your criteria for entering, exiting, setting stops, and taking profit. Trying to trade without this is a little like being in a foreign country, asking for directions and getting an answer in a language you don’t understand accompanied by a vague wave of a hand in the general direction – you’ll be extremely lucky if you get anywhere close to your destination. Part of the reason this is so important is that you are creating a pattern-recognition lens through which to view the market. Your success depends on your ability to recognize this particular set of circumstances/pattern and take advantage of it. The writing of a trading plan forces you to move your implicit knowledge of this pattern(s) to an explicit level. Becoming an expert trader is an extension of this process. Over many years, a trader recognizes increasingly more complex patterns, first at an intuitive, subconscious level, then at a conscious or explicit level. 2. You’ve mentioned that you feel you should be farther along with your trading skills, a break-even trader by now, and that you are feed up with your job and see trading as a way out. That’s a lot of pressure to put on yourself, but I can understand why you might feel that way. For now, let me suggest that you develop a plan for reaching your goal of making your living from trading. Let’s start with the technical skill/activities set you will need. Make a list of the skills you will need in order to be profitable and how long you think it will require to obtain these skills, or completing these activities. Examples might be completing your trading plan, finding a money management system that best suits your trading strategy, Next, let’s do the money: amount of money you need to live on, what capital you have for trading, what percentage of profit you can reasonable expect to make over a given period of time, how this will change and over what period of time, and any other pertinent factors. Please take the time to write this out. If you do so, you will have a different feel for the process. Where I’m hoping this will take you is to a recognition that making trading your sole source of income is a little like getting a PhD, it doable, but it is definitely a one-semester-at-a-time procedure. Having a clear road map can help you be less judgmental and more relaxed about where you are on the learning curve. 3. Because when you have about four losses in a row, you act out your feelings of frustration, etc., let me suggest that for the present, once you have three losses in a row, you call it quits for the day. What we are trying to do here is avoid the stimulus that triggers the destructive behavior until we have other strategies for handling this circumstance in place. 4. Creating a space: It’s easy move straight from feeling to action. What we want to do in trading is create a space between our emotions and the resultant behavior, i.e., between feeling we are being left out of a move and impulsively taking the trade. There are two important reasons for this. First, emotions are information (data) about us, NOT ABOUT THE MARKET. And, second, emotions are constantly in flux and change rapidly. If we can stop the action, even for a moment or two, then we have a chance to examine our feelings and the inner dialogue that accompanies them, and we give our feelings time to change. I’m going to make a distinction here between the intuition or gut feeling of an expert trader and the emotional responses of fear and greed in all their nuances. True intuition is implicit pattern recognition making itself known, and it feels different that other emotions. It can be subtle like an itch trying to get your attention, or it can be a full-blown knowing what will happen next. But it is not about all the other stuff traders feel. Most impulsive trading actions, such as jumping in or out of trades, are strategies for relieving the discomfort of the emotions the trader is experiencing. Using the example above of feeling left out of a move, once the trader has jumped into the trade, those feelings go away and there is a sense of relief. (Of course, these feelings may be quickly replaced by another set of emotions if the trade goes badly.) Let’s start by collecting some more data and building some new strategies: • First, when you are not in front of the charts, write down what emotions you were feeling and what you can remember saying to yourself just before, and during, the time that you were taking your revenge trades. • Next, when you are trading, practice taking your emotional temperature. Every 5 to 10 minutes, write down a couple of words about what you are feeling. Use a timer to make sure you do this. The purpose of this exercise is twofold: becoming more aware of your feelings and elucidating their content. • Here is a link about diaphragmatic breathing. [ame=http://www.youtube.com/watch?v=xIwZsmOZtzE]YouTube - YOGA FLAVA Deep Diaphragmatic Breathing[/ame] If you don’t like this one, there are plenty of others on YouTube. Please start practicing this techniques 3 to 4 times a day for at least 5 minutes. You can do this in a sitting position as well as lying down. The reason we are doing this because the fastest way to calm emotions is to calm the physiology. With practice, you teach your body to calm down very quickly when you use this breathing technique. A calm physiology and high emotional charge are two incompatible and mutually exclusive states. • When you are aware that you are emotionally uncomfortable, say, “This feeling is just information about me, not about the market.” Keep saying it until you feel more relaxed. That’s enough for now. Please report back about your experience with these suggestions.

Dear Mule1976: Would you mind giving us more information? In answering questions 4, 5 and 6, please don’t try to give a logical or rational reason, just give us what you are saying to yourself about this. 1. “I have been trading off and on for a few years now, and have not been profitable…” Please tell us why you haven’t been profitable and if you trading with a system you know works? Do you have a written trading plan? 2. “I feel like lately I’ve been making some progress and improving…” In what areas have you been improving? What is responsible for the improvement? 3. “If I have a few losses in a row…” How many losses or amount of money lost triggers this behavior? 4. “This has only happened the last 6 months…” What changed in the last six months with you, your situation, or what people are saying about your trading? 5. “I think it’s because I haven’t been improving as much as I think I should be….” What is your thinking about how much you should have improved or where you should be in you trading career? 6. “….and want to prove to myself I can make money” Please say more about this. I know that some of these questions may be pretty personal, but if you are willing to share this information, maybe we can help you unwind the “I NEED to get that money back” so you can stick to taking trades that follow your system. There are some good suggestions on this thread already. Any that resonate with you? Best Regards FxGirl

"we all know that successful trading is about eliminating emotion from your decision making." - JayKay71 There is no such thing as eliminating emotion from trading; there is only learning to deal with your emotions in a way that supports your trading goals.

Zdo: Thanks for the link to Like 2.0: The little book of Flow. Lots of great ideas in this gem. One of the few places where I would use a slightly different approach is in dealing with thoughts or the intellect. "It's thought that creates the doubts and fears, that blocks our natural ability to learn and accomplish," is what the author says. I'd much rather see the intellect (and the ego, for that matter) as a valued junior partner. Under the guidance of the Self, the power of the intellect is an amazing thing. And after all, both the ego and the intellect have their places in the scheme of things. I'd like to just view their shenanigans with love and affection.

Hi, Rande: Let’s start with the things we can agree on. First, I wholeheartedly agree that yoga and meditation are wonderful methods for optimizing brain function. Second, I agree that the pharmaceutical industry is actively engaged in trying to convince us all that taking a pill is the solution to almost all body and brain problems. Third, I agree that in most areas of life being able to function in a relaxed and anxiety-free manner is helpful – of course, there are some situations when higher levels of arousal are required as in sex, sports, and performance arts, etc. Fourth, I agree that the impartiality of a sage would be a great trading asset. Perhaps we should encourage more sages to take up trading - I can see the ads now "We guarantee emotion-free trading. Our managed accounts are traded only by certified Sages". Sorry, it's hard for me to be serious for too long. About Steven Stosny, despite his being on Oprah (which is a usual thumbs-up for me), I am not a fan of his work. Certainly the Duluth method isn’t particularly effective, but I don’t find any real evidence that Stosny’s method is much better. Abusers and batterers are tough to work with and I don’t think anyone has it right yet. I do like Mary Aninsworth’s work – I remember when it first came out; it was ground breaking. But I can’t agree with your conclusions that “many of the disorders and brain dysregulation so medicalized today are simply grown up versions of the primitive disruption to early attachment and the adaptation the brain makes to compensate.” I certainly think that early childhood experiences influence the development of personality, but I don’t think that you can stop there. Nor do I think that you can lay “brain dysregulation” all at the feet of early childhood experiences. RAD is a very rare diagnosis. Would you mind my asking where you were working that you dealt with such children? About ADD and ADHD, there are certainly things that you can do that don’t involve drugs to help people, both adults and children, with this disorder. Reducing anxiety-producing circumstances (such as a boss or teacher demanding a certain level of performance) can be useful because when people with ADD try to force themselves to concentrate, the PFC activity diminishes. The harder they try, the worse it gets. But I know of nothing in the literature that says that the lack of safe attachments is a factor leading to ADD or that the “establishment of safe attachments” makes a difference in treating ADD. I think that for most people who have been diagnosed with ADD, some sort of adjustment in the functioning of the brain is helpful, whether it is through supplements, drugs, food, or neurofeedback. I guess I’m just not convinced that safe attachments do that. I recognize that you and I are coming from very different theoretical backgrounds and that our experiences in working with people have also been very different… and that is what makes these discussions so interesting, don’t you think so too? You have said: “The key in my work is first regulation of emotion and state of mind, then it is awakening the aspects of the self that create a state of mind conducive to peak performance in trading. After all the heavy Emotional Intellence and Cognitive work, a foundation is laid to work from empowered Jungian archetypal elements of the psche.” I’d love to have you operationalize that statement, perhaps with case illustrations? Or maybe you could say how you would work with a hypothetical trader who is having certain difficulties such as getting out of trades too soon, has tunnel vision, or can’t take a trade, etc. It might be fun to have everyone on the thread talk about how they would deal with a specific issue. I think we could learn a lot from each other. Most of the effective therapists that I know who have been in the field for many years say that they use whatever works regardless of their original theoretical orientation. So I’m interested in what you use that works to help traders become successful, and hope that we can continue this discussion in a collegial manner. Do you think we should move this discussion to the “change thyself” thread?

I used EFT with several groups of traders (about 20 in each group). I taught them the technique and then practiced it with the group using the emotional issues that they were experiencing as the target of treatment.I found that they felt more positive and hopeful about their ability to at the end of the session (about one hour). Several of them continued to use the technique on a daily basis for a while and reported that they felt it helped their trading. However, I didn't see any real evidence that the technique resolved the emotional issues associated with trading. But to be fair, this wasn't a controlled study and I didn't do any formal follow-up with these traders. If you decide to try EFT, please let us know what your experience is. Thanks.

Hi, Rande: I think we may have some things in common about our approach to coaching traders. I can certainly agree that calming the body and mind gives us a greater opportunity to choose our behavior during trading. We actually developed a biofeedback device to alert traders when they moved out of optimal physiological levels for trading and it worked very well. Because a calm physiology is in compatible with high emotional arousal, one of the quickest way out of emotionally driven behavior is to settle the physiology. This can become a learned response with a few deep breaths or visualization of a calming or loving senario as the trigger. And, yes, the amygdala and limbic system are involved in producing quick identification of threats and avoidance of danger, and it is possible to get stuck in a chronic “fight or flight” state (another area where biofeedback can be very helpful). Certainly, this part of our brain can and does hijack the rational portion at times. Some behavioral economics studies nicely connect this process with the perception of economic loss. However, fear, like other emotions, is complex. The fear of missing a trade is very different from the fear that you’ll never master trading, or that you’ll let your family down. And I think that there is a learned/experience component involved in the development of these fears that is far beyond the simple survival response of the amygdala. But, luckily for us, as a species, and as individual traders, we do have a neo-cortex, even a prefrontal cortex, and other brain structures. So we are able to learn, reflect, analyze, think abstractly, etc. Also, fortunately for us, the amygdala isn’t the only brain structure involved in emotional response and so we have a much greater range of emotions than just that of fear. “What many call brain dysfunction is about our brain adapting us to environmental response. Once the pattern is established, it locks in and easily sweeps "normal" functioning away.” I do agree that we develop behavioral strategies and habitual thinking patterns in response to how we perceive our environment, and that we can call some of these dysfunctional. And while these patterns do shape the brain in that neural pathways are strengthened, I see that as different from ‘brain dysfunction’ in which the physical or chemical functioning of the brain is impaired. This ‘brain dysfunction’ is clear visible in cases of severe autism, but much less clear in cases of mild ADD. If you are working with a trader with mild ADD and are unaware that that is the case, you can spend a lot of time trying to influence emotional or behavioral responses and get only limited results. Although the techniques you are using may be very good, correcting the underlying chemistry of the brain may be necessary to get these techniques to work and achieve the results you and your client desire. “Attachment between mother's and baby is built around fear of abandonment or isolation.” This one made me laugh. Any mother who has a loving relationship with her child knows that this statement is untrue. If you want to look at this from a purely scientific perspective, there is a surge in oxytocin and other hormones and neurotransmitters in the mother and child (and even the father) that stimulates mother-child bonding. There is also heightened activity in the basal ganglia – another area of emotional activity (lots of activity here when you fall in love). I was nineteen when I had my first baby. I remember being blown away by the overwhelming love I felt when I held my son for the first time – it was the most powerful emotion I had ever felt. On the way home from the hospital, I startled my husband by speaking totally out of character and saying vehemently, “I’ll kill anyone who tries to hurt him or take him away from me.” – not exactly fear of abandonment or isolation. Yes, babies can become distressed when they are separated from their mothers. But in the beginning, this isn’t fear; it is simply pleasure seeking/pain-avoiding behavior. It is only if the baby’s needs aren’t attended to that this develops into fear.

Hi, Rande. I’m not sure that I want to agree with your assumption that “the dominant emotion that the brain (and mind) organize around is fear…” If you have had children, you know that they come into this world with few fears and that most of what you call ‘inherent’ fears are developed along the way. If children have any inherent traits, it seems to me that they are curiosity, pleasure-seeking, and pain-avoiding behaviors. I am in no way denying that many traders suffer from some of the fears you have described, but to say “all are unavoidable” is, to my mind, an exaggeration. Each trader has developed a different view of himself and life based on his interpretation of his experiences. Some interpretations, and the subsequent behavioral strategies associated with them, are supportive of happy, health lives, and some aren’t – and we could also say that some are supportive of profitable trading and some aren’t. “Organic brain dysfunction is far from the typical brain (and mind) of a trader.” Maybe. Do you think that the tunnel vision that some traders develop once they are in a trade, their inability to take in new data about the trade if it contradicts their original assumptions about the trade, is just fear of loss (or any other type of fear)? Or is it possible that if this happens repeatedly that it might be a problem with the functioning of the anterior cingulate (the portion of the brain that regulates cognitive flexibility)? It seems to me that at least we ought to do a little differential diagnosis here. “Once people "get it" that they can step out of blindly being sweep along by their histories and can powerfully influence the creation of their world, people find the confidence, hope, and courage to become designers of themselves.” This is a laudable goal, but I think it is psychotherapy, not coaching. And although I think it is wonderful to help people become self-actualized designers of themselves, I don’t think it is a necessary prerequisite to successful trading. I’m interested in hearing more about what you mean by “In emotional regulation training you literally retrain the brain’s architecture and chemistry. Please say more.

Dear Zdo: I’m genuinely sorry if I upset you by entering a post that was somehow in contradiction to the spirit of this “know thyself” thread. I had simply hoped to expand the discussion. Since most threads seem to wander, I wasn’t aware that the topic was limited. However, if we are going to explore ‘know thyself’, don’t you think that ‘know thyself’ generally leads to ‘change thyself’ or at least “accept thyself”, which is a form of change? “Our posts about “psycho dynamics”, “unconscious conflicts, fusional complexes, dissociation, etc” may be worthless to you and most likely millions of other traders – but I really appreciate them.” I’m delighted that this thread has been a place where you and others have had an opportunity to discuss these theoretical approaches; however, I believe that there are other equally valuable approaches to ‘know thyself’. I don’t think we have to limit ourselves to one approach, do you? “However, I think if you stick with it you’ll ultimately find that it’s not just brain dysfunctions. It’s even better seen as whole body dysfunctions, of which changing the ‘brains’ is only a (major) part…” Now this is a very interesting issue. The Heart Math people would certainly agree with you that the brain is not the only locus of control. And certainly many people report that their “gut” feelings are an important part of their way of knowing. And, any one who has done neurofeedback or biofeedback knows that the mind and body are intimately connected. And many over-learned (practice, practice, practice) activities such as shooting baskets, hitting a golf ball, and marksmanship seem to have a ‘body memory’ associated with their optimal performance. I wonder if successful trading doesn’t also have a similar aspect. Nevertheless, it seems that if the brain isn’t functioning correctly, thoughts and feelings are deeply affected. I’d like to address this issue first, then go on to others. “So I’m challenging your attribution that developing your own system is “the prevailing way of thinking” in the industry …” Well, you might be right here, Zdo. However, I have seen people who claim to be experienced traders give that advice to beginners over and over again in forums here, on LinkedIn, Facebook, etc., and in a myriad of articles on trading. You said that you insist that traders develop their own systems, but for a different reason. I’d be interested in what that reason is. “On topic herein is not really about the ‘changing’ part of the process (but content about that is for the most part accepted.) Rather, on topic is more about the ‘awareness’ parts of the process…” People become aware by observing their thoughts, feelings and behaviors. But once you attach a label such as a fusional complex, or an unconscious conflict, you are a long ways down the road past awareness and into a system that defines your thoughts, feelings and behaviors as functional or dysfunctional (or at least on a continuum with functional at one end and dysfunctional at the other) and that posits ways to change them. Which is fine by me. However, with great respect for all that psychoanalytic concepts have given to the field, I personally prefer a different orientation for the development of ‘know thyself’. Best Regards, FxGirl

I’ve avoided taking part in this discussion so far because so much of the focus has been on psychodynamic theory and concepts. But, as a cognitive-behavioral-whatever-works therapist, I finally decided that I'd like to say something about this. Recent research (last 10 years) involving SPECT scans shows us that much of what we have thought of as personality dysfunction, is brain dysfunction. Many obsessive-compulsive, anxiety, depression, and impulse control issues are the result of brains that aren’t functioning correctly. Address the problems (using diet, supplements, drugs, exercise, learning activities, etc.) in the brain and thoughts and behavior change. Fail to address the problems in the brain, and all the psychotherapy, psychodynamic or cog-behavioral, will be at best of limited value and, at worst, a waste of time. My guess is that many traders who invariably get out too soon, or can’t make themselves take the trade, or move their stops, and so on, are suffering from varying degrees of brain dysfunction. If these problems can be addressed, then the remaining behavioral difficulties with their trading can be addressed in relatively short order. And I do mean, in short order…. and assuming they have a system that actually works. For those who have a healthy brain, the biggest problem is finding their edge. The prevailing way of thinking about trading begins with the assumption that you have to develop your own system. The rational behind this advice seems to be that this is the only way to truly learn how the market works (I would argue with this assumption, but that is for another thread). The problem for new traders is that they don’t have the experience or knowledge to develop a successful system. So, problems with the system get confounded with problems of execution (psychology) – sometimes for years. So, it seems to me that if you are going to try to help someone with the psychological issues of trading, it is important for both of you to know, not assume, that the system being traded really does have an edge. The best psychologist (meaning the most effective) I ever met told me that people don’t seek help if they could figure it out for themselves. Although I believe that only the client can make psychological changes, if all we do is “be present”, the service we offer to our clients is limited. A faithful dog could do as well. Simply being present or simply being empathetic is the perfect scenario for coaching (or therapy for that matter) to drag on for months and/or years. Although there are clients who already know what they need to change and how to do it and a coach who is an empathetic sounding board is all they require, most traders aren’t in that position. Remember, we are doing coaching here, not therapy. What we are after is behavioral change. These traders have tried everything they know to change their behavior and their strategies haven’t been successful. You can root around trying to uncover unconscious conflicts, fusional complexes, dissociation, etc. as the basis for your bad trades, or you can focus on how to change behavior in the here and now. We are not trying to help a client have a better marriage, related to his mother in a more positive way, or increase his level of satisfaction in the bedroom. Instead, we are trying to impact at a limited, specific set of behaviors. Most people come to trading as a way to make money. Certainly, trading can have the additional benefit of allowing you to explore who you are and how you approach life, just as any other difficult challenge can. However, a coach’s job is to help a client develop behavioral strategies that support their trading goals. In my opinion, a psychodynamic approach may work eventually, but it is the long, winding road to the goal of making money through trading.

Dear James: I wanted to comment on several of your posts. Your statements are in quotes. “I understand some new research points to taking financial risk may be processed in the amygdala of the brain - in which case, those people simply shouldn't trade.” Which people are those, James? We all have amygdalas and if it is a threat, it goes through the amygdala. It’s what happens after the frontal lobes get a hold of the information that determines whether the subsequent behavior works for us or against us. “What if we've heard so much of this "traders psychology" jargon and we force ourselves to pay attention to it - thus causing more problems.” I think that there is plenty of evidence that emotions drive behavior in trading with moving stops, adding to a losing trade and getting out too early as only a few examples. These behaviors aren’t a result of “traders psychology jargon”; they are the result of not having a strategy that adequately handles the emotional aspects of trading. “You find yourself making dumb moves? Ask yourself, do you want to keep losing money? If no, then stop making stupid mistakes repeatedly. Trust me, I speak from experience - as do many. Of course, it's not really that black and white, but we can try can't we?” Ah, yes, if it were only black and white. Unfortunately, many people can’t just command themselves to ‘stop making stupid mistakes’ and have that work for them. If they could, we’d have a much better world…and certainly no need for a Trading Psychology Forum. Trading psychology is ultimately about learning to manage the inevitable emotions generated by trading in an ambiguous and risk-filled environment in a way that supports your trading goals. If you have a trading plan that works, and you are able to follow that plan, then you have developed a successful psychological strategy. However, if you are moving your stops, getting out too soon, or hesitating to take a trade that meets your criteria, then your psychology strategy needs some work.

Dear BlowFish: Thanks for calling our attention to Anna-Maria's post - very interesting, and obviously it works well for her. We probably all have our own metaphor for trading the market. For me, it's surfing. I spent hours in the waters off the southern California coast as teenager. When there is clear intent in the market (you see the wave coming), you time your entry, turn the board around and wait until you feel it (meets my trade criteria) - the water where you are sitting on your board begins to suck back into the the face of the oncoming wave (pullback). Then when you feel the power of the wave under you, you dig in and paddle (entry). The wave pulls you up into it and you take the ride. As the power of the wave ebbs, you kick out (take profit), and paddle back out for the next wave (next trade set up). Yes, I know that there are guys out there trying to take my money, but I certainly am not in the market "... to bury the stiff who gets the wrong side of my next long-short pitch." No battle for me, just harmony with what is.

"eg Analyse dreams, Analysis, Word association, honest friends, Performance appriasals at work , people who tell it like they see....eg spouse or girlfriend....conflict in our lives can also be a great vehicle to look within and question.....but the unconscious is really unconscious..it needs mirrors we can trust to reflect back our unconscious parts." All good mirrors, JBW. Below (or beyond) Freud's scary concept of the unconscious is a place where the constraints, misunderstandings, and misconceptions of the personality cease to exist and the natural state of peace and joy emerges. Meditation is a wonderful gateway to this state, and this state is the ultimate "mirror". As regards trading, the best advice is to speak your thoughts out loud when you are trading. What you hear is the raw data of your perspective and emotional state. An interesting experiment is to record a trading session when you do this (talk out loud) and listen to it later when you aren't looking at the charts. Now, that can be scary!

Hi, JEH: Yes, if you can't reduce your lots or contracts, it makes it tough to try out this strategy. The only alternative is to go back to a demo for a while. Of course, you don't have the same emotional response as when there is real money on the line, but trading in a demo may still be a help.

Hi, Natedredd10: You said, "Faith is super important..." I agree with you. Lack of faith in their system seems to be a big issue for many traders, and results in hesitating to get in, then once in a trade, getting out too soon. For those whose systems have a high win/loss ratio, developing faith can be relatively easy. For those with potentially profitable systems, but with win/loss ratios closer to 50-50, faith may be a hard won commodity. Many traders have a personal rule that after losing so many pips on a given day (or percentage) or having so many losers in a row, they stop trading. Obviously, from a statistical point of view, this is a formula for ruining your win/loss ratio. Most traders stop because they are so emotional frayed at that point that they feel they can't, or shouldn't, continue trading. My mentor taught me that if you have a losing trade, you must always take the next trade that meets your criteria. The market moves in cycles of trends and consolidation. If you stop trading, you miss the next payout cycle. But psychologically, if you don't take the next trade, you miss learning at a gut level that if you stick with it, your system does work.... and you can have faith in it. And at another level, you miss developing the psychological muscle to do the heavy lifting. In other words, you never develop an effective strategy to manage the strong emotions of trading. Taking the next trade, and the next trade, and the next trade can be tough until you develop faith in your system. One of the best ways to do this is to reduce the overall size of your trades so that a series of losing trades doesn't trigger the same level of emotion distress. This makes it is easier to see it through to the payout cycle and, thus, easier to develop full confidence in your trading system. Once you have solid faith in your system, then increase your trade size gradually, a step at a time, until you are back up to your normal size. If you find that you start to do any of the things that indicate that you aren't trusting your system (hesitating to get in, getting out too soon, etc.), decrease the size of trades again for a while. P.S. In all the above, I'm assuming that you do have a system that works: that you have backtested and know what the win/loss ratio is, and that you have clear criteria for entry, stop placement, and taking profit.

Hi, Zdo: There is a lot of truth in what you say. Yes, big name graduate schools are interested in candidates that will do research and yes, it does take certain skills to “play the PhD game”. But just because you can do research or play the game, doesn’t mean that you can’t also do therapy well. You are right that talent and passion are essential ingredients for becoming a great therapist; however, just like in trading, it sure helps to have a good mentor. I think that a PhD program gives you a better shot at that, as does an APA approved internship. Still there is no guarantee. I went to a first class school for my PhD, but they didn’t offer a course in marriage, sexuality, drugs, or finance. Guess that people want to talk about in therapy! I’d love to meet your “old crone lcsw”; she sounds fabulous.

Dear Zdo: Regarding your statement “And, in my opinion, those small odds plummet to virtually no odds of a trader getting matched up appropriately.” Yes, finding a really good therapist can be a daunting task, but then, so is finding a good car mechanic. Here are some criteria to use in finding the right psychologist: Eliminate anyone who doesn’t have a PhD – an MA just isn’t enough training. Eliminate anyone who’s PhD isn’t from a school whose name you recognize – there are lots of shoddy programs giving PhD’s. Eliminate anyone under 40 years old – they just don’t have enough life experience. Eliminate anyone who hasn’t been licensed for more than five years – you have to do this for a while before you get good at it. At this point, you have probably reduced the field by 80%. Eliminate anyone who you dislike the minute you met them. Don’t try to work it out- run. Eliminate anyone who tells you that their patients’ average length of therapy is more than 2 years (unless their specialty is working with borderline patients). Eliminate anyone who seems ill at ease, has a nervous tick, annoying personal habits, or a laugh you don’t like. Eliminate anyone who isn’t smarter than you are. Now we are down to about 5% and getting close to your match as a therapist. So, give it a try for a couple of session. If at the end of that time you don’t feel that person can help you, move on. Oh, yes, don’t settle for a therapist that just wants to talk about how you feel. Change is about doing things differently, not just emoting. More later about doing working specifically with traders.

Hi, DugDug: We could root around and find out if not getting chosen for the team or missing the senior prom contributed to your feelings of being left out, but probably your diagnosis is the correct one. Take a break. Have some fun. I hear Morocco and Costa Rica are nice this time of year, depending on whether you like your country green or brown.

Yes, John, you are right there is a wide variety of skill levels among psychologists. But reputation comes from results. It's a difficult craft to learn, similar to in some ways trading. To become really good in either field requires that you come to terms with your own inner glitches. But therapy also requires that you develop a deep understanding of human desires and behavior... as well as compassion and respect. Like trading, there is no substitute for experience. I'm retired now, and glad to be spending my time trading Forex. But my husband is still doing therapy. He sees 40+ patients a week (most therapists see 25) and is booked out for six weeks (which is amazing in this economy). It's like that because he gets results.

Well, it seems with guys that a hardy "just do it" works. So let's see if saying "just stop doing it" works. So, DugDug, "JUST STOP DOING IT!" On a more serious note, DugDug, it sounds like you are very confident about your trading, have had a lot of successes which are the basis for that confidence. That's all good. So, are you just excited to get in (ie., this is fun), or are you afraid you'll miss out if you don't jump in, or are you at a place where you feel you rule the market? Until you can tell me more about the reason you are jumping in too soon, try to put a little space in between the impulse to get into the trade and the action of taking the trade. An example of this might be getting up from the desk, walking to the other side of the room and taking a couple of deep breaths before returning to the computer. Assuming that you plan your trades and are using a trading style that doesn't require split-second reactions, any activity that takes your eyes off the charts for a bit will probably help give you the mental space you need to be more deliberate in timing your entry. If some simple activity doesn't do it and you need serious space, try unplugging your mouse and putting it in another room (or the refrigerator) or giving it to your wife. One of the best ways to deal with impulsive behavior is to calm your physiology. You can't be agitated and relaxed at the same time. Close your eyes, take long, slow deep breathes - use you diaphragm to breathe, relax your shoulders. Focus your mind on the rise and fall of your abdomen. Keep it up for 5 minutes. This is guaranteed to relax you. If you practice this a couple of times a day, your body will learn what is expected of it. Then, you can trigger this physiological response by simply taking a couple of breaths when ever trading gets tense. Hope this helps.

No offense taken, DugDug. Men and women are different - in plenty of ways. However, if "just do it", doesn't result in just doing it, follow the steps above.

Thanks for the reference. Now that I know what you are talking about, I'd like to ask if you think that applies to trading?