TRADING PSYCHOLOGY
The One That Got Away
How Your Stories Shape You
by Adrienne Laris Toghraie
We all have stories that chronicle our lives. At first glance, these stories seem harmless enough, but the cost of holding onto them can be very high. Instead of illustrating why things have turned out the way they have, these "harmless" stories hold the potential to determine how successful we will become in the future.The stories you tell reflect your worldview -- and they can help you succeed. Some of these stories are more influential than others. The more we reflect on a particular story, the more powerful that story and its message becomes. The level of detail given to our thoughts determines the depth of the feelings associated with them. When our feelings have more depth, they have more power to influence our behavior.
If our thoughts about our trading please us, our minds will support us in following the rules of our trading methodology. If our thoughts disturb us and are attached to actions that go against our ingrained rules, our minds will establish a negative pattern of behavior. When these negative thoughts are repeated, breaking those patterns of behavior becomes more difficult.
THE BIG FISH THAT GOT AWAY
Recently, I worked with a trader named Jack, who loved to relate detailed stories about his ability to forecast market tops and bottoms. Of course, his forecasts made money for everyone but him, or so he claimed. "If only I could act on my own advice, I would be a multimillionaire!" he'd say. Jack clearly felt it was important for me to be aware of this, because he repeated it many times between his stories.
As a trader's coach, I have heard many stories like this over the years. These risk-averse "analysts" would rather have others act on their predictions and bear the risk than take action themselves. After the fact, they can cherry-pick the stories about being right on forecasts without assuming the risk themselves. Conveniently, they neglect to include stories about when their predictions would have lost money.
In this case, Jack desperately needed to encourage himself and win adulation from others with his stories. Unfortunately, the stories were all that he had to show for his hard work. He did work hard; the problem was that he did not work smart. What Jack wanted was to find a new and innovative shortcut to trading success without having to do what top traders do to become successful.
Sandwiched between his self-promoting trading stories were stories that revealed his other side. These stories revealed the Jack who was anchored in negative behaviors from a self-inflicted life of difficulty. These stories told of drug and alcohol abuse, high adventure, macho choices, motorcycle crashes, sleepless nights, poor nutrition, broken relationships, and broken hearts. For Jack, these stories represented conclusive evidence of his unique ability to take risks in other areas of his life. Naturally, he failed to relate this self-sabotaging behavior to his inability to follow his trading rules.
How could a man give up his stories when his self-preservation and identity were so dependent upon them? Initially, Jack's stories were extremely interesting. Their drama and intensity made his life a high adventure. But when you live in your imagination with such an intense state of emotion, the ordinary becomes boring. Would new stories about a trader following his rules and making money from them be enough to sustain his ego?
MORE FISHY STORIES
Jack's life is not unique. Many traders have stories that explain their failures and successes. The stories that explain successes are generally positive anchors, even if they result from adversity and loss. Traders who have transformed adversity and loss into success have created their own formula for success. The traders who have stories justifying their failure, however, have their own magic formula for continued failure. Let's take a look at some generic failure stories:
...Continued in the January issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the January 2005 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2004, Technical Analysis, Inc.
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