Even if you just find one or two supportive peers to share ideas and results with, you’ve taken an important step to create a fresh, interpersonal context for the changes you’re trying to make. If you choose your peers wisely, they will challenge you, support you, learn from you, and teach you. Because you value them and don’t want to let them down, you’ll be more likely to stick to your preparation, discipline, and goals.

A little-appreciated piece of psychological wisdom is to find social contexts to be the person (trader) you want to be. Over time, the feedback and responses from others will mirror the best of you to you and that ideal self will become an increasing part of you. When you’re your own trading coach, you don’t need to do everything yourself. A cardinal principle underlying the psychodynamic framework is that the best changes are the result of powerful, emotional relationship experiences.

Your assignment is to find just one person to be part of your team: someone whose developmental efforts you can support, and someone who will support your own. Out of that relationship may spring many more—a network of dedicated professionals mentoring and motivating each other. When you turn trading into a relationship experience, you gain role models, become a role model, learn from others, and benefit from teaching others. You add fresh ways to experience your strengths, even as you build on them.

COACHING CUE

Online trading rooms are excellent venues for meeting like-minded traders, and they can be powerful learning tools. Several long-standing ones are Linda Bradford Raschke’s trading room, which emphasizes technical trading across multiple markets (www.lbrgroup.com); the Market Profile-oriented Institute of Auction Market Theory room run by Bill Duryea (www.instituteofauctionmarkettheory.com); and the trading room run by John Carter and Hubert Senters (www.tradethemarkets.com). Also take a look at the Market Profile-related educational programs run by Jim Dalton and Terry Liberman (www.marketsinrprofile.com) as possible venues for connecting with like-minded traders. Two well-known trading forums are Elite Trader (www.elitetrader.com) and Trade2Win (www.trade2win.com). Both can be ways of sharing information with other traders and connecting with peers. For those developing trading systems, the community that has developed around the TradeStation platform (www.tradestation.com) is worth checking out. Indeed, if you have a favorite trading platform or application, connecting with others who are using the same tools can be quite valuable. Market Delta (www.marketdelta.com) runs educational programs for users and maintains a Web presence for users, as does Trade Ideas (www.trade-ideas.com); these are two trading applications I’ve found useful.

LESSON 47: TOLERATE DISCOMFORT

An important insight from psychodynamic psychology is that our defenses—the ways we cope with the pain from past patterns of conflict—can take a physical manifestation. Consider a trader who is caught in a losing position. He watches, tick after tick, as the trade grinds against him. Gradually, he becomes tenser: he hunches over the screen, tightens his neck and forehead muscles, and grips his mouse tightly. This physical tension can be seen as a defensive strategy. This strategy cuts off other, threatening physical and emotional experiences. Perhaps the trader would love to yell and curse, but is afraid to lose control. Perhaps the trader just wants to cry, saddened by a series of needless losses. Not wanting to seem weak, he holds back the tears with his tension.

There are many other physical manifestations of defense. Consider the trader who is conflicted about acting on a well-researched trading signal. As his anxiety mounts, he tells himself that the market is too uncertain and he walks away from the screen, only to find that his signal was valid after all. His avoidant defense—leaving the situation—temporarily defuses his nervousness, but it also keeps him from figuring markets out and acting on opportunity.

Still another physical defense occurs when traders act out of frustration, pounding a table, throwing their mouse, or cursing loudly and blaming unseen others for their losses. By venting their feelings, they avoid introspection and self-responsibility. Their defense is against the guilt and the awareness that they have been hurting their portfolios.

Often we use our bodies to keep our feelings out of sight, out of mind.

One of my subtle defenses is that, when I sense a position isn’t going my way, I’ll begin a frantic scan of information to validate my idea. Of course, I’m defending against the feeling of being wrong and I’m looking desperately for reasons to stay in the trade and undo the loss. This reaction generally makes the situation much worse. I’ve learned that if I’m behaving frantically in a trade, there’s usually good reason for my feelings and I need to listen to them.

Recall that in psychodynamic theory defenses are coping strategies that protect us from the emotional pain of past conflicts. One of the most basic defenses is repression: keeping thoughts, feelings, and memories out of conscious awareness so that they cannot trouble us. The problem with repression, of course, is that a conflict repressed is a conflict that remains unresolved. We can’t overcome something if we remain unaware of its presence. Many traders use their bodies to repress their minds: their physical tension binds them, restricting the physical and emotional expression of feelings. I’ve met traders who were quite tight physically and yet who had no insight into the degree and nature of their emotional stresses. In an odd way, getting tense was their way of coping: they were always mobilized for danger, tightly keeping themselves in control. It is difficult to stay in touch with the subtle cues of trading hunches—the implicit knowledge we derive from years of pattern recognition—when our bodies are screaming with tension and even pain.

In your self-coaching, it takes more than a willingness to interrupt these defensive patterns to make the most of them. What is also needed is the ability to focus on the feelings being defended against. The questions you want to ask yourself are: “What feelings am I holding off when I’m tensing my muscles?” and “What am I trying to avoid by blaming others or by walking away from the screen?” The idea is to hold off on that defense—purposely relax the muscles, turn the focus inward, stay in front of the screen—and simply experience the feelings that are threatening.

In psychodynamic work this is known as facing or confronting one’s defenses. In counseling, for example, a client might begin talking about her painful relationship experiences and then suddenly change the topic and begin talking about her children and how they are doing in school. I might gently point out the change of topic to the client, explaining that it’s perhaps easier for her to talk about her children than about herself. She then resumes discussing her relationship, and new information—and a flood of feelings—comes forth, followed by memories of her bad relationship with her father. Breaking through the defenses leads to an emotional breakthrough: she becomes aware of suppressed and repressed feelings and their depth.

Psychodynamic therapists are quite familiar with this phenomenon: when you get in touch with repressed thoughts, feelings, and impulses, the result is a fresh emotional awareness of your situation. Your perspective changes when your emotional state and awareness change.

This shift often leads to new insights and new inspirations for dealing with difficult conflicts.

When you feel in new ways, you often see in new ways as well.

This emotional work can be conducted effectively through guided imagery. If you vividly imagine a market situation that leads you to tense up or lash out in frustration, you can reenter your frame of mind at that time and see what it feels like to not engage in those defenses. Very often a different set of feelings will emerge in the situation: ones that you hadn’t been aware of. For example, when you refuse to shout and blame others, you may find that you feel saddened for yourself, pained at your losses. This frees you to address the pain and support yourself, rather than bury the feelings beneath a show of anger.

Enhanced emotional awareness can lead to a feeling of empowerment, not greater distress. A good psychodynamic counselor or therapist will challenge our defenses, not letting us get away with the various strategies we use to keep difficult feelings at bay. What results is awareness that the feelings we’ve been avoiding are not so devastating after all. Perhaps at one time in life, when we were young and more vulnerable, we couldn’t cope with those feelings and had to do our best to erase them. Now, as mature adults, we don’t have to run. Feeling our most threatening emotions and seeing, at the end of it all, that we had nothing so terrible to fear after all is a tremendously powerful and empowering experience.

So what are you running from? Think of your worst trading patterns as defensive maneuvers: actions you’re taking to ward off emotional pain. Then, when you refuse to act on those patterns, just sit with the experience and see what you feel. See if you can find a different way to handle that feeling. Very, very often, beneath our impulsive trading, our anxious avoidance of risk, our outbursts, and our mismanagement of risk are efforts to protect us from a painful emotional experience. Once you find that experience and contact those feelings, you find there’s nothing to run from. You can handle loss, fears of failure, and disappointment. As your coach, you only need to prove that to you.

COACHING CUE

Massage can be an excellent tool for reducing physical tension, but also for learning about your body’s pattern of tension. When you become more aware of your body, you can catch yourself tensing muscles and restricting your breathing and then make conscious efforts to relax. When you relax in this manner by loosening muscles and deepening breathing, you are opening yourself to emotional experience—and new ways of handling your feelings.

LESSON 48: MASTER TRANSFERENCE

When I was in graduate school, I entered psychoanalytic therapy during my internship year in New York. The therapist’s office was in his home in a typical Manhattan high rise. Many of the issues I wanted to work on pertained to rebellion against authority, a pattern that appeared in various work and school settings. I generally tried to please those who supervised me. If I couldn’t win their approval, I became quite rebellious. I particularly did not like the feeling of being controlled by others. If there was a hint of coercion in a working relationship, I pushed back—sometimes quite hard.

When I arrived at my therapist’s office, I noticed that the keys had been left in the door. I pocketed the keys, knocked on the door, met my therapist, and began the session. A few minutes into the session, the therapist’s wife—mortified to interrupt our session—entered the office to ask her husband if he had the house keys. I reached into my pocket, smiled at her, and handed them over with a wink. Not a bad start for a first session.

Well, you don’t have to be a Freudian to have a field day with my therapy session, even apart from the sexual symbolism of the keys. I had the keys and I had control. When the wife needed something, I was the one to give it to her.

To my therapist’s everlasting credit, he responded very well to the situation, didn’t get defensive, but also didn’t ignore the matter. He encouraged me to join him in reflecting on what had happened and why it happened. That’s the psychodynamic way: you use your relationship as a medium for dealing with repeated conflicts from the past.

What the therapist recognized, of course, was transference. Transference, in psychodynamic jargon, refers to the transferring of conflicts from the past to the present day. In other words, I was reacting to my therapist the way I might have reacted to my father or boss.

Had the therapist become hostile and defensive (reactions he would have been entitled to, given that I had pocketed his keys!), I would have stayed in my rebellious stance. Indeed, such a reaction by the therapist would likely have fallen into the trap of confirming my worst fears about authority figures. By refusing to budge from his professionalism, he disconfirmed my expectations and took himself out of the authority role. That gave me the space to take a look at what I was doing in this and other relationships and why I was doing it. Eventually I came to recognize that my need to take control in relationships stemmed from weakness and fear, not from strength. I learned that I could achieve far better control by using my relationship skills to engage people constructively.

The curative force in psychodynamic work is the use of the relationship to create new, positive, powerful emotional experiences.

It is not unusual for traders to personalize markets. Sometimes we view markets as dangerous, as out to get us, as rigged games, as treasure chests, as playgrounds, or as complex puzzles. When we attribute human characteristics to markets, we have to ask ourselves why we choose some qualities over others. Just as I projected authority onto my therapist, we project the qualities we most struggle with onto markets. This is a kind of transference. If we’ve lived for years with the sense that no one listened to us, we now feel that markets are irrational and capricious. If we’ve felt that others have taken advantage of us, we may just focus our frustration on the market makers who manipulate markets to our detriment.

The idea of transference suggests that what most frustrates us about markets is most likely to be something that has frustrated us in our past—and probably in relationships. In a very important sense, we have relationships to the markets we trade, and it’s not unusual for us to imbue those relationships with the same qualities that bedevil our personal relationships. When we act out past patterns with current markets, we’re no longer responding to objective demand and supply; lost in our own patterns, we become blind to those of our markets.

We can see examples of transference in our dealings with trading partners as well. Very often, how a trader interacts with me reflects how she is dealing with markets. Some traders will avoid interaction with me out of embarrassment due to recent losses. These same traders enact avoidant patterns in their trading, neglecting to limit losses, neglecting their preparation. Other traders take a helpless stance with me during coaching, almost begging to be spoon-fed answers rather than trying methods out for themselves. These same traders become passive in difficult markets, giving up readily, displaying little resilience after normal losses. One advantage of sharing your trading with a peer mentor or a group of like-minded traders is that you can monitor how you engage them and how they deal with you. Not infrequently, the patterns that show up in your dealings with traders will reflect the patterns you need to work on in your trading. Patterns of overconfidence, avoidance, rationalization—all come out in our social interactions.

Your greatest shortcomings in dealing with relationships will find expression in markets.

How do you view the markets you trade? What do you say about markets when you’re most upset about trading? If you were to draw a picture of your markets or describe them to a nontrader, how would you depict them? A worthwhile assignment is to review your journal and track your self-talk for anything you might say to personalize markets and trading.

As your own trading coach, you have the ability to create your own trading experiences. By controlling your risk exposure, executing trades only when there is a favorable reward-to-risk ratio, and limiting your setups to clear, tested patterns, you have the opportunity to create trading experiences that don’t follow the transference script—much as my therapist refused to accept the role I had cast for him. If your problem is handling frustration, your challenge is to create manageable frustrations in how you approach markets. If your pattern is escapism, your task is to find safe ways of staying in trades, in accordance with plans.

Create trading experiences in which you can safely face your fears and constructively give voice to frustrations. That experience provides new endings to old scripts.

When we project hated qualities onto markets, we divide ourselves. Part of us fights the trading process and part of us is tries to stay absorbed in it. Thus distracted and divided, we are less able to pick up on market patterns and shifts among those.

There’s a saying traders use: “Let the market come to you.” What that implies is that you should approach markets with an open mind, processing patterns as they unfold. This means being free of projections, free of conflicts that we transfer to our trading. By tracking how you talk to markets—and about them—you can step back from those repetitive themes and truly let markets come to you.

COACHING CUE

You can see from the foregoing discussion why it is so important psychologically to reduce your trading size/risk when you are experiencing trading difficulties. This provides a safe context for trying out new ideas and tweaking your methods, so that you can face market problems directly and constructively rather than respond with defensiveness. When we make our trading more planned and rule-governed, we create experiences of control. When we reduce risk, we create experiences of safety. The essence of self-coaching in the psychodynamic mode is to generate new and powerful experiences that change how we deal with self, others, and world. Fashioning new trading experiences enables you to experience your trading and your markets in fresh ways that open the door to opportunity.

LESSON 49: THE POWER OF DISCREPANCY

A cornerstone of the psychodynamic framework is that talk alone does not generate lasting change. Rather, as we saw in the last lesson, we change through new, powerful emotional experiences. These experiences are powerful precisely because they undercut our worst fears and expectations and show us that we can, indeed, master the past conflicts and feelings that were once overwhelming.

We can think of this change process as generating new endings to old stories. Perhaps my old story is that I am fearful of loss, having been through traumatizing losses in my past, either as a trader or predating my trading career. Out of this fear of loss, I find it impossible to hold trades until their logical stop-loss or profit targets have been hit. Invariably I become so concerned with protecting a gain or minimizing a loss that I front-run my trading plan and exit early.

Note that this pattern is a defensive one: I am trying to ward off the discomfort of loss by getting out of the market prematurely. The cost of that pattern is that I never fully participate in the upside of my ideas, leaving me to chop around in my P/L. As long as I continue to act on that pattern, I never stay in touch with that fear of loss and thus can never master that fear. Repeating the pattern simply reinforces it.

So what we need in psychodynamic work is a new ending to the scenario. We need to refuse to indulge in the defense and purposefully sit in the trade, while allowing the feeling of fear to remain. The idea is that, at one point of time in our lives, this fear was too threatening to sit with. Now, however, at a new life period when you have more resources, you can handle the fear. You don’t need to continue to defend against it. Getting in touch with your basic conflict and its emotions—the things you have been most defending against—is crucial to the psychodynamic change process.

The psychodynamic change process can be schematized as a sequence:

• Identify your recurring problem patterns.

• Connect yourself to the costs and consequences of those patterns.

• Identify what those patterns are defending against (what you are avoiding).

• Create experiences, particularly in relationships, for facing what you’ve been avoiding.

• Repeat these experiences across different relationships to internalize new, constructive ways of coping.

Your problems, this view emphasizes, are simply ways of protecting you from fearful memories, feelings, or desires. Once you experience those fears and acknowledge them, the challenge is to channel the fear in a way that does not derail your trading plan. You could talk with a trading colleague to gain some perspective, perform some exercises to calm yourself down and reassure yourself, or use the opportunity to write in your journal and remain an observer to the anxiety rather than the one immersed in it.

By refusing to act on the old defensive pattern, you guarantee yourself a psychologically helpful outcome. This is very important. As long as your position is sized properly with appropriate risk/reward in the placement of stops and targets, one of two things will happen: you’ll either hit your target and make your money or you’ll get stopped out at your predetermined level.

While the latter scenario is less desirable than the first, neither scenario is catastrophic. By acting in a manner that is discrepant from your old pattern, you have created a win-win: either you make money, or you find out—in your own experience—that the loss was not so bad after all and nothing to fear. In some ways, it’s this latter experience that is the most helpful. By facing your worst-case scenario and seeing that it’s something you can, indeed, cope with, you generate a tremendous sense of confidence and mastery.

Trading well is a powerful source of new, positive emotional experiences.

There are many ways of constructing discrepant experiences. One is to surround yourself with people who respond differently to you than those from your past and let them be a part of the changes you’re working on. They can then support you in not repeating old patterns, but also in providing positive feedback when you enact new, positive ones. Another way to generate discrepancy is to face uncomfortable situations directly, refusing to engage in old defensive maneuvers. Once you get in touch with the feelings you’ve been holding at bay, you’ll be surprised at how readily you can arrive at ways of coping with them that provide you with the new, constructive endings.

A term used by psychodynamic therapists Alexander and French captures the essence of this approach: corrective emotional experience. What enables people to overcome their problem patterns is a set of emotional experiences that correct the learning that occurred during times of past conflict. It’s not enough to perceive a problem and think about it; as your own trading coach, you need to create experiences that enable you to move past that problem. Invariably this means refusing to keep difficult feelings buried and, instead, experience them fully and face them directly. When you see that you can live through your emotional worst-case scenarios and emerge with no lasting damage, that is the corrective emotional experience.

Your assignment, then, is to conduct a personal experiment and seek just one corrective emotional experience during the trading day. Identify the repetitive trading behaviors that most disrupt your trading and then figure out what you would be thinking and feeling if you didn’t engage in those behaviors. When a situation arises in which you would normally repeat your pattern, make the effort to hold off and experience those feelings you identified. See what those feelings are like, see how you cope with them, and see how the new coping affects your trading. You may be surprised to find that facing your fears is the best way of moving past them.

COACHING CUE

If you have a trading mentor, someone you respect and admire, try trading like that person just for one day. Do everything as you think they would do it. See how you feel with the discrepant experience, as the enactment forces you to forego your own negative patterns. In enacting an ideal pattern, you create new experiences with markets that undercut old, repetitive patterns.

LESSON 50: WORKING THROUGH

The term “working through” has a specific meaning in psychodynamic work. Once you have made initial changes—breaking old patterns of defense, facing challenging emotional conflicts, and finding new ways of dealing with those—the working-through process involves extending these gains by repeating the process across a variety of situations. As we’ve seen, repetition combats relapse: working a problem through a number of relationship situations cements new, mature ways of handling core conflicts.

A classic example is the trader who avoids closeness in relationships out of fear of rejection. Sure enough, in his relationship with his counselor, he transfers his past fears to the present relationship and avoids intimate topics. While this provides a superficial sense of safety, it prevents the trader from talking about what is truly important—and moving beyond it. Once the trader makes a conscious effort to open up in the sessions, the counselor provides the discrepant response by not being rejecting. This makes it easier over time to break the pattern with the counselor in future sessions and remain open.

In the working-through process, the trader in our example would take the progress with the counselor and now apply it to other relationships, as appropriate: friendships, close work relationships, and romantic relationships. By working through the conflict in multiple situations, new, positive patterns are cemented. The positive mirroring of many relationships enables the trader to internalize a sense of safety and security, which can be carried forward to a variety of life situations. In other words, it’s not a single corrective emotional experience but multiple such experiences that enable us to internalize a new sense of self.

Successful self-coaching builds multiple corrective emotional experiences, so that new, constructive patterns can be internalized.

After all, this really is the essence of psychodynamic work: redefining the self by creating and absorbing so many impactful, constructive experiences that it becomes impossible to remain stuck in the past. I internalized the identity of an author not just by writing articles and books, but also by interacting with editors and readers over time. There was a time when I sat in front of a blank screen in writer’s block mode, concerned that what I wrote would not find a receptive audience. Following multiple positive experiences with writings and readers, that is no longer a concern. The writing flows as naturally as conversation.

Your training as a trader should provide ongoing corrective emotional experiences: training itself becomes a means of working through our shortcomings.

When you’re at the point of working through, you want to be an active experience generator and tackle your patterns in as many situations as possible, giving yourself the opportunity to enact new ones. As prior lessons have emphasized, and as you’ll detect from the advice of experienced traders in Chapter 9, this is particularly powerful if you’re working problems through with the support of trading peers. Their mirroring of your success, like the feedback that solidified my identity as an author, will enable you to literally take your changes to heart.

Your efforts at self-coaching in the psychodynamic mode will find their greatest success if you can disrupt old patterns and enact new ones on a daily basis, with the active feedback of those you’re working with. Many traders I’ve known have sought to keep their specific trading performance secret, obviously embarrassed that they’re not making more money. They freely talk about winning days, but remain strangely vague or silent following bad ones. This is exactly the opposite approach to the one that will work for you. You want to be visible, warts and all, because that will help you—emotionally—put those warts into perspective. If your flaws (or your concerns about others’ reactions to those flaws) are so threatening that you must hide them, then your defenses control you. When you can make yourself completely visible to others, you have nothing to hide. Their acceptance of you is complete and genuine, not a false reflection of a false self.

A while ago, when I was posting my trades live to the Web via the TraderFeed blog, I invited readers to join me and post their trades as well. The daily count of unique visitors at that time was around 2,000; I figured that, even if just one-half of 1 percent took me up on the offer, we could get 10 different models of trading to learn from. Well, out of 2,000 people, only one showed tentative interest. No one was willing to go public with his trading.

That, dear reader, is how losers react. If readers were taking a psychodynamic approach to change, they would freely share their trades in real time and make no effort whatsoever to maintain false selves. Over time, their progress would be evident and the massive positive feedback they would generate would cement a new identity, a deep sense of security, and an emotional fearlessness.

Accountability provides powerful opportunities to work through our greatest insecurities.

Your challenge for this lesson is to open the kimono and conduct your working-through socially, with the feedback of people you respect. This would be part of a daily trading plan, ensuring that you’re generating corrective emotional experiences every single day. Several traders I know have taken precisely that approach by starting their own blogs, posting their trades, and developing relationships with the traders who responded constructively to their ideas. Relationships are a powerful medium for change, perhaps the most powerful. If you harness the right relationships you will give your self-coaching a reality that transcends simple entries in a trading journal.

COACHING CUE

Find at least one person to whom you are accountable for your development as a trader. This should be someone you can trust in sharing your P/L, your trading journals, and your tracking ofpersonal goals. A major advantage enjoyed by traders at professional trading firms is that they are automatically accountable for performance and can thus openly discuss success and failure with mentors and risk managers. Accountability leaves no place to hide; it’s an excellent strategy for combating defensiveness and removing the threat behind setbacks.

RESOURCES

The Become Your Own Trading Coach blog is the primary supplemental resource for this book. You can find links and additional posts on the topic of coaching processes at the home page on the blog for Chapter 5: http://becomeyourowntradingcoach.blogspot.com/2008/08/daily-trading-coach-chapter-five-links.html

An excellent overview of psychodynamic approaches to brief therapy can be found in Hanna Levenson’s chapter “Time-Limited Dynamic Psychotherapy: Formulation and Intervention” in The Art and Science of Brief Psychotherapies, edited by Mantosh J. Dewan, Brett N. Steenbarger, and Roger P. Greenberg (American Psychiatric Publishing, 2004).

A worthwhile resource for building emotional self-awareness is Leslie S. Greenberg’s Emotion-Focused Therapy: Coaching Clients to Work Through Their Feelings (American Psychological Association, 2002). See also the classic text by Leslie S. Greenberg, Laura N. Rice, and Robert Elliott, Facilitating Emotional Change: The Moment-by-Moment Process (Guilford, 1993).

Articles relevant to psychodynamics and self-coaching can be found in the “Articles on Trading Psychology” section of my personal site: www.brettsteenbarger.com/articles.htm. These articles include “Behavioral Patterns That Sabotage Traders” and “Brief Therapy for Traders.”

It is rare to find trading coaches who know anything about psychodynamics; a notable exception is Denise Shull, who wrote the chapter, “What Would Freud Say: Stroll Down Freud’s Mental Path to Profits” in the book edited by Laura Sether, The Psychology of Trading (W&A Publishing, 2007).