So where do you start?
First, we must figure out the architecture of your general reactionary style. I don’t mean that we simply want to know how you tend to react, but rather that we want the unconscious reasons for your tendencies and the raw data of what goes through your mind when you are challenged with the uncertainty.
Here’s an exercise, loosely adapted from Harville Hendrix’s book, Getting the Love You Want, that I would like each of you to commit to doing. It will put you on the path to being able to recognize your fractal, repetitive psychological set-ups.
Find a voice recorder and record your stream of consciousness through the sequence of two to three trades or decisions. Perhaps some of you take 15 minutes to execute three trades and some of you take 15 days. For those of you who take 15 days or even 15 months, no, you don’t have to record every single thing you think the entire time! Put the recorder on as you are thinking about getting in or out of a position and start talking.
We don’t need a narration of the market action even though that will be your temptation. We want the self-talk or the stream of consciousness that relates to your observations of yourself. If you can’t “hear” it, try it from the point of view of one or both of your parents. Imagine they were in the room commenting on your decision making. Work on this over a couple of weeks and then set the recordings aside.
Next, answer this series of questions in this order.
Write down five to 10 memories from before you were 18 years old. They can be anything that comes to mind—sports, school, friends, teachers, or holidays. Look at pictures or yearbooks or ask your family if you can’t remember much.
• From that list, pick three that stand out from the rest. Maybe they still have an emotional charge, maybe you even think of them every once in a while. Myself for example—as seniors in high school my nemesis Jane looked at me one day and said “Oh, you should be a gym teacher.” Well now she was valedictorian, teacher’s pet, and if nothing else, I will give her smart—but for some reason she wanted me to feel not smart enough to handle anything outside of gym! I still remember it and I know it hasn’t lost all of its sting because one, I even remember it and two, thinking about letting her know I did well in graduate school has a certain appeal. Memories like that are the kinds that will be most useful for this exercise.
For these three memories, write the story of what happened. It doesn’t have to be War and Peace, just a kind of news report on who, what, where, why, and when, more or less as I just did.
Next, take these stories and look at them from a different point of view. Ask what the other people in the story were feeling or what it seemed like they were feeling. In my case, my good friends were sitting around and they burst out laughing; fortunately not at me but at Jane for her misjudgment and clear put-down (nothing against gym teachers; actually, it sounds like a very fun job now that I think about it!).
Last, write down how the situation made you feel in the moment and what you told yourself about the situation.
Once you get this far, set the writing and the recordings aside for a few days or weeks. Just let both steps simmer in the back of your mind. (Listen to yourself here. Work at the pace that feels right to you.)
Next, while you let the first two steps “marinate,” consider, if it feels comfortable, making some sort of record of your dreams.
In this case, what actually happens doesn’t matter one iota. What matters is the sequence of feelings and emotions in the dream; or, in other words, those feelings that you wake up with in reaction to the events in the dream.
I know it isn’t necessarily easy to remember but do what you can. Keep a bedside notebook or your phone nearby so you can jot down your thoughts and feelings right away. For the purposes of this exercise, try to get three to four, but also know that this is a good habit to get into because the emotional sequences in dreams usually escape the filters of waking life.
For this step, summarize the following from the data of your memories and if you worked at all with your dreams, supplement your answer with that emotional data.
• What do I expect for myself?
• How do I expect things to turn out?
• How do I seem to feel about myself?
• What kind of labels do I talk about myself with?
• What fears come up?
• How do I react to others?
• How do I react to being told something other than what I want to hear?
You are trying to arrive at the basic story of your typically unconscious feelings. Just do the best you can with whatever your mind serves up.
Go back to your trading recordings and summarize what feelings came up during your decision-making moments. Again, we’re looking for the themes and the feelings that repeat themselves across market and decision sequences.
Now compare this information to what you discovered in step 4.
What seems similar?
Something should; in fact, for some people, it jumps off the page. For others, it doesn’t immediately click, so if you find yourself in that situation, let it rattle around in the back of your brain for a few weeks. However, let’s take a look at the kind of thing you might find.
“I never can get what I want.”
“It is always my fault for …”
“If I had just been a little more careful or worked harder …”
“If I just didn’t do the stupid things!”
This list could go on and on. One thing about fractal-emotional contexts is that while they are similar they are also like fingerprints. Everyone has one that is truly their own. The details differ from person to person.
But play each one out, or just an imaginary one you can come up with, as it would relate to taking a trade, being in a winning trade and deciding what to do or getting out of a losing trade. To do this, imagine: “What if I felt that way?” and “How would that feeling be acted out when I am in the midst of a decision I am very unsure about?”
For example, “I can never get what I want” might translate to a feeling and acting out of not letting winners run or getting out of trades too early. “It is always my fault” easily morphs into “I shouldn’t have done that” and getting out of a trade almost immediately. “If I had been a little more careful” also leads to getting out early.
Exits are the tough part of trading because, as we discussed earlier, the potential for regret always looms as a relatively conscious-feeling context but these feelings above exacerbate that. And most of the time no one knows it! In fact, one of the ironies of trading is that winners almost always make you feel bad—either you didn’t stay in long enough or you got out soon. We expect losers to make us feel bad but we fail to realize that winners ironically usually put us in a “no-win” situation in terms of our satisfaction with the result.
On the other hand, occasionally, a trader calls us who wants to know why they seem to not have the ability to take a trade at all. Of course, these callers trade their own money, but over the years I have run into more than one who has sat in front of a screen for years, can usually explain the market quite well, and yet can’t actually put money at “risk.”
In one case, recently, I worked with an exceptionally nice man with whom we figured out together had a rather complex multifractal (many zigs and zags in a core pattern of emotional experience). I can happily report that unraveling what his repetitive experience was helped him deal with market decisions in a completely new way, one that worked much better than his old way.
He came from a very unusual family situation. His parents didn’t speak to each other for years, even though they lived under the same roof. His childhood consisted of relaying messages back and forth and sitting through endless completely silent dinners. And as you can imagine, his parents both attempted to curry more of his favor. He grew up being pulled in two directions every moment of his life.
At first I didn’t see it but then it hit me. Any trade has the potential regret tree. As we recently discussed, no matter what you do in the majority of your trades, you could have always done better—let run longer, got out sooner, or just taken the money and run. In short, after working on this issue for a few months we realized that the pro/con argument for any market decision mimicked his previous situation with his parents. Any reasons to buy (and the feeling contexts in place) took on the role of one parent and the reasons not to buy or to sell unconsciously took on the role of the other. No matter how much he understood what was happening in the market or no matter how much confidence he had that he had “seen this movie before,” it didn’t matter. The completely unconscious emotional fractal operating was an exact repetition built of the two transferences—one stemming from his mother and one originating with his father—of his childhood. Amazingly, this went on for years, which while again astonishing, isn’t really when you remember that his brain was wired to fire within this context. So what solved the problem?
The classic Freudian viewpoint says that the interpretation or that just by realizing the trade was not really a re-creation of his parents’ push-pull dynamic will solve the problem. Other schools working with psychoanalytic theory have found it much more effective to create a new emotional experience. Given that you have to have a feeling to actually take any action, we somehow had to work with the feeling—on the feeling level—in order for him to be able to implement a market decision and not be stuck going back and forth forever between the pros and cons of a given situation (like how he was stuck forever going back and forth between his parents).
As is often the case, the solution to creating a new emotional experience almost always means going with whatever feeling is in place. This means stopping the effort to use your intellect to talk yourself out of feeling and doing what is called “joining” it—or going along with it, at least in your mind.
So one week, I gave him the assignment of imagining that the reasons for and against the trade were being argued by his mother and father, respectively. We made the unconscious context both conscious and felt.
A couple of weeks went by and sure enough, he found that by putting the feeling context into the here and now, he was actually able to work with the underlying feeling. In turn, their power to be unknowingly acted out dissipated, and he actually took a trade!
Now believe me, I know that seems almost impossible. But I have seen this kind of thing over and over.
Renee was actually having a little trouble following this. “Denise, are you saying that instead of using his intellect or cognitive capacity to remind himself that the two sides of the trading argument were not literally his mother and father, you asked him to do the opposite? Most people would try to remind themselves about reality, right? But if I follow you, you are saying that a kind of play acting that demonstrates the underlying feelings can be more effective. Is that correct?”
That’s basically it, Renee. It really boils down to feeling the unconscious feeling context so that the energy of the feeling is occurring in the present. They call it “joining the resistance,” where resistance means an intellectual defense against awareness of the repetition or recreation of an earlier experience. Let me give you another example.
A few weeks ago, I worked with a trader at a multibillion dollar hedge fund that traded a purely discretionary strategy. He had recently been given more capital and instructions from the chief investment officer to “hit the ball out of the park.” Of course, you might be able to guess how well he had been doing since that admonition—not great. We talked about how he really felt, that he was trying too hard and kept telling himself not to but it wasn’t working. He had even taken on more risk in his personal account, which normally he was exceptionally conservative about.
I told him what I wanted him to do was go back to his desk and really feel the feeling of hitting the ball out of the park. Really try to do it—put on more size and swing for the proverbial fences. He looked at me like I had just grown an insect out of my forehead, but within a moment he laughed and said, “But then I would probably take off risk!” In other words, as soon as he allowed himself to feel what he really felt, as opposed to trying to talk himself out of it, his emotions changed. He felt differently about what he wanted to do. Using your head to talk yourself out of the feelings you have just doesn’t work very well, if at all. It might look on the surface as if it does, but the feeling will linger and reappear, oftentimes acted out instead of just felt. Leaning into the feelings or fully experiencing them without any judgment about whether they are the right way to feel or whether you want to feel that way has this ironic effect of disrupting the feeling.
In this case, wanting to hit the ball out of the park makes perfect sense. Who wouldn’t want to? Actually doing so may be near impossible, but that doesn’t make the feeling wrong. Simply put, that feeling is motivation and working with it in a different way allows it to have a positive impact.
You might not want to see it. You might not be able to see it. Most traders can’t fully figure it out, at least at this level of detail. But I guarantee you that for each one of you, I can figure out the match between your personal history and your emotional experiences in trading. I have never, in all my years of coaching, been unable to find a trader’s repetition, assuming he or she gives me the data. Most of the time, I can do it backwards—I hear of a problem, such as being able to make money for a long stretch and then inexplicably giving it back, and I have a fairly good idea of what life generally was like for the trader when they were a child.
I am not saying that to pat myself on the back. I am saying it to convince you that it is there and, in turn, motivate you to do the detective work. It’s worth every bit of psychic discomfort the process might bring for that first moment when you avoid your next worst trade of the year because you had the knowledge and the understanding of how to act out of a different feeling context than one that was imbued into you.
A subject we must touch on, although it is far from my favorite, is the very real resistance to knowing or feeling what we feel, either the surface feelings or certainly the fractal ones. Many times we would all like to leave well enough alone. Sometimes even certain types of psychologists will tell you to do so. It seems that particularly in these days of designer drugs, it appears so much easier to just take a pill as opposed to resolve the underlying and unconscious fractal-emotional context.
It is true that most of these feelings don’t feel that good. I was never that fond of figuring out that my biological mother gave me up and then turned around and had another daughter only 18 months later. I didn’t think it bothered me because my parents, the real ones who raised me, gave me so much more than it appeared she could have—a better education and exposure to so much more of the world. For most of us, such stuff got buried for a reason—self-protection at the time of the original experience and perception. To excavate the feelings brings up pain. It just seems much easier to live without that pain. And plenty of cognitively trained psychologists will tell you it won’t do any good to go there anyway. So, why bother?
But see here is the rub—you are tricking yourself. The multifractal and simple fractal self-perceptions and expectations are being acted on.
But we tend to like what has defended us in the past. Defense mechanisms, the roots of not knowing, worked for us as children. They kept us mentally safe and motivated. If something goes wrong when you are little and you literally have no power, it makes you feel as if you do (have power) to say “oh, it is my fault.” Think about it; if it is your fault then it lies within your purview to do something about it. This is actually called the narcissistic defense.
In adulthood, these explanations and expectations hold us back. They function more like keeping a caterpillar from becoming a butterfly. A silk cocoon seems to have its advantages but, really, how does it compare to the free flight of a butterfly?
How does a two year old feel in general? Can you remember? I know that neither Michael nor Renee have young children but what about the rest of you? Think back to some of your earliest memories or, if you can’t remember, conjecture. As young children, don’t we all feel totally dependent on the adults, or otherwise helpless? Aren’t we all scared “out of our mind” if we wander off from our mothers in the grocery store? Can you get a sense, a visceral memory of that level of fear?
In a way, the market again makes us all feel exactly that way, on one day or another. The Monday after the S&P downgrade in August 2011 put everyone into a situation where they had no context of any kind—factual or emotional—and as such was a very nerve-wracking day for many even very experienced professionals. Or, it might have been the Flash Crash, October 2008 or August 2007. If you were around, it might have been in October 1997 or 1987, the days when what seems to be the norm comes unglued, because it does. The glue—the general rhythm, range, and speed—goes haywire.
Probabilistically speaking, it is the path to “all correlations go to 1.” Contextually speaking and on the surface, it depends on what came before; but feeling-context wise, it returns all of us to fractals of childhood. For a moment, or much longer, we have no idea what to do.
We do everything we can to avoid this feeling of falling into an abyss. We add charts and news analysis and now machines whose operators purport to have taught them to learn through ostensibly life-like neural networks. We might, however, want to consider simply feeling this feeling consciously and intentionally. Think of it as battle training—if we are familiar with the feeling context, then we will have a better idea what to do when it strikes. If we are not, and you can say this about every feeling, we will just act it out. We will buy or sell at the worst moment.
Normally, we think we act out when the pain is too great, and that may be true to an extent. I submit to you it is actually when the uncertainty is too great and we imagine the pain.
And yes, I know, Home Depot can scare the heck out of anyone, at any age. Either you have no clue what to do with all of this stuff or you have no clue how you are going to do everything the person with you is planning as you walk down the aisles.