FXstreet.com (San Francisco) – The Greenbank traded lower against its major competitors as the…
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FOREX Technical Analysis: AUD/USD Coiled for Emotional Trade
FOREXAnalysis: The AUDUSD is too high to buy and too quiet to short. Volatility is so low that the next drop will probably prove corrective. It often takes several 'false starts' in a volatility environment this low before the 'real' turn occurs …
FOREX Trading: EUR/USD Setting Up for a 'Sell the News' Trade – December 11 …
New software will analyze language more accurately to gauge the emotions of humans in the world of trading and finance. The software, a sentiment reading tool, was developed through a partnership of Thomas Reuters and MarketPsych. The process is called behavioral economics, and it reaches a variety of investors, regardless of class or assets. The More >
www.hedgefundlive.com No matter how mechanical traders want to be, there is always an element of psychology and human emotion. The best traders can minimize this on a regular basis and on days when they cannot minimize at least limit the damage that they could do to their trading. Today was just such a day for [...]
[at CNBC] – Europe faces an important challenge in creating greater awareness of the importance of a stable currency, but to achieve that goal, its citizens will need to grow more attached to the euro, Otmar Issing, former European Central Bank chief economist, told CNBC.
Core Ideas in Trading Psychology: Creating Change Through Mirrors and Corrective Emotional Experiences
Changing Problem Patterns
Trading as a Performance Activity
Introduction to Trading Psychology
When people find themselves locked into repetitive patterns of thought, feeling, and/or behavior that interfere with their lives, how do they escape? As all too many dieters are aware, we can know our problems and want to change them, but sustaining change can still be challenging.
A core idea in the Psychology of Trading book is that we tend to operate within a relatively narrow bandwidth of consciousness. If we imagine our possible states of mind and body as arrayed along a radio dial, we are generally stuck with a few presets on that dial. Life events can shift us from one state to another without our awareness, triggering patterns of thought and behavior specific to that state. That is how we can be wholly determined to quit smoking in one frame of mind, only to lapse into a smoke when we are bored or after we eat and drink.
The most effective techniques utilized by psychologists are those that enable people to become aware of those state shifts and reprogram the triggers unique to particular states. If, for instance, frustration in reaching my goals tends to trigger negative patterns of self-talk for me and those lead me to withdraw and feel depressed, I can use visualization and real life experience to place myself in frustrating situations and rehearse alternative modes of self-talk and behavior. With sufficient repetition, we internalize those new modes and reprogram our radio dials.
It is not simply the act of talking with a therapist that creates change: it is the act of doing things differently and generating new experiences that eventually become part of our selves. Alexander and French referred to these as “corrective emotional experiences”. They recognized that insight into problems, in itself, is not enough: change is accelerated and cemented through powerful emotional experience. Ironically, we know that powerful emotional experience can generate sudden, substantial life changes when it comes in the form of psychological trauma. Less acknowledged is that positive, powerful emotional experience can also catalyze major shifts in our life course.
From this vantage point, then, we can see that the problem of being stuck on the radio dial really boils down to having too few powerful and constructive life experiences. Every relationship, every activity, every day at work potentially provides us with new ways of experiencing our selves. Every aspect of our environment becomes a mirror, reflecting to us who we are. Trading is one of those mirrors: it can reflect experiences of mastery and pride of accomplishment or frustration and failure. Romantic relationships are another mirror; who we are with helps shape our experience of our selves.
To create change, therefore, we must become architects of our own experience. That means carefully creating our life mirrors, particularly selecting mirrors that take us out of our comfort zones on the radio dial to generate fresh experiences of the self. If we stay in life routines, we will live out the same routines in life; change cannot occur. Implemented properly, trading journals are not only tools for reflecting on our performance; they provide blueprints for our life’s architecture.
For more on psychological techniques for achieving corrective emotional experiences, see the Daily Trading Coach book; for more on the role of mirroring in trading development, see Enhancing Trader Performance. Posts relevant to creating life mirrors include The Devon Principle, my Theory of Romantic Relationships, and How to Change Yourself.
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