The Psychology of Trading

by Brett N Steenbarger

  Her reaction was another good sign.

  (Therapists often come across as humble human beings, insisting that they don't hold all the answers for clients. Don't believe it for a second. My approach to the session is typical therapist arrogance: If you can't find my humor amusing, you must be troubled! Anyone who thinks they're going to change a person's life by meeting with them for one out of 168 hours in a week surely has a bit of hubris!)

  Mary and I spent much of the remainder of the first session exploring her recent relationships with men and the pattern of giving too much and receiving very little. She made it clear that this was not a pattern in her female friendships. She also indicated that her growing-up experiences were positive, in a home that was supportive and caring. At one level, she recognized that she was bright, attractive, and personable. She should be succeeding at relationships with men. At another level, she felt like a loser because she was unable to sustain those relationships.

  "Am I asking for too much?" she implored. "Am I driving everyone away?" Clearly, she was hurting.

  One of the greatest mistakes a therapist can make is to become seduced by a person's words. What people say and what they mean can be worlds apart. Often, the nonverbal communications of a person speak far more to their meanings than their words. It is not unusual to encounter clients who are smiling, cheerful, and engaging as they recount the events of the week, their bodies tense with nervous energy, their faces taut with the effort to restrain painful emotions. At times, I make an effort to tune out clients' words and simply absorb the feeling tone of their verbal and physical communications.

  This can be of tremendous help in trading, as well. As I have indicated earlier, the state of my body often reflects information that I have processed, but not consciously. A tensing of my muscles and a shift in my posture in the chair at my trade station is often the first clue of a trade that is not living up to expectations.

  Respecting the power of nonverbal communication, I waited toward the end of the first meeting to ask about the envelope that Mary had been clutching tightly. A bit sheepish, she mentioned that it contained some of her creative writing. I asked if I could see her work, and she agreed. Several short stories were in the envelope, along with poems and fragments from a journal. I only had to read a few pieces to realize that she had talent. When I pointed this out to her, she brightened noticeably.

  "You really like it?" she asked.

  "Absolutely."

  "I was thinking of entering a creative writing contest," she offered.

  "That sounds great," I said. "I think you might have a shot at winning."

  We wrapped up our conversation and set our next appointment. It was a nice ending to a first session.

  Little did I suspect what was ahead.

  Our second session was tumultuous from the outset. No longer was Mary's hair pulled back. It flowed loosely down her shoulders. She was wearing a low-cut blouse and a very short skirt. She was also wearing much more makeup than before, and it was applied with a notable absence of artistry. In place of her straightforward speaking tone, she now talked in a hesitant fashion, looking away from me. Her voice sounded small and distant. I was shocked. It was as if she was a different person.

  When I pointed out that she seemed uncomfortable, she nervously mentioned that she had a nightmare the previous evening. She didn't see any point in discussing it, however.

  "It's only a dream," she said. "It doesn't mean anything."

  Gently, I suggested that we explore whether it had meaning. "Dreams sometimes reveal what's on our mind," I explained.

  It took a while for Mary to recount the dream. Every few sentences she backpedaled, claiming, "This is crazy. Dreams are made up. They aren't real."

  Eventually, she managed to convey her nighttime fantasy. It was quite vivid. She was at home in the dream and suddenly I appeared. I suggested to her that we could hold our sessions in her house. She felt very uncomfortable about that but didn't say anything. I asked her to go upstairs; and in the dream, she noticed my wedding ring and froze with fear. That's when she awakened.

  Once she had finished relating the story, we began to explore its significance. "In the house you actually live in," I asked, "what is upstairs?"

  Embarassed, she said, "My bedroom." Before I could say anything else, however, she added, "But I know you'd never do anything like that. It's just a dream. I know you don't have a personal interest in me."

  From her tone, as well as from the dream, I could tell that personal interest meant sexual interest. A key moment had occurred in the therapy. I could see that she awaited my reply, her eyes practically begging for the reassurance that I was not after her body. Yet, here she was, dressed more provocatively than any client I could recall!

  Once again, it was one of those pivotal change moments.

  I leaned forward in my seat and looked deeply into her eyes. I was practically touching her. Slowly, kindly—so as to not activate her defenses—I said, "You're wrong. I am interested in you in a personal way. And, from the way you're dressed, you seem to be interested in me as well."

  At that point, all hell broke loose. Soundlessly, Mary began shaking. For a second, I couldn't tell if she was angry, anxious, crying, or having a seizure.

  The real work was about to begin.

  AFFLICTING THE COMFORT ZONE

  One of the first things I teach my psychiatry residents is that the purpose of therapy is to "comfort the afflicted and afflict the comfortable." The phrase sticks in their minds because it captures an important reality. Some people come to their meetings in need of support. They have been traumatized; they are overwhelmed with anxiety, depression, or anger and need a refuge from their pain. Others enter counseling in a rut. Locked in patterns that bring self-defeat, they are all too comfortable with their old ways. They fear change. They fear the unknown. "I know it's a bad relationship," many people will tell me, "but I don't know if I want to be alone." When a car is stuck in a ditch, it sometimes needs a good nudge to get it going. People aren't so different.

  The standard therapeutic maneuver with Mary would have been to reassure her, to establish proper therapeutic boundaries, and to continue to explore the meaning of the dream. By shoring up the safety of the professional relationship, she would feel sufficiently secure to examine the dream's significance.

  Taking a look at the dream, however, is very different from reexperiencing it. Mary made it perfectly clear that she did not want to go near the nightmare. She had been trying very hard to convince me that it was unworthy of attention. Her discomfort, however, told me otherwise. In temporarily blurring the boundaries by stating my "personal" interest in her, I afflicted the comfort zone—for both of us. I made a bet that my initial impression was right and that she was strong enough to withstand the breach of comfort. When I saw her shaking before me, I wasn't quite so sure.

  Mary turned to me, sobbing. She was very upset, but now she looked directly at me. My gentle tone, more than my words, convinced her that I was not a threat, and she spoke freely. Her words poured out. She explained that her father was rarely around when she grew up. He traveled a great deal and divorced her mother while Mary was still young. Her maternal grandfather took care of her while her mother worked long hours to keep the household afloat. Although he was generally nice to her, he had a drinking problem. His moods would change dramatically when he had been drinking. He would become verbally abusive to Mary and her mother, reminding them of all he had done for them and ranting that no one in the family appreciated him. Worse still, when Mary was seven years old, he began fondling her when he was drunk, several times pulling down her panties. This continued until puberty, when she managed to establish residence with her father.

  Mary looked at me intently, tears in her eyes. "I feel like it was my fault," she explained. "I let him do that to me. I never told anyone."

  Now my voice was quiet. Humbly, I told Mary that I needed to apologize to her. "I'm very sorry," I said.

 
She looked at me quizzically, and I explained my remorse: When I asked to see the envelope that she was guarding so carefully, I had violated a personal boundary. The envelope and her writing were, strictly speaking, not a part of our meeting. I was displaying a personal interest in her. At one level, she was pleased that I appreciated her writing skill. At another level, however, she experienced my interest as yet another boundary violation from a man. Her dream nicely illustrated her fear that I was like her grandfather. And her decision to come to therapy in her dressed-to-kill outfit suggested that she expected to gain my attention the way she had received it in the past.

  I explained myself to Mary: "I do have a personal interest in you. But I do not have a sexual interest. I care much, too much about you to repeat your past." Through her tears, Mary's smile reemerged.

  Silently, I breathed a sigh of relief.

  REPEATING PATTERNS

  Our following sessions filled in the gaps. Each of Mary's relationships with boyfriends repeated her childhood. She became sexually involved very early in these relationships and began to fantasize of a future together. Desperate for acceptance, she did whatever she could to please the man. When he did not reciprocate, her feelings of loneliness and betrayal took over. She felt used, taken advantage of. Symbolically, it was the grandfather all over again.

  If all this sounds a bit Freudian, well, it is. One of Freud's greatest insights was what he called the "repetition compulsion." Not too long before Freud, the philosopher Friedrich Nietzsche had called it "eternal recurrence" and made it the center of his worldview. Basically repetition compulsion means that evolution is not inevitable. People repeat the same patterns in various ways and on various scales throughout their lives. Freud saw clearly that unresolved conflicts led to a loss of free will. Without resolution, people are condemned to eternally relive the past. The goal of his therapy, called psychoanalysis, was to regain that free will. Freud believed that, if people could become conscious of their unconscious repetitive patterns, they would no longer be controlled by their patterns.

  It is difficult to appreciate the degree to which much of people's lives have a scripted quality, as they unwittingly repeat patterns of thought and action. Many of these patterns can be traced back to unresolved conflicts from earlier in their lives. Talking about these patterns does not change them. In John Cutting's terms, Mind #1 has a peculiarly difficult time penetrating Mind #2. Only a powerful emotional experience—actually engaging in a relationship with a man who cared about her for more than her body—had the potential to dislodge Mary from her patterns. Powerful emotional experiences create the pivot shifts that enable people to change their routines.

  Enacting unresolved conflicts in one's financial dealings can be particularly destructive. One physician and part-time trader, Dr. D., sought my counseling after repeatedly facing steep market losses. Dr. D. would take a large position in hopes of making a killing, only to wind up deeply in the hole. At that point, he would follow the market avidly, taking additional positions to balance and bail out his initial faulty trade. Occasionally, he was able to rescue the trade; generally, he fell short and experienced deep feelings of failure. It is interesting that when Dr. D. limited himself to paper trading, he tended to make money, picking stocks with a systematic and well-researched strategy. Only when he entered the emotional arena of actual risks and rewards did his destructive patterns emerge.

  Although he was a successful physician, Dr. D. did not feel like a success. He grew up in a neglectful home and felt ignored by his father. Much of his childhood energy was spent in a desperate struggle to gain his father's attention and affection by succeeding in sports and in school. He learned, however, that no achievement was ever great enough: Nothing he did could satisfy his father, who spent long weeks away from home on business.

  In later life, even after his father had died, Dr. D. found himself replaying the same emotional scenario in his trading, much as Mary repeated her unsuccessful approaches toward men. Having internalized the sense of not being good enough, Dr. D. now tried to prove himself through his trading accomplishments. Paper trading and small-size trading were not good enough; he had to make huge profits to demonstrate his worth. Ironically, this meant that he was most emotional when he was most financially at risk. When his positions were on paper or limited in size, he could follow his trading plan and take frequent profits. As his size expanded, his focus turned from the market to his emotional script, luring him into decisions he otherwise would never have made.

  Dr. D. was an intelligent, educated man. He was a success in his profession. But none of this prevented him from blindly repeating a painful and destructive pattern. It was as if that part of his life were not under his control, activated by feelings of insecurity and playing itself out without his conscious awareness. In a very real sense, he was as out of control as the Woolworth man, living out an irrational life script.

  Dr. D.'s therapy proceeded in an unorthodox manner. Simply making him aware of his repetitive pattern would not be sufficient to alter it. As soon as his mood shifted and the not-good-enough feeling overtook him, his perspective would be lost and he would find himself looking for the next market killing. The key to change, as it was with Mary, was to activate the pattern and then do something different. Powerful experience—a new ending to the old script—is what changes people.

  In Dr. D.'s case, we conducted a funeral: an actual funeral, complete with burial and ceremony. During a marathon session, I asked Dr. D. to write down on paper a complete list of all the things he wanted, but never received, from his father. I also asked him to recount specific incidents in which he felt hurt by his father's lack of recognition. Laboriously, we went through his list, replaying the old, painful memories. Each time we hit on a traumatic memory, I switched gears and asked Dr. D. to recount an unsuccessful market trade. Again and again, we reviewed his trading failures, driving home the destructiveness of his pattern and his inability to win recognition through his trading.

  Halfway through our recital, after one particular heart-rending memory in which he recalled his father not showing up to an eagerly anticipated championship Little League game, Dr. D. recalled one of his worst trading experiences. He had taken a fully margined position and, after a decline in the stock, faced a margin call. He added to his trading capital rather than liquidate the position. He lost that money as well. Pale and teary-eyed, Dr. D. looked squarely at me and said in a hoarse whisper, "I can't keep doing this to myself."

  The shift from competent doctor to teary-eyed trading failure told me we were ready for the ceremony. We buried the list of hurtful occasions and conducted our funeral, saying goodbye to all his hopes and expectations for his father. After saying our farewells amidst tears and relief, we rehearsed a new pattern. Each time Dr. D. felt unworthy, he was to vividly image the funeral session we had held and picture himself saying, "I can't keep doing this to myself." Whenever that occurred, he was to take a position in the market half—not double—the size of his normal trade. Indeed, drawing on my own experience, I suggested that he initially trade an amount so small that it could not possibly attract the attention and admiration of others.

  Freed of the need to be somebody in his father's eyes, Dr. D. was finally ready to succeed in his trading. Quite a few months after our last session, I received a call from him. He was proud of having caught an important bottom in the market. When he mentioned his position, I smiled inwardly. It was a surprisingly modest stake. But it yielded a meaningful profit.

  Dr. D. finally got it. He was trading from the couch.

  CHANGING REPETITIVE PATTERNS

  I wish I could say that Mary's therapy ended successfully with my efforts at providing a powerful new experience in response to her dream. Change is generally not that simple and straightforward. With rare exception, it is not enough to have a single mind shift or emotional experience. Only through repetition do those experiences become internalized as part of one's identity.

  That is where
transference comes in.

  Freud referred to transference as the replaying of old conflicts and patterns within the counseling relationship. Mary's second session is a perfect example. I was an older man who showed a personal interest in her. Longing for acceptance, she offered herself to me in the way of her past. All that needed to happen to complete the circle was for me to accept her offering. At that point, I truly would have become her grandfather and she would have repeated the Faustian bargain in which she traded her body for attention.

  The goal of therapy has been described as providing new endings to old stories, and that was what I was trying to do with Mary. If my relationship with her was to be truly therapeutic, I could not take her offering. My goal was to provide her with a different kind of relationship: one that offered closeness and caring without exploitation. Perhaps then she could internalize from our interactions the sense of acceptance that had been missing for so long.

  Achieving that is more difficult than it might seem. Part of Mary only knows acceptance through offering her body and soul. If I refuse that offering, that part of her is apt to become hurt, angry, and lost—as she has felt in recent relationships. So while a mature part of Mary might appreciate that I am not out to take advantage of her and really do care about her, there is a little girl inside who might not accept that. That little girl will only go down the therapy path kicking and screaming. Freud called this phenomenon resistance. The part of the person locked in the past is threatened by change and only knows gratification in the accustomed way. Just as someone might defend himself or herself against external threats, like a mugger or an oncoming car, the mind defends itself against the anxiety of internal threats. New endings to old stories, at some level, are too anxiety provoking for people. As a result, they invoke all sorts of strategies to avoid the new endings, pushing away the very experiences that could help set them free.