Joan seemed immersed in the fantasy. "She's in bed with her teddy bear. She seems so small, so vulnerable. She doesn't know what's happening. Mom's not there."
"Where are you in the room?"
"I'm beside the bed, kneeling beside her. I'm reaching out to her on the bed and holding her hand."
"What are you saying to Little Joan?"
"That it's going to be okay. I'm there to help you. Everything will be all right. I'll take care of you."
"Is there anything else you're saying to her?"
Joan's voice broke, as tears ran down her eyes. "I love you. I love you. I love you. "
That evening, Joan had a homework assignment in therapy. Before dinner, she had to wear her white hospital coat at home and replay in her mind the images of Little Joan. I asked her to immerse herself in the lullaby and rock herself, as she focused on Little Joan. Then, as she prepared and ate her dinner, all to the tune of the lullaby, I wanted her to create an image of feeding Little Joan: sitting at the bedside, holding her hand, offering her food. If Little Joan worried about eating too much or becoming fat, she was to imagine herself offering love and reassurance, helping that little patient of hers.
Joan embraced the exercise. When she arrived home for dinner, she didn't just wash her hands. She wore her white coat and scrubbed, as if she were about to enter the operating room. She vividly visualized Little Joan as her patient and even made herself read up on her patient, as she would during a rotation. She learned about the connection between depression and eating disorders and the ways in which eating problems can serve a thwarted need for self-esteem. Most of all, she kept her compassionate mind-set as a physician-to-be. "Above all else, do no harm," she had been taught, so she refused to berate her little patient.
Perhaps most interesting of all was the way Joan became Little Joan when she immersed herself in the lullaby and the rocking. It was as if those sensations had become associated with a particular experience: a caring, nurturing experience. The result was an interesting exercise in multiplicity: simultaneously accessing the mature, care-giving self while activating the child-self capable of receiving nurturance. By rocking and humming the tune as she ate, Joan made eating an activity associated with a physician's caring, not unlike Mother's caring. No longer was it an exercise in self-loathing.
It would be an exaggeration to suggest that Joan overcame her eating disorder with just a few exercises. The reality is that it took quite a few meetings and many repetitions of the exercise before Joan joined her friends for a summer beach party wearing a new, revealing bathing suit. But one thing struck both of us after that dramatic session: She stopped binge eating and purging.
Joan couldn't feed herself properly, but she knew how to feed her patient. Cued by a white lab coat and a lullaby, she merged her compartmentalized selves and created a novel pattern—and, eventually, a new self-image.
WHEN EFFORTS AT CHANGE FAIL
To an outside observer, it might have looked as though Joan had undergone a personality change. A more accurate description would be that she had become more of the person she was already capable of being. The signal on her radio dial that corresponded to the loving, caring, physician was boosted, allowing her to access it even when she was not in her professional role. Had she not possessed this initial capacity for nurturance, it is highly unlikely that therapy could have worked for her.
Indeed, many of my greatest failures in counseling have occurred when I could not find a healthy, mature identity to anchor future changes. That piece of emotional health, no matter how seemingly small, is like a break in a sheer mountain face. If it is sufficiently deep and wide, it can provide a toehold for the upward trek.
Sometimes, however, there is no break in the rocks, or at least I fail to find one. It doesn't happen often, but it is striking when it occurs. Counselors in the addictions field are perhaps most familiar with the scenario: A person is referred for help by the family or by the justice system following multiple episodes of drinking. The person, however, is in denial. She doesn't feel that she needs help. There is no need to try various exercises or to examine particular patterns because there is no real problem!
A T-shirt once worn to a session by a client of mine read: "I don't have a drinking problem. I drink, I get drunk, I fall down. No problem!" The shirt was funny because it captured the thinking of the alcoholic. Some element of observation is missing. Without it, even the best and most sensitive interventions fall on deaf ears. It is very difficult and very frustrating to try to get a person to see what is plain to everyone else.
Perhaps that is why Alcoholics Anonymous (AA) approaches recovery very differently from traditional therapy. AA teaches that people must "hit bottom" before they can own their problems. They need to experience sufficient pain and consequences that they finally say, "No more!" AA regulars know that the worst thing you can do for a person in denial is to shield them from consequences. Addicts need to go through crisis and hit bottom in order to reach their turning point. Indeed, the grizzled veterans of recovery will employ tough love to accelerate the crisis. In so doing, they recognize that you can't simply talk people into their epiphany. "Bring the body and the mind will follow" is a popular AA slogan. Change occurs more through internalized experiences than through therapeutic insights. But even to bring the body to recovery, there has to be enough of a crack in the rock face for the person to acknowledge, "Maybe I do have a problem."
When people lack this duality—the ability to be an observer to their problems as well as an involved participant—therapy becomes every bit as hazardous as climbing a sheer mountain face.
One such incident occurred with an alcoholic man who was referred to me by the court system in Cortland, New York. I was a psychologist on the staff at the county mental health center, and, as is the case in rural communities, I was expected to handle just about any problem that walked in the door. Nothing, however, could have prepared me for this individual.
He was mandated for counseling because he had raped his five-year-old son.
I read the referral material from the court. The man had a history of alcohol-related offenses, including driving while intoxicated (DWIs), as well as several arrests for petty theft. The referral summary graphically depicted the physical damage done to the child; the emotional damage was left to the reader's imagination. The report indicated that the man at first denied that he had committed the act. Later, he said that he was drunk and didn't know what he was doing. Throughout, he minimized the damage that he had caused.
A cardinal rule in counseling is that one must develop a rapport with clients. As I have shown, the therapeutic alliance is a bond that forms between the therapist and the observing part of the client. Research consistently finds that the depth and the quality of that bond is the best predictor of the eventual success of counseling. It is obviously not helpful to the formation of an alliance to be harshly critical. After all, if people seeking help experience the therapist as blaming and punitive, they are unlikely to return for assistance. It is important, therapists are taught, to show a basic respect for clients—even when they act, feel, and believe very differently from you. Even when they rape their children.
I couldn't do it.
The man entered my small office, his demeanor nonchalant. He wore a flannel checked shirt and a worn pair of jeans and work boots. He sat down and looked for me to start the interview. I scanned his face and body for signs of discomfort. I could find none. Almost involuntarily, I blurted out, "I read through the materials from the court. How could you rape your little son?"
I immediately regretted my words. The question, however, didn't seem to upset him in any way. A hint of a half-smile crept over his face; and, with a slight shrug of his shoulders, he responded: "Because my daughter wasn't home." No pain, no remorse: I would have raped the girl, he seemed to be saying, but, hey, I had to take what was available.
This, I was certain, was the face of evil—not a cold, calculating, malicious intent, bu
t the absence of any capacity to care.
Our interview lasted less than 15 minutes. The man wanted counseling visits to fulfill the judges demands, but he could not specify any changes that he wanted or needed to make. Every fiber of my being wanted to help him out: out the door! I referred the case back to the judge, feeling a mixture of outrage and impotence.
Without the toehold, I had slipped down the mountain face. Moving the radio dial is of no avail if there are no signals to amplify.
CONCLUSION
It is time to return to that "fearless trading inventory" I had conducted a while ago. Recall that I discovered that many of my trades lacked consistency in execution. Recall also that I found that, when I performed my homework and remained focused on the market rather than on my profits and losses, I actually traded reasonably well.
If you have a valid, tested trading methodology (and this is a significant "if"), and if you are underperforming the method's historical performance, there is a real possibility that you, like Joan, are encountering triggers for state shifts that are getting in your way.
Just as Joan had at least two selves, one self-defeating and the other caring and affirming, many traders—myself included—have at least two trading selves. At times, these selves are in sync with the market, letting the hard work speak for itself. Other times, traders front run their trading signals, ignore their stops, double up on their losers, and pull the rug from underneath their winners. If you can examine occasions when you've traded in the zone and well out of it, you will find that, like Joan, you are carrying on very different internal dialogues at those times.
Activating your Internal Observer and noticing your self-talk as you are trading will tell you precisely who is doing the trading, which of the "I's" is in control. Many times, you do not identify the triggers as they occur, but you can recognize the negative self-talk that immediately follows. This self-talk has an automatic, scripted quality that is largely independent of the objective circumstances of the moment. It truly seems as though the trigger has pressed a "play" button in your head, activating a well-worn tape. Identifying the contents of those tapes is a very helpful step in being able to interrupt them. Many times, you can become sensitive to common phrases in your negative self-talk, such as "loser" or the catastrophizing "what if," using these to trigger a new, more constructive action pattern.
One way of accomplishing that is through what I call the "trading coach" exercise. This is a variation of the challenge that I posed to Joan. Recall that I asked her if she would say the same things to her patients that she had been saying to herself. She laughed at the very thought, knowing full well that she would never behave so destructively in a professional setting.
In your "trading coach" exercise, you are to go into trades as if you were a mentor to a developing trader. Your job is to teach this student how to become the most successful trader possible. Imagine that any position you contemplate, enter, or exit is your student's position. How will you talk with your student if the trade is going well? If the trade begins to falter? If the student is contemplating an exit or wants to hold on? Your job is to be the best coach you can be. Then compare that talk to the self-talk you may have been engaging in before, during, and after you put on your positions.
Most people, like Joan, have a caring, constructive side that they access in their relationships, personal and professional. Too often, people cannot access this engaging self once they experience triggers associated with past losses, failures, and threats. By using their negative self-talk to trigger a coaching exercise, people—like Joan—can interrupt damaging patterns and replace them with their most positive ones.
This was the key to success for Ken, Mary, Walt, and Joan: They activated their Internal Observers as problem patterns were occurring and made conscious efforts to enact positive patterns from their existing repertoire. The vast majority of traders I have encountered do not need therapy. Rather, they need to learn to become their own therapists, by observing their triggers and shifting to new modes of thought, feeling, and behavior once their problematic tapes begin playing.
Generally, the successful trades come from immersion in the process of trading. The unsuccessful trades come from immersion in the potential outcomes of trading. The winning trader is immersed in the market, much as Joan was absorbed by her care for her patients. The losing trader is not really focused on the market. He is thinking about himself, his account statement, or his reputation.
A profitable exercise you can conduct is to replicate Joan's therapy on yourself, much as I conducted the inventory. Identify the contexts in which you already are enacting the role of the successful trader. Audit your trades and observe your patterns. Focus your attention on what you are doing right during those trades that work out well. And then, in the best solution-focused tradition, do more and more of what works—and find the triggers that help get you into your positive modes.
The goal is to create a model for yourself of "you, the successful trader. "What you will find, if you observe carefully, is that this successful trader is a distinct self, complete with its own moods, internal dialogues, body postures, and thinking patterns. The idea is to find that spot on your mind's radio dial corresponding to that Successful Trader and then lock in a preset on that frequency. You want to access that channel so many times that, eventually, you can summon it at will.
All you need to reach your profitability goals is a replicable edge in the markets, a pattern to trade that tilts the odds in your favor. Once you've found that, the rest is consistency—doing over and over what works. Many traders with whom I have talked despair that they have not discovered more patterns to give them an edge. They buy books and attend seminars in the desperate hope of accumulating more sources of edge. That climb up the trading mountain face, however, must be tackled one step at a time, beginning with a single toehold. It is far better to internalize success from a single pattern than mixed results from many patterns.
As Linda Raschke has emphasized, if you can master even a single trading setup, you will have set into motion a model—an identity—that can be accessed and expanded many times over. Vince Lombardi once remarked that every game boils down to doing the things you do best and doing them repeatedly. The key is finding what you do best and making that a template for your future development. Joan changed when she brought her medical student self home for dinner. Traders change when they recruit those aspects of themselves that are focused, disciplined, and flexible and import those into their trading—even when there is but one source of edge. In the absence of consistency, any edge is valueless. Without the trading edge, however—the pattern as well as the consistency to follow it—the rock ledge of trading looks perilously steep and breathtakingly sheer.
Chapter Eleven
Pinball Wizardry
When people think they can change and when they think they cannot, they accurately forecast their outcomes.
Aristotle referred to humans as "rational animals." We humans constantly seek to explain the world around us and to extend our conceptual grasp. Toward that end, we build mental maps of people and events, much as the first explorers developed their maps of the world. Sometimes these maps are quite distorted; other times they are accurate guides for action. The field of behavioral finance has documented a number of cognitive and emotional biases that distort our mapmaking and mislead us in trading and investment decisions. To the degree that personal or all-too-human triggers interfere with our efforts to predict and to explain events, we as traders are unlikely to meet our Aristotelian potential.
In this chapter, we will explore the relevance of cognitive psychology for trading, with a special emphasis on modeling: the creation of mental maps. We will see that cultivating new maps that account for fresh experience is an important element in changing both our personalities and our trading. But to accomplish this, we must be willing to confront the errors and the omissions of our present maps. We must stop automatically following our maps and instead become
mapmakers.
CREATING MODELS OF THE WORLD
A model is a representation of an object of interest. There are model homes, model cars, or models of the stock market. A good model captures the essence of an object, while discarding aspects that are not central to its identity. A model rocket, for example, is shaped like an actual rocket and possesses its own means of propulsion, but it lacks the size of the real thing and is constructed with different materials.
Scientists create models as ways to further their understanding of unknown aspects of nature. Reflected in the creation of a model is an underlying theory, an explanation of the patterns we observe in the world. If my theory describes human thought as a series of energy transformations within a closed system (as in Freud's early work), my model is drawn from physics and the laws of conservation. I am trying to explain cognition in recognizable, Newtonian terms.
As with the cognition/physics example, models in science typically draw on analogies, casting the unknown in terms that are familiar to us. On the one hand, behaviorism drew on models of animal behavior—principles of reinforcement and shaping—to explain how people acquire new action patterns. Cognitive approaches to therapy, on the other hand, owe their models to computers—they portray the mind as an information-processing unit that transforms cognitive inputs into emotional outputs.
As John Flavell observes, the developmental psychologist and researcher Jean Piaget emphasized that all people create models of the world to aid their intellectual grasp. He referred to these models as schemas and noted that they serve as personal maps. Such maps help people make sense of events and organize their responses to the world. When people encounter events that they cannot explain, they attempt to assimilate the events into their schemas, keeping their understandings intact. If, however, the fit is poor, people reach a point of disequilibrium. The maps no longer adequately represent the territory of their experience. People then accommodate, Piaget explained, and change their schemas to fit the new experience.
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