Tuesday, November 10, 2009

The Golden Thread Across the Canyon

You know what you need to do to execute your trading strategy, but somehow circumstances seem to dictate different responses in the moment. With hindsight you know that had you been more "disciplined" you would have been more profitable.

Why is it so hard to be "disciplined?" Why are New Year's resolutions hardly every kept? Why does it feel like you are acting from a different brain when trading than when researching? Why does learning a new more satisfying behavior feel so hard to do?

The brain has an incredible ability to automate our repetitive behaviors so we can focus on more critical or creative activities. These repeated behaviors "emerge as a result of experience-dependent plasticity in basal ganglia-based circuits that can influence not only overt behaviors but also cognitive activity." * What this means is that repeated behaviors, thoughts, stories and activities create neural pathways and complex network connections that can become a working unit. The entire complex of neural activity can be fired by a single trigger.

Often, these complex neural patterns are copies of earlier patterns that eventually connect to our more primal needs. Even if our current response is dysfunctional, we still repeat it time after time.

But now we want to build a new trading behavior. As we do this in real time if feels so very "hard." It feels like swimming in molasses. Why is this? Because the old patterns are so well developed, so easily connected to multiple neural circuits and complexes that executing the old behaviors feels both easy and good at the same time.

Creating new behaviors means that you are building new neural circuits where none have been before. Imagine driving down an interstate highway with its overpasses, bridges, fuel stops and connecting highways. Now imagine a broad canyon with jungle, boulders and sheer cliffs. Your job is to build a new foot path to a new destination on the other side. To make it even worse, as you hack your way through the jungle, you don't know where you will end up or if there is anything of value on the other side. It is tough to be motivated to keep hacking, when you can hear the cars on the freeway zipping right along the eight lane bridge above you to their familiar destination, even if it isn't where you want to go.

Building new trading behaviors (we call them Mind Muscles™) when you have never experienced the satisfaction of the results of that new behavior is like hacking your way through the jungle. It is a big job that requires a lot of determination. That is why we recommend a different process of creating new positive rewarding and more functional trading behaviors.

This process can be visualized by imagining the broad canyon. Your destination connects to a different point on the other side than the bridge. What if, rather than hacking your way through the jungle and building a new foot path, you could have an experience of zipping to the other side, even if just for a millisecond. It's like you can taste the satisfaction of experiencing the results of the new thinking pattern or behavior? Think of this a thread across the canyon. With the thread, you can pull a cord across. With the cord you can pull a rope. With a rope you can pull a cable and eventually build a bridge.

It is the same way your brain works. As we parse out the behaviors we need to in order to trade successfully, we can then create a simulation, visualization, or experience that is rewarding for each of these parts. We have created the thread across the canyon without hacking through the jungle. Now, having that experience once, we can expand it. If we can do it for a millisecond, we can expand that experience to a second...a minute...an hour and then for all of our lives

The hard part is getting the thread across the canyon in the first place. That is why a guide who can create a scenario that allows you to experience that positive new behavior for a moment can be very helpful. When we work with active traders building new Mind Muscles™, we play out scenes that allow new behaviors to be fully appreciated and savored, even if for just a moment. This gives the client the golden thread they need to build that bridge across the canyon.

* Annual Review of Neuroscience Vol 31

[See other articles from the MarketPsych blog]

Richard Friesen