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Dealing with self-sabotage
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Dealing with self-sabotage

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Dealing with self-sabotage

One issue that I see repeat itself over and over again in members trading journals is self-sabotage.

Dr. Brett Steenbarger wrote about this a lot, but here is a particular article:


Quoting 
Behavioral Patterns That Sabotage Traders – Part One

Brett N. Steenbarger, Ph.D.

Brett Steenbarger Trading Psychology


Although I do not maintain a private practice of counseling/coaching for traders, it is perhaps inevitable that traders would contact me for assistance after reading my book on The Psychology of Trading. Once in a while I take on a project of working with a group of traders because of the opportunity to push the envelope and use psychology to improve their trading performance. In the past few years, I would guesstimate that I have gathered personality questionnaire data and assisted over one hundred traders.

That’s a decent-sized sample, and provides me with worthwhile insights into the minds of traders and the problem patterns that interfere with their trading. Below I outline a few of the things I have learned from questionnaires and interviews with individuals who are trading for a living.

q Most trading problems are varieties of performance anxiety. Performance anxiety occurs when a performance that is usually automatic becomes the object of excessive scrutiny. This attention to the performance creates an interference effect, in which the performance can no longer flow naturally. Such performance anxiety frequently interferes with athletic performance, public speaking, sexual performance, and test taking. Whenever fears about the outcome of a performance dominate the performance, outcomes are apt to suffer.

q Performance anxiety occurs as much during times of market success as during times of market loss. It is not at all unusual to find traders who are good at taking (appropriate) losses, but who become fearful when they book a gain and take profits prematurely (i.e., prior to reaching their profit targets). Interference effects following strings of losses are no more debilitating than interference effects from pressure that traders feel when they are making money.

q Traders commonly try to replace negative self-talk with positive self-talk during trading. This is a mistake. When traders are immersed in the market and focused on the screen, they are not engaging in self-talk at all.

q Perfectionism is the most common source of performance anxiety among traders. Traders tend to be achievement-oriented and often set lofty goals for themselves. These performance goals contribute to tension when the goals are not met. In general, it makes sense to replace performance goals with process goals. Instead of setting a goal of making $250,000 a year, a trader should, for example, set a goal of following a trading plan (entries, position sizes, exits) on 90+% of all occasions.
q Perfectionism leads traders to overtrade. Overtrading is the most common source of losses among the traders I’ve interviewed. Traders overtrade when they feel internal pressures to make money that blind the trader to what is happening in the markets at the time. Trading when volatility is low, trading outside one’s trading plan or strengths, trading to make up a loss, and trading imprudently large size are examples of overtrading.

q Traders that master performance anxiety at one level of size (e.g., 5 contracts) frequently re-encounter it once they meaningfully increase their size (50 contracts). We generally calibrate our emotions by the dollar amounts we make or lose. This makes a fifty contract trade much more difficult for traders than a five contract trade, even though the setups may be identical.

q Traders often think they have worse psychological problems than they actually have. When performance anxiety patterns have interfered with trading for a considerable period of time, traders often become convinced that they have deeply-seated emotional problems that need intensive psychotherapy. Often, the self-perception that one is damaged—that one is emotionally unfit—is a larger problem than the performance anxiety itself, which is a very solvable problem.


To be sure, there are problems other than ones related to performance fears that can interfere with trading. Many of these are described in my book. The unique thing about performance anxiety is that it can afflict highly successful traders every bit as much as rookies. This is because the root of much of the anxiety—perfectionism—tends to be present in the most achievement-oriented and successful individuals. It is truly a double-edged sword.

Somewhere between the extremes of performance pressure and complacent laziness is a happy medium where traders can focus on self-improvement without sabotaging their results. Trading is like dating: You want to keep initial expectations reasonable, enjoy it while it’s happening, and learn from it once it’s over. In the second and final article in this series, I will take a look at strategies traders can use to overcome performance pressures.


Brett N. Steenbarger, Ph.D. is Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and writes occasional feature articles on market psychology for MSN’s Money site (www.moneycentral.com). The author of The Psychology of Trading (Wiley; January, 2003), Dr. Steenbarger has published over 50 peer-reviewed articles and book chapters on short-term approaches to behavioral change. His new, co-edited book The Art and Science of Brief Therapy (American Psychiatric Press) is due for publication during the first half of 2004. Many of Dr. Steenbarger’s articles and trading strategies are archived on his website, Brett Steenbarger Trading Psychology.

I wanted to start this thread to try and actively discuss this topic and help those who are experiencing it. Many who do experience this are completely unaware of it (perhaps most in fact).

For those who are aware of it, and are actively working on dealing with self sabotage, what have you found to be useful? Are there any particular exercises or discipline routines that have helped? Any particular books?

Many years ago I went through this process myself and I have since learned to control it. Some of the changes I made personally include:

- No longer placing blame on myself for a trade. Taking responsibility is crucial, but blaming yourself -- at least in my eyes -- is different, and it is that difference that is important.

- No bad mouthing or talking down about myself or about a trade. This includes "if you want to be profitable, do the opposite of me" type of phrasing. It also includes "I always enter at the worst possible time" and etc. What you want to do instead is fully recognize these events, but not to do it in a such a critical way that you feel like an idiot when making mistakes in your trades. Instead you just need to acknowledge the mistake in a level headed, clear and concise manner, without bringing overly colorful language into it which is unhelpful.

- Setting myself up for success instead of failure. This seems a no brainer, but in fact most people do the opposite. They have completely unrealistic expectations about trading. They lack the skills or experience necessary to properly identify good from bad when it comes to methodologies, risk management, etc. For less experienced traders in this position, you simply need to first and foremost acknowledge that you know very little, instead of trying to convince yourself that you have a proven edge or a winning methodology (when chances are, you really don't). Once you have modified your goals to make it easier to succeed, rather than fail, you will slowly start to recognize things about yourself and your method that you can then go explore and spend more time refining, instead of the backwards approach all too many seem to take which is to assume they have a winning strategy after they've looked at a chart with a bunch of indicators on it for a few hours.

There is much more naturally, but I don't want this thread to be about me. Instead, I want to facilitate an exchange of ideas with members.

What about you?

Mike

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I really like ...

"Whenever fears about the outcome of a performance dominate the performance, outcomes are apt to suffer."

That sums it up for me. I think, like denise shull talks a lot about those reoccurring themes in our lives and shadow selves....I find the awareness of those are vital.....knowing when you're tired/hungry/angry....

The big thing for me....and pardon the mini sermon here....lol, but in the bible when it talks about the fruits of the spirit.....if a trader is living and practicing those, then you have a huge edge. If you're trading from, love, joy and peace you won't be greedy and impatiently taking every trade under the sun....you won't be fearful and worry about the outcome, so there will be no pressure to make $300 on this trade so you can make your car payments....yada yada.....ya'll get it.

See the big picture and don't sweat the small stuff.

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