Fear(less) log Nr 2 - THINKING ABOUT DEATH?
THINKING ABOUT DEATH? EPISODE 2 (JAN 2023).
So here we go.
Thanks very much to everyone who found the 3 seconds it took to upvote the email I sent last month. As Elon would say “Vox Populi, Vox Dei” which in this case means that we will shoot ahead with our conversations on fear in trading…where it comes from, how it manifests itself, and what we can do about it.
PS: I haven't yet managed to divide the email subscription list into categories, so you will get both, updates on Traderistic and these blogs on fear for the moment.
Fearful traders think about their death when putting on a trade.
A light topic to start 2023 with, I thought. 😀
Obviously, when I first heard about this I was 'mildly' sceptical, but it is an attention grabber after all, so I dug into it and I listened to an Alphamind episode with John Locke.
(By the way, I am not affiliated, and I get no money or any benefit from any of the traders, podcast providers, brokers or other individuals or brands I mention here, I just pick what I think is worth picking.)
For what it's worth though, in my view, the Alphamind podcast is an incredible source, full of psychological support and trading wisdom, making the trading journey a tiny tad easier and a bit more bearable. I highly recommend listening to all the episodes. Follow Steve on Twitter: @AlphaMind101
So where were we? Yes, Episode 50, one of the earlier ones with a trader called John Locke.
Two different approaches of dealing with fear I want to talk about
1. The Feedback Loop
John talks about the fact that what we see (how the world occurs to us) is based purely on our beliefs and thoughts (you know the phrase: everyone sees the world through his/her lenses) and that is why someone who is already fearsome will create scenarios (for him- or herself) that make him or her even more fearsome.
As a consequence, if we take a trader who is trading with fear and who is looking at the same ruleset and at the same situation as another trader who is trading with abundance, then both will interpret and filter the information completely differently.
And if there is any flexibility in the ruleset, any grey zone, they will take different actions. And that is where it will usually go wrong for the fearful trader, 9 out of 10 times messing up the trade.
The trader is stuck in an indefinite loop where the belief defines his/her thoughts, the thoughts define the emotions and the emotions define the actions which reinforce the belief (A negative feedback loop).
So if the fearful trader believes “I am never gonna make it, my strategy is no good, etc”, the unavoidable consequence is that the arising thoughts will lead exactly to what he/she is trying to avoid - a fearful emotion which triggers an action such as closing a winner early, letting a loser run, hesitating to put an order on, etc etc. It is very similar to what Mark Douglas mentions in Trading in the Zone when he talks about “Our beliefs shape how we feel about the results of our actions.”
So what can we do about it?
Well, you might say, “how can I change what I believe? I believe what I believe.” John suggests that the solution is to not ask if the belief is actually true or not, but ask if the belief is actually benefiting you or not?
If you conclude that the belief is not doing you any good, then you can actively choose to change the belief. Whenever you feel this belief is present, intentionally try to change the way you think about it – think a different thought. You will then feel a different emotion, take a different action and have a better result! (Positive Feedback Loop here we go)
Rinse and Repeat.
2) Thinking about death when trading
Our subconscious mind is such a vast, unbelievable super-powered nano computer that it is capable of sucking in and interpreting so much more information than we can all consciously process.
Confused? I'll explain.
Referring again to John, who explains that what our mind can not stand (quote: “freaks out about”) is if the consequences of a certain action are undefined.
If you take a professional, successful trader, and you ask him what the last trading loss means to him or her, the answer will be somewhere along the line of “well it's just a trading loss…trading is a probability game right?…you lose some you win some.”
But if you ask the same thing to someone who is fearful in trading, the answer might be something like “It's a disaster…I don't want to lose any more… It's all a mess.”
The problem that trader has is that answers such as “It's a disaster” are undefined. The mind doesn't know what to do with “It's a disaster” so it spirals down this dark path into the unknown.
To test this, John refers to an exercise called 'Thought Download' where you ask yourself what exactly it means to you if you have a trading loss. It goes something like this:
I have a trading loss. SO WHAT?
If I keep losing, I will lose all my money. SO WHAT?
When I have no more money, I can't trade anymore. SO WHAT?
If I can't trade anymore everyone will think I am a failure. SO WHAT?
If I am a failure, nobody is going to love me anymore? SO WHAT?
If nobody loves me, then what's the point of living?!!
So for a fearful trader who does not clearly define what the next trading loss means, the subconscious mind just starts spiralling down this dark hole, where the only 'reasonable' outcome is that eventually he or she will die!!
Now, what can we do about it?
First, accept mentally that trading is a probability game and that your strategy will lose. (There is no trader in the world that wins all the time!)
Second, do the above SO WHAT? exercise and write down precisely step-by-step what a trading loss means to you. This will help the realization that it doesn't mean all of the above, i.e. you are not going to die, you are not a failure, and it is just a trading loss.
Fear-levels (which we help measure at Traderistic by the way) will come down and trading will become easier and, most importantly, not life-threatening.
There are some other very interesting things John talks about, such as how our reptile brain deals with fear shutting down our logical thinking (remember the fight-or-flight response?). It leads to people making irrational decisions (believing they act logically) only to realize later that it was the stupidest thing they could have done...pretty much what we are talking about at Traderistic.
References
Click here for the Alphamind website and the podcast I am referring to. I recommend to start listening-in on the episode from min 30:50 onwards just as Steve is about to change topic (the part before is mostly options related).
(Do also scroll down on that page and read some comments… hilarious)
Wishing you a happy, successful and particularly fearless 2023!