Saturday, January 02, 2016
Pain and pleasure - The Dickens Pattern for traders
Recently I came across my copy of Awaken the Giant Within, by Tony Robbins. I originally bought the book 10 years or so ago, but after reading it once, I pretty much forgot about it until I came across by chance, gathering dust.
Over the last few years, I've become greatly interested in the whole self-help/psychology sphere and the impact it can have on a traders' mindset. This can ultimately determine whether a trader will become successful or not in the long run. And, in the meantime, I've read a whole bunch of books related to that topic. Re-reading Robbins' book shows where a lot of these ideas originally came from or became popular.
A lot of the concepts can easily be applied to trading - in particular when it comes to looking at your own trading mindset, or even your risk management. For example, here is Robbins' ideas about pain and pleasure:
"If we link massive pain to any behaviour or emotional pattern, we will avoid indulging in it at all costs. We can use this understanding to harness the force of pain and pleasure to change virtually anything in our lives"
Now, in good ol' NLP, there is the concept of ensuring your thinking 'towards' or 'away from' something. Generally, the brains responds more positively when you direct your thoughts 'towards' something. In other words, how to talk yourself, either in a positive (towards) tone, rather than using negative (away from) language, can impact on how you react to those thoughts or words.
That may seem only a small difference, but how the brain reacts to the tone and direction of the words is critical.
One such strategy that Robbins popularized is the Dickens Pattern, which utilises both the pain (away from) and pleasure (towards) aspects.
In Charles Dickens' Christmas Carol, Scrooge meets the Ghost of Christmas Future. He is shown what will happen to him in the future if he continues with his current behaviour and life choices. The pain this causes allows him to make the necessary changes in his future behaviour - and for the better. In other words, by highlighting the 'pain', he makes changes and works towards the future 'pleasure' as a target.
In his excellent book High Performance Trading, Steve Ward talked about a traders' version of the Dickens Pattern, which may well work for traders who are struggling to overcome negative behaviour and become profitable:
Find somewhere comfortable to sit. Relax and close your eyes.
Picture yourself six months down the line. You still have all your old, negative, trading behaviours which have adversely affected your performance up to now. What can you see or hear? How do you feel? Magnify the particular points that are clearly undesirable.
Now repeat this process but look a year into the future, and then maybe five years - maybe even further ahead.
Once you have done that, we will now look at the alternative future. Again, picture yourself six months ahead, but this time on the basis that you have been able to shed your negative trading behaviour(s). Instead, you have effected the positive changes that you identified and needed to make. Now, over those six months, you have been able to behave and perform as you would like to.
What can you see or hear? What do you notice about your performance? How do you feel? Focus on the feelings of making those changes and the improvement in your overall mindset.
Again, go through the same process but looking further into the future.
Finally, ask yourself the critical question:
"Which future would I like to create for myself?"
I would recommend doing this exercise after you have already conducted a review of your trading performance to date, clearly identifying any particular issues or negative behaviour caused by a poor mindset or risk management that you want to change. Write these points down, and then next to them write down the new, positive behaviour you want to put into place.
Going through this exercise may jolt some losing traders into an 'A-ha!' moment and start thinking about, and making, the changes they need to make to improve their performance.
Of course, this exercise may not work for you - everyone is wired differently. I've read some traders call NLP as 'old hat' and not relevant anymore. My view is, if something works for you, carry on doing it - even if it doesn't necessarily work for others.
But if this exercise makes sense to you, then try it - what have you got to lose? Every day that passes is a day lost, that you will never get back. Start now, and you could be in a completely different place in six months' time.