In the first two parts of this series, we used a variety of visualization techniques to simulate good trading. In this third and final part, we are going to use the same advanced visualization techniques, but in different ways that can also serve to help our trading. Rather than simulating good trading, we are going to use visualization tools for new purposes: to undo bad trading results; to manage emotional states; to set goals for the future.
Visualization Basics
We know that visualization works because your brain equates images with the real thing. Thus, mental practice reinforces real, physical practice, improving the decision-making circuitry involved. In this part, we are going to expand this—because your brain has trouble telling the difference between imagined and real images, we are going to invent certain experiences in order to persuade our brain to bring about what we want to happen or to change what happened in the past. Instead of reinforcing our decision-making circuitry for something we are doing, we are overwriting stuff that we don’t want to happen or creating entirely experiences that we do want to happen.
“How” this works is quite interesting. To put it bluntly, your brain is a learning machine—it is always soaking up information, drawing conclusions or generalizations and taking action. Most of these happen without your conscious awareness. Oftentimes, these generalizations do not serve you or your trading.
For instance, imagine that you have a position on that’s losing money and you begin to experience the usual symptoms of stress – sweating, tunnel vision, heart pounding, etc. You are like a deer in headlights. Obviously, you didn’t make up your mind in advance to become stressed and to watch your decision-making powers wilt away. Instead, your brain just did it automatically. The generalized fear you have of losing money is acting up, without your control and it’s hurting your trading.
This is where advanced visualization techniques come in. With the right tools, you can easily deprogram yourself from these automatic reactions—negating the unconscious generalization that hurts your trading results. Ultimately, the goal is to reprogram oneself so that, in the future, your brain will make the right unconscious decisions and work towards your goals.
It’s one thing to talk generally about visualization techniques. Now, we are going to plunge into different settings. What each has in common is that we are using the same tools of visualization, but in slightly unconventional ways that are specific to the setting. Before, we had used visualization as a very blunt instrument—as a generalized tool for practicing trading excellence. Now, we are going to use it with surgical precision. The idea here is that by understanding how our brain works, we can use visualization in a very specific way to induce a very specific result—but ultimately, one that is more powerful.
Three Case Studies
Case Study #1: Undoing the emotional impact of bad trading and its results
A common experience for traders is that after a run of bad trading decisions, or a string of poor results, we begin to lose our confidence and encounter negative and inhibiting self-talk. Perhaps all traders go through periods of disappointing results or making mistakes. Sometimes, we just sail through it naturally without any ill effects. The problem arises when our brain makes unhelpful generalizations that lead to self-criticism and a lack of confidence. As any trader will attest, this can seriously undermine one’s game and make it difficult to get back in the groove.
If you have had a really bad run and are feeling depressed, then you can confirm: it’s one of the most disempowering feelings in the world. It’s like getting the stuffing kicked out of you in a fight or being fired unexpectedly from a job. It’s downright unpleasant. But once we have gone through the initial emotions, the next step is to pick ourselves up again and get on the right track, to making good decisions and being profitable.
The best first response is to stop trading immediately and to review the trading before and during your bad run. You may have been deviating too far from your trading style or risk management practices. Before getting started trading again, make sure to have those methodological questions squared away. Then, start trading only with substantially reduced size, so that the P&L swings will carry less emotional impact. As always, good trading fundamentals dominate.
But sometimes good fundamental trading skills are not enough to recover from a bad run. Once you are back to trading, you may be afraid to take risk, or you may be stuck in a self-critical rut. Whatever it is, you want to get back in the game and to have all of the psychological resources that you need to succeed.
We will do a visualization exercise that takes away the emotional sting of bad trading results and thereby helps you to get back in the game. As we covered in Part 2, changing the way that an experience is represented can alter the emotional impact. What we want to do is to change our memory, so that it takes away the emotional pain associated with bad trading. We follow this set of instructions:
This process is adapted from the book “NLP: The Technology of Achievement”, which details the processes used in sports and in therapy to improve performance and clear out unresourceful psychological feelings.
Case Study #2: Reversing unresourceful emotional states
The previous case study is one example where we need techniques to manage our emotional state, in order to stay empowered and resourceful after a bad run of trading results. However, it is by no means the only situation where we would need to do manage our results.
There are numerous possible stresses to our trading: We could be getting over-exuberant; we could have life events like the birth of a child, death in the family or divorce that are impacting our emotional state and thus our trading; we could be distracted by something unrelated to our trading at work.
While there are innumerable possible distractions, the solution is always the same—we want to return to the most powerful, useful emotional state for trading in order to make the best decisions possible. Thus, we need a universal exercise that shows us how to get in the right state.
The first part of this is identifying exactly when we were in our most resourceful state ever. Maybe you had experienced it one day, coming back from a really restful vacation, where you felt completely focused, switched-on and in-the-zone. Perhaps it was after a yoga or meditation session, where you felt a certain kind of clarity that you hadn’t before. The famous psychologist Mihaly Csikszentmihalyi called this “flow”, when you are completely absorbed in an activity and distractions just seem to drop away. Athletes call it being “in the zone”.
It is possible that you haven’t experienced this kind of state in relation to your trading, either because you’re just starting out or because you haven’t build the kind of confidence and self-assurance that comes with success. Thus, you’ve only encountered “flow” in the context of athletics, where you became totally absorbed in the activity. Nonetheless, this is a good analogue for what you to achieve in trading: immersion, brisk decision-making, an absence of internal “chatter” interfering with your performance. It could even be from school, where you very well-prepared for an exam and you just sailed through it effortlessly. The key is to find a period of peak performance and effortless, spot-on decision-making that you would want to replicate at any given time.
Once you have identified your idealized peak performance state, then you want the necessary tools to get into that state whenever you need it. That way, you will have the tools to reverse any unresourceful emotional states. That is exactly what we are going to practice.
The series of steps:
Case Study #3: Setting Goals
One of the most widely known uses for visualization is to simulate experiences that we would like to achieve- not just playing well at a sports competition, but also receiving a gold medal at the Olympics or kicking the game-winning goal. We know how visualization works as mental practice– we are firing the same neural pathways as the actual physical experience. By doing a mental run-through of how we would like to do it, we are reinforcing this in real life.
For goal states that we would like to achieve, the mental process works a bit differently. If we are just imagining ourselves receiving a gold medal at the Olympics, then aren’t we just practicing bowing our heads so that they put the medal on correctly? Is that what we want? Of course not.
What we do want is for the goal experience to draw us powerfully, to encourage us to undertake the actions necessary to achieve it. That requires a different, specialized visualization exercise.
While a visualization exercise can have some pull on us towards a goal’s achievement, the key is to explicitly link the goal’s achievement in the future with the actions necessary to reach the goal, starting from today. In effect, we are pre-programming our brain with a course of action that can be followed, all the way up to the goal. That way, the steps to take at any point are simple, and we have imagined walking through them all successfully, all the way up to our goal.
The key to this process is understanding how your brain represents time—its past, present and future. Once we understand that, we can manipulate that to induce our desired outcomes—for instance, a goal that we have achieved at a certain time in the future.
The first step is to understand that your brain stores its past and its future in a certain relationship to the future—and we are going to work with that relationship. Otherwise, how would you be able to distinguish between events that happened in your childhood and your to-do list for tomorrow? Once we get how our brain stores events or items that are in the future, then we can use that knowledge to implant certain goals in our future, as if their success were already pre-ordained. Better yet, we can fill in the area between now and the goal with all of the things that we did to accomplish our goal.
Before we start the exercise, we need to discuss how to set goals. Well-formed goals need several criteria in order to be accepted by your brain and spur action
Now we are going to practice working our well-formed, richly described goals into our future.
10. Watch yourself performing the various actions, like the work that you did every day, the preparation, the psychological work, etc. and see yourself doing it at various points along the way. The reason for this is to reinforce the idea of what you were doing every day, or at regular intervals.
11. Also, imagine yourself having made any changes that were necessary to accomplish your goal. While in the goal state in the future, you could imagine yourself as being a better version of you, through having improved in certain ways or having overcome personality flaws. While you may not be able to identify when exactly those happened, by the time of your goal, those changes will have occurred.
12. Now float back to your present. Contemplate the future and your future goal should pull yourself more powerfully.
This is a visualization exercise that you can do many times and have it get better every single time. Each time you can update the goal image and make it more and more compelling. With every run-through, you can fill in more and more details for how you got there.
These techniques are widely used in the therapy context. Two authoritative guides to the topic are “Timelines and The Basis of Personality” and “Adventures with Timelines”.
Conclusion
This marks the end of the three-part series on visualization. Hopefully, this has given you, the reader, a comprehensive overview of visualization and its relationship to trading. We covered a lot of ground, all the way from what visualization is to sophisticated techniques for its utilization. Above all, remember to practice the techniques as outlined in this piece—otherwise, you will be missing the main benefit.
For those who do practice the techniques, I would love to get feedback. What were your experiences? Did you feel good or comfortable doing the techniques? Were they useful? Have you tried any experiments that work better? Let me know! Email me at bruce [at] howoftrading.com
By Bruce Bower | www.howoftrading.com | Twitter: @HowOfTrading