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Dear John & Group,
I'd like to make a few personal comments about your note, belief therapy, and the
effect of beliefs in my trading.
To some degree due to my inability to make money trading, my 25-yr marriage
collapsed circa 1992. I had begun therapy several years before, realizing that I
was on shaky grounds individually and in my marriage and wanting to do what I could
to save both. Although I was very angry about it at the time, the therapy for me
made it clearer and clearer that my marriage indeed was going downhill, and after
several years, it did finally collapse, my then wife and I separated, I filed for
divorce, and the actual divorce became final a couple of years later.
I moved and in the process changed therapists. My new therapist was a belief
therapist, and the majority of time in my therapy sessions was spent discussing and
analyzing my beliefs, and specifically looking for and analyzing what he called
"mistaken beliefs." Upon finding a putative mistaken belief, he had a system of
subjecting it to confirmation, in effect, my homework for our therapy sessions.
After several years, I got more and more back on my feet and eventually left
("graduated from") therapy, which I want to say I found quite helpful for many, many
reasons.
An incidental result of all of this was while I had not concentrated on discussing
my trading beliefs and activities in therapy, I thought "Well, if this therapeutic
method works as well as it has for me individually, let's give it a shot re my
trading." One of the therapist's maxims was "You gotta believe it to see it." Now,
for me, a died in the wool student of the scientific method (BS from MIT, PhD from
Caltech, ex-member of Caltech faculty), this maxim had given me a little cognitive
dissonance from my firmly held belief "You gotta see it to believe it." So, I
thought, simply for the sake of doing experiments in my head re trading, what would
happen if I adopted the notion "You gotta believe it to see it", asked my "What are
my fundamental beliefs about trading?", and turned those beliefs on their head (as
if they were "mistaken beliefs")?
One of my fundamental beliefs was that the market is at bottom random, in other
words, that there is no fundamental structure to the market, structure sufficient
for any prediction of future market behavior to be made based on that structure ---
basic belief: markets display Brownian motion. (I'm not talking here about
trendiness and leptokurtosis.) Maybe the problem was not that there wasn't market
structure but that I hadn't believed that there was market structure. On the notion
that I had to believe it to see it, I adopted the belief "Markets are structured ---
their movement is not entirely random" and set forth to see if I could find any
observations consistent with that belief, and if so found, if I could determine any
pattern to those observations.
What I did on a daily basis for the better part of a year was to print out a 2-tick
chart for that day's S&P and spend hours daily looking for repeating patterns in the
price action. It took me several months before I began seeing them, but see them I
did and verified that what I saw occurred in other markets besides the S&P. And
then it took me several years thereafter to find some underlying basis for them,
sufficient to make a foundation for a trading program. And that's what I have used
to inform my trading ever since.
Well, what can I say after all of this?
With some humility, some of the engrained beliefs that I had adopted as a scientist
"I've got to believe it to see it" had gotten in my way as a trader. When I began
questioning these beliefs and adopting beliefs inconsistent with them ("I gotta
believe it to see it" & "The market has fundamental structure" & "I can identify
that structure and use it to inform my trading"), that led me to work in which I
eventually found evidence consistent with those beliefs. That evidence led me to
develop a trading approach that was both qualitatively and quantitatively more
successful, both subjectively and objectively, than I had even employed before.
Furthermore, I don't know of anyone who is doing anything similar to what I am doing
in my trading. That leaves me thinking I'm looking and acting "away from the pack",
and I feel good about that, both in relation to my trading and about me as an
individual.
Now, for the last few days, we've been discussing the ways we as traders relate to
the market. And I'd like to share a quote that I heard several years ago that I
have found true for me --- I still have the little bit of newspaper containing the
quote that I keep in a little box of junk on my trading desk. This quote was from a
review of a book dealing with being a writer of fiction, but I think it has
applications to activities such as trading too. "What's nice about finding your own
voice is that it puts you out of the competition. This is who you are and you trust
that and you're no longer competing with other people in subject matter or anything
else because you can't do what they do and they can't do what you do."
Now, at bottom, I'm no computer wizard (a la Mark Brown) or floor samurai (a la Tom
Baldwin in the US pit or Lew Borselino in the SP pit) but I believe I have "found my
own voice" and I no longer see myself as in competition with any of you or anyone
else on the floor or in the markets in general. The markets do what they do. I do
what I do. I do my "thing." I've convinced myself there's something to it, and I
trust it. I don't know anyone doing anything like it. They do their "thing." I
presume theirs works for them. Mine works for me.
I attribute all of this to my having worked with this therapist, and the hours we
spent discussing mistaken beliefs. The irony for me of all of this is that I don't
think I ever would have gotten there but for the breakdown of my first marriage and
its eventually dissolution, much of which arose due to my then wife's exasperation
(as well as mine) with my spending hours, days, weeks, months, years in compulsive
activity "going nowhere" (and certainly not making any money trading), expending
great "heat" and producing no "light." What a "gift" she gave me!
Life goes on. My best to all of you and your own trading.
Peace be with you,
Richard
John Bowles wrote:
> Regarding the above topic and noticing an exerpt from Mark Douglas's book
> "Immediately below" I thought I would add something. It may be of interest to
> those still having problems after reading the recommended books for traders.
>
> Mark Douglas (2000): If you believe that anything can happen and that you don't
> need to know what is
> going to happen next to make money, then you will always be right.
>
> Mark uses "If you believe" a lot. In my original post I mentioned I know a
> therapy called REBT. This stands for "Rational Emotive Behavior Therapy". It is
> a cognitive therapy developed by Albert Ellis in New York. It is essentially
> Belief Therapy. Beliefs are habitual and subconsious. Therapists in this most
> practical of all Therapies use a technique called "Inference Chaining" to
> determine what the beliefs are that are causing the emotional upset (fear,
> anger, sadness, whatever). The therapists know the beliefs but they direct the
> client to find the problem beliefs on their own. This is not the couch therapy.
> This is very active and the therapists fully explain what is going on "educate".
> Once the problem beliefs are uncovered new ones are developed and exercises are
> given to install the new beliefs so they become habitual. Part of the work
> involes "Just do it" or what they call "invivo exercises". Another technique
> called flooding is simply "Just jumping in with both feet and doing it a lot in
> rapid succession". In the case of trading it would be taking a lot of small
> trades for as long as it takes. The reason for this is the belief habits become
> so fast and automatic they get tired in with muscle responses. One has to adjust
> the beliefs and just do it to get proper results. Again this isn't sit on the
> couch and listen to the therapist talk stuff. It is get off ones ass and just do
> it stuff. Part of the reason I thought the extract of Mark's book was good is
> because it emphasizes "If you believe" all over the place. As I mentioned above
> the therapists extract the bad beliefs and get the client in the habit of
> replacing the bad beliefs with rational beliefs. Reading a book is not good
> enough. One has to have an active program to adjust the belief habits and it
> takes time. Doing provides feedback which reinforces the beliefs "Yes, I lost
> money but I did not die therefore the belief must be true". "Yes I had a win
> after a loss therefore the odds in my system are likely to be true". If one
> tries to tippy toe into the problem there is a hidden subconsious irrational
> belief under that being this "It's awful, I can't stand it, I have to build up
> gradually". Studies have shown that this is completely false. If is more
> efficient to believe that flodding isn't awful and that it is more efficient and
> as a result just get in there and set up a special exercise to get rid of the
> irrational belief as soon as possible through active work and move on.
>
> John.
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