I came across an interesting Ted Talk. The talk (20 min) is about the Left and Right hemispheres of the brain and how our perception changes when one hemisphere of the brain shuts off. Jill Bolte got a research opportunity few brain
scientists would wish for: She had a massive stroke, and watched as her
brain functions -- motion, speech, self-awareness -- shut down one by
one.
It is really a rare coincidence i.e., Jill Bolte herself is a brain scientist, courageous enough to observe and understand her brain from inside out through the stroke and recuperated enough to spread what she observed when her left brain hemisphere shut on and off during the stroke that lasted for 4 hours.
"We turn to God for help when our foundations are shaking, only to learn that it is God who is shaking them. For difficulties are divine surgeries to make us better..."
Recently I came across a nice free app that helps one to reduce the stress and get back into the game quickly with increased alertness, energy level and productivity. We all know more or less that meditation and cultivating mindfulness is very important to reduce stress and to improve our well being in general. But problem is majority of us don't do a regular meditation/mindfulness practice even after knowing it is highly beneficial to us. The reasons often are something like "I don't have time to meditate", "Meditation is boring", "I don't have discipline to meditate regularly" or "When I sit still and meditate, it makes me more anxious" etc. I think this app provides a good solution to above challenges i.e., it has 5 short practical exercises for the user to chose one from for the day and each of the exercises takes just 30 seconds. Also the exercises can be done anywhere and anytime of the day. (Note: Don't do the exercises while driving etc). The exercises are simple and designed to interrupt our automatic mindless thinking and bring us quickly into present moment.
There are multiple gateways (breath, sight, hearing...) available to us to come into the present moment. The exercises in the app are designed such that each exercise uses a different gateway to the present moment. All we need to do is just follow the simple instructions given for that exercise. No need of lot of preparation or scheduling a time slot in our calendar etc. Probably I should favor all exercises equally but for now my favorite exercises are Deep seeing, Deep hearing and Deep breathing. For deep breathing exercise, by the time I do 3-4 breaths, 30 seconds is complete. So 10 deep breaths takes a minute or more. 3-4 breaths is also good enough to see the difference. Deep contact exercise is bit confusing. But that is fine as I do a similar exercise which I picked up in past from one of the Eckhart Tolle's books.
On a side note, given these exercises are so simple, quick and can be done anywhere/any time of the day, it would be great if this functionality is available as a mobile app in future. All in all, I think the exercises are great and beneficial to include in daily routine. Don't let the simplicity of exercises trick you. Best way to evaluate is to just try the exercises and see how you feel immediately afterwards. Link: 30 seconds to Flush stress Disclaimer: The above are just my opinions and your experience/benefits from usage could be different from mine. I am not affiliated and don't gain anything by others usage of this app.
My primary source of information for trading markets is WallStreetCurrents. Often people gloss over but I think streamlining and being efficient in keeping track of markets, gathering and digesting relevant information will go a long way in helping one's trading. Given this is a daily activity, any efficiency gains here would quick multiply.
It doesn't matter whether one uses
WallStreetCurrents or some other site that resonates more with you. Key is filtering noise, being efficient and being structured in gathering data and doing analysis. Coming back to topic of this post, WallStreetCurrents has a new addition.
Now a days there is a lot of information available on the net about trading - techniques, psychology, money management etc. Yet most people lose in markets. One can write it off saying it is due to trader psychology or discipline etc. After watching to below presentation (19 mins), it feels may be partly it is a "last mile" problem and a good nudge that influences trader at subconscious level to cross the last mile might make a big difference.
I think one last mile problem for struggling traders is respecting and focusing on risk even though they know intellectually very well that big part of trading is managing risk. Another last mile problem could be having patience while entering or sitting with or exiting positions.
For example when you started trading and came across a new opportunity, what did you used to investigate first? - potential risk or potential reward? Now what do you investigate first? If there is a change in your focus order, what was the nudge?
One nudge that often pushes an individual trader to start respecting & focusing on risk at subconscious level would be blowing up an account. I think this applies to entities as well. For example, would JP Morgan be more prudent with risk for next few years? Is the blowing up multiple billion dollars by London whale be a good nudge? How about other banks? Would recent JP Morgan losses serve as a nudge to them as well? It seems often the nudges come in the form of pain.
Different traders likely will have different last mile problems. Also trading is a journey and not a destination. So the last mile problems likely change as a trader evolves and also as the market regime changes.
I am curious to hear your opinions on -
(a) What are the other last mile problems for traders? and
(b) Effective nudge(s) to influence trader at subconscious level to cross that last mile?
Talk Summary:
MacArthur winner Sendhil Mullainathan uses the lens of behavioral economics to study a tricky set of social problems -- those we know how to solve, but don't. Just like in trading, we know how to reduce child deaths due to diarrhea, how to prevent diabetes-related blindness, implement solar-cell technology ... yet somehow, we don't or can't. Why?
A fascinating presentation (10 minutes) on Mirror neurons by Neuroscientist V Ramachandran. Only recently discovered, these neurons allow us to learn complex social behaviors, some of which formed the foundations of human civilization as we know it.
Does it mean traders who work in banks and prop firms with opportunity to watch veteran traders has an advantage from psychological side over retail traders?
In daily life we are often exposed to one-sided information about various issues, disputes etc involving multiple parties. The same applies for trading. This study by Amos Tversky et.al is about how people jump to conclusions based on limited information even knowing well what the information they have represents only one-sided information.
This is an interesting presentation (20 min) on understanding root of human irrationality and biases. Basically through a clever series of experiments, the researchers teach monkeys the concept of money and using that to get food. Then they create a market place and choices for monkeys similar to what humans face when making financial decisions. These experiments in "monkeynomics" shows that some of the biases like loss aversion and silly choices we make, monkeys make too.
I read an interesting article in Scientific American magazine. Imagine, for example, that you are in a library and you are lost. Are you in the Science Fiction or the Fantasy section?
One approach is you can go around until you find a helpful sign. Let's say you took faster approach and simply looked at the books on the shelf next to you. You see:
Cognitive distortions are simply ways that our mind convinces us of something that isn’t really true. Dr. Aaron Beck, the “father” of cognitive therapy, first proposed the theory behind cognitive distortions. We all may suffer from these occasionally, but when they come to be how we see and interact with the world, they can prevent us from seeing things as they are and limit your growth and success.
By learning to correctly identify this kind of distorted thinking, one can then answer the negative thinking back, and refute it. This post covers the most common cognitive distortions. Part-2 will cover couple of exercises one can do to refute these distortions and replace with more rational, balanced thinking.
Interesting Ted Talk by Nobel laureate and founder of behavioral economics Daniel Kahneman. Using examples from vacations to colonoscopies, he talks about how our "experiencing selves" and our "remembering selves" perceive happiness differently. Duration - 21 minutes.
We don’t choose between experiences, we choose between memories of experiences. Even when we think about the future, we don’t think of our future normally as experiences. We think of our future as anticipated memories. ~ Daniel Kahneman
In India there are lot of monkeys. When a local wants to catch a monkey, following is one efficient way used to trap them. A hole is drilled in a coconut just large enough to accommodate a monkey's hand. The coconut is then secured to a tree by a wire. Then a banana is placed inside the coconut.
This parable is told of a farmer who owned an old donkey. The donkey fell into the farmer’s well. The farmer heard the donkey praying or whatever donkeys do when they fall into wells.
Losses are always painful, but the emotional repercussions are often more difficult to redress than the financial consequences. By focusing all & attention on an errant trade, we quite possibly overlook other emerging opportunities.
I believe we are more alike than different. When confronted with unexpected adversity, we likely to be gripped by a mix of emotions: panic, hopelessness, or a dogged determination to get even. The consequences of each of these reactions are discussed below.
I like this exercise better than Square breathing. Following are the steps from my reading notes:
Countdown Breathing:
Close your eyes. Note the level of tension you are feeling. Then take one Calming Breath.
Then place one hand on abdomen right beneath the rib cage. Inhale slowly and deeply through nose into the bottom of the lungs - in other words, send air as low down as you can. If you are breathing from your diaphragm, your hand should actually rise. Your chest should move only slightly while your abdomen expands.
Pause for a moment when you've taken a full breath.
Then exhale slowly through your nose. Be sure to exhale fully. As you exhale, allow your whole body to just let go (like visualizing your arms, legs going loose and limp like a rag doll). Breathing should be smooth and regular, without gulping in a big breath or letting breath out all at once.
Count from ten down to one counting backwards with one number after each exhalation. Some might prefer to count forward. Others instead of counting might prefer to see the number in mind's eye. Any way, the process should go like this
Extend the exercise by doing this 2-3 sets. Or take a short break and do this several times a day.
Additional Notes:
(Optional) When you reach number one, keep your eyes closed and think to yourself, I am CALM on the inhale and RELAXED on the exhale. Let mind grow still as you think calm and relaxed over and over with each breath. With time and enough practice, just saying word RELAX itself will bring on a mild state of relaxation.
Let go of thoughts by imagining putting them in a bubble or balloon and seeing them drift away.
Place one hand on the chest and other on the abdomen. Without changing your breath, notice whether you are breathing in your upper chest only or whether your breath is rapid and shallow (or) slow and regular.
Calming Breath:
Take a long, slow inhalation through the nose - first filling your lower lungs (by pushing belly out) and then expand upper lungs.
Tense muscles one by one (feet, calves, thighs, abdomen, hands, raise shoulders, neck, face).
Then let go while slowly and completely exhaling through pursed lips (like a sigh) relaxing the muscles in the reverse order (i.e.,
face, neck, shoulders, hands, abdomen, thighs, calves and feet). If it helps let body go limp as you exhale.
Do this occasionally during the day to release stress and muscle tension.
Quite interesting in just 1-2 breaths how noticeable difference this short and simple exercise makes. I think it is useful to have this as part of trading routine.
It is quite rare to find a trading book/site that talks about breathing and its importance in trading. I was no different. Took it for granted many years i.e., knew it is good intellectually but didn't believe enough to actually do it and see the benefits in trading.
This technique produces good positive results quickly when one is feeling anxious, nervous, excited or fearful and would like to calm. It involves 4 steps - (1) Breathe in to a count of four, (2) Hold to a count of four, (3) Breathe out to a count of four and (4) Again hold to a count of four. Take normal breaths in between if needed. Repeat above for 10 times. That's pretty much it.
Better not go over board with this i.e., doing forcefully or over breathing or doing too many repetitions. Also better to check with medical professional if there are any pre-existing conditions.
Inhale, and God approaches you. Hold the inhalation, and God remains with you. Exhale, and you approach God. Hold the exhalation, and surrender to God ~ Krishnamacharya
I think understanding why we do things that are not in our best interest and then intiating a change is more effective than trying to change by will power alone. Following are some reasons that cause us to outguess our system -
Most people like to think of themselves as risk takers, but what they really want is a guaranteed outcome with some momentary suspense to make it feel like the outcome was in doubt. The momentary suspense adds the thrill factor necessary to keep our lives from getting too boring. However, when it comes right down to it, no one trades to lose or puts on a trade believing it is going to be a loser, and all systems will definitely have some percentage of losing trades. So it's difficult not to be tempted into trying to guess which ones are going to be the losers and not participate.
Another reason - We often form expectations about the future with information that method don't take into consideration. Consequently this sets up a conflict betwen what our intellect says should be happening and the prediction of human behavior offered by our well tested method.
Another reason - If we risk our money on a gambling event that we know has a random outcome, then there's no rational way we could have predicted what actually happened. Therefore, we don't have to take responsibility for the outcome if it isn't positive. Whereas, with trading, we believe future is not random i.e., price movement, opportunity and outcomes are created by traders acting on beliefs and expectations of the future. So we form a concept of future and how that will affect the markets. This adds an element of responsibility, desire to over analyze and outguess our method.
My experience is trying to out-guess a well tested method is often an exercise in frustration. Sometimes the signals we get from a trading method will have us trading in ways that are contrary to our reasoning and turn out to be right. Other times, you will agree with the method and it will be wrong.
In short, trading methods are not designed to be out-guessed i.e., they aren't designed to give us isolated signals of an opportunity to be taken when it seems right. Their job is to define and categorize past relationships in collective human behavior and give us a statistically probably outcome of the future. (Credits: Source - Mark Douglas material).
Hope you enjoyed this post. Feel free to share and leave a comment.
Knowing others is intelligence; knowing yourself is true wisdom. Mastering others is strength; mastering yourself is true power. -Lao Tzu
Every day, we make decisions that have good or bad consequences for our future selves. Can I skip gym just this one time? Can I take this trade just one time against my rules? Can I eat this creamy pastry just this one time? The list goes on.
The following Ted talk video (15 minutes) from Daniel Goldstein talks about tools that help us imagine ourselves over time, so that we make smart choices for our future self.
We regret short term for the things we have done, and in long term for the things we have not done.
Most people believe that success precedes happiness. "Once I get a promotion, I'll be happy". Or "Once I hit my performance target, I'll feel great". Problem is success is a moving target. As soon as we hit target, we raise it again.
No wonder, the happiness that results from our success is fleeting. Research shows that it actually works the other way around i.e. people who cultivate a positive mind-set perform better in the face of challenge.
Training our brain to be positive is not so different from training our muscles at the gym. Recent research on neuroplasticity reveals that even in adulthood, as we develop new habits, we rewire the brain. Engaging in even one brief positive exercise every day for as little as three weeks can have a lasting impact.
Five activities that correlate with positive change:
Choose one that resonates well with you. Then try doing it every day for next three weeks.
Jot down three things you are grateful for in your life.
Write a positive message to someone in your social support network or coworker
Meditate at your desk for two minutes.
Exercise for 10 minutes.
Take two minutes to describe in a journal the most meaningful experience you had in past 24 hours
Change our relationship with Stress:
Stress is another central factor contributing to our happiness. Many training courses on mitigating stress focus on its negative effects. The problem is, we then get stressed-out about being stressed-out. The next time you’re feeling overwhelmed, try this exercise:
Make a list of the stresses you’re under.
Place them into two groups—the ones you can control (like a project or your in-box or your routine) and those you can’t (the stock price, housing prices).
Choose one stress you listed under the group you can control.
Come up with a small, concrete step you can take to reduce it.
Then act on it. In this way you can nudge your brain back to a positive—and productive—mind-set
Bottom line, increasing happiness increases our chances of success. Doing activities that correlate with positive change, changing our relationship with stress and nurturing social support are a great start!
Credits: The source for this post is from Harvard Business Magazine article - Positive Intelligence
Happiness is not something ready made. It comes from your own actions - Dalai Lama
This is a simple story of a stone cutter. It is also an empowering story that I think many traders can feel and see themselves in.
How does a stone cutter break open a giant boulder? He starts out with a big hammer and whacks the boulder as hard as he can. The first time he hits it, there is not a scratch, not a chip - nothing. He pulls back the hammer and hits it again and again - 100, 200, 300 times without even a scratch.
After all this effort, the boulder may not show even the slightest crack, but he keeps on hitting it. People sometimes pass by and laugh at him for persisting when obviously his actions are having no effect. But a stone cutter is very intelligent. He knows that just because you don't see immediate results from your current actions, it doesn't mean you are not making progress. He keeps hitting at different points in the stone, over and over again, at at some point - may be on the 500th or 700th hit, may be on the 1004th hit - the stone doesn't just chip, but literally splits in half.
Was it this one single hit that broke the stone open? Of course not. It was the constant and continual pressure being applied to the challenge at hand. It is the consistent application of the discipline of CANI (Constant And Never ending Improvement), the hammer that can break open any boulder that is blocking the path of your progress.
My progress as trader was (and is) never linear i.e., no visible progress for weeks, months (and on some - years) and then suddenly few aha moments that nudge towards a bit more better trading and better trader. The cycle then starts again. You can see now why I find the above story empowering.
What is your experience on this road? Can you share any stories that you found helpful and empowering as a trader?
"In the confrontation between the stream and the rock,the stream always wins - not through strength, but through persistence." - Buddha
This journal is to share my thoughts related to trading and market analysis. Most of my trading is on index futures. I trade other markets also but on higher time frame.
