Dreams don’t always come true. It’s hard to accept, but no matter how much we want something, and no matter how hard we try, it’s quite possible to fail to achieve our goals. Some psychologists argue that people can learn almost anything. If one believes that a skill can be learned through hard work and practice, he or she will persist until the skill is learned. To some extent, many skills can be learned, but if you have pushed yourself to the limit and tried a variety of things, you have probably found that some skills are just not possible to learn. For example, I was the first chair clarinetist in high school band, but I could not compete with future professional musicians I met in college. I won first place in physics at the county science fair in high school, but barely passed physics in college. And although some people like my writing, the highest I placed in high school essay contests was third place, and my writing doesn’t even come close to my college friends who became screenwriters and reporters. There is nothing wrong with admitting one’s limitations, and I have many of them. I know that no matter how hard I try, I can never achieve all my dreams.
But despite my natural limitations, if I truly believed it was possible to achieve my goals and that anything could be learned, I would make many attempts and surely live by old adages like, “at first if you don’t succeed, try, try again,” or “practice makes perfect.” Unfortunately, some skills just cannot be learned. Honing the proper mental edge requires that you admit your limitations and set realistic goals, rather than fool yourself into thinking you can achieve the impossible. In Wednesday’s Marketwise column, a trader named Tom asked me if it were possible that dreams don’t always come true. The fundamental issues addressed in this column go beyond trading and extend to anyone with high aspirations trying to achieve one’s goals.
I received an email from Tom who has been trading for many years yet feeling he is making little progress. He feels like giving up. In his own words, he says, “I have given everything I could to this dream…and it is just not working anymore…Do you think…[it is] possible to believe in something that long and in the end not have it work out?”
I like to be optimistic, but realistically, we know that the odds of a trader making it are slim. Hard work and persistence are not always the only prerequisites to success. Do you think everyone who tries to become a surgeon makes it? Do you think everyone who went to law school passes the bar? The sad fact is that many people pursue seemingly realistic dreams that don’t come true. An unfortunate fact of life is that one can pursue a dream for many years and never achieve success. That said, I have seen many people beat the odds. Perhaps it is merely American mythology, but there are countless stories about people who beat the odds and achieved success (In their own way, for example, I think both presidential candidates illustrate how one can beat the odds). The bottom line is that you will never know what you can do unless you try, so you might as well try and see what happens. Maybe you will be one of the rare few that beat the odds and become successful.
On the other hand, it’s vital to avoid getting hurt. Trading is potentially dangerous. It can not only ding your ego, but also hurt you financially. All traders must ask themselves if they would be better off spending their time pursuing other activities. If you think trading is doing more harm than good, you should stop.
Here’s an exercise that may help you decide if trading is right for you. Ask yourself, would you trade for no money. Suppose that you did not have a dime to bet. Would you enjoy following stock prices anyway? Would you enjoy reading about stocks, making forecasts, and seeing if you were right just for the fun of it? If the answer is yes, trading may be right for you. But if you think, why bother following the markets just for fun, then you may want to consider whether trading is right for you. In other words, if you are in it only for the money, it may not be right for you. But if you are not losing any money, why not pursue trading? As long as it does not hurt you psychologically (or financially) or consume your time when you should be doing other things, what is the harm?
Unfortunately, many people do not approach trading wisely. They set unrealistic goals and waste their time trying to achieve the impossible dream. Setting well-defined, realistic goals is essential for achieving high levels of performance. Specific goals are the best, and allow for direct feedback. You know exactly where you stand. It may not always be a good idea to set goals too high, however. If you have the requisite skills, setting high performance goals and trying to reach them can be a powerful motivator. But if you don't have the requisite skills, and fail to achieve your goals, you may tend to feel disappointed and just want to give up. It may be useful to set a learning goal during initial stages of learning, and then move up to setting high performance goals after you have achieved an adequate level of mastery.
Psychologists have discovered that performance goals, such as trying to achieve a 20% profit for month, are not always the best goals. Here's why. One may not have the experience or skills to reach a goal that exceeds one's abilities. For example, would you try to run a 20-mile marathon if you can't even run a mile? Of course not. So why make such high and lofty trading goals until you have the requisite knowledge and skills? Many novices make the mistake of setting their goals too high. It's understandable in a way. Ambitious people are taught to set high performance goals. If one doesn't even consider achieving an ambitious goal, then one may not even try to achieve it. It is vital to set high standards and do whatever it takes to reach them. But goals should be set realistically.
When novices set high goals that exceed their skills, they usually fail, feel discouraged, and give up. So if you are a novice trader or a trader struggling to regain profitability, it may not be a good idea to strive for a specific performance goal, such as a 20% profit per month, at least not until one develops the skills to meet this expectation consistently. It's useful to distinguish performance goals from learning goals. When we set goals, we usually think of setting performance goals; that is, we think about a specific percentage a month we should achieve. But for novice traders, it is more useful to consider setting learning goals rather than performance goals. A learning goal is more modest and can be achieved more easily. It involves breaking down the larger goal into specific steps that are doable, and rewarding oneself after each step is accomplished. For example, a learning goal may be stating, "I'm going to study for 30 hours a week to learn a new trading technique." The specific goal will not immediately lead to the larger goal of making a 20% profit per month, but it is easy to achieve, will lead to personal satisfaction upon completion, and in the long run, will contribute to the long term goal of becoming a seasoned trader.
So if you're a novice or a struggling trader, set yourself up to win. Don't set overly high performance goals. Set realistic learning goals instead. Break the larger goal down into specific steps, and reward yourself after you complete each one. Focus on skill building rather than performance.
Although research has shown that setting learning goals, rather than performance goals, enhance persistence, some researchers warn than encouraging people to set learning goals may be misleading. For example, if a young musician does not have the talent to join the symphony, setting learning goals may encourage him or her to persist, but the final goal of becoming a concert musician may never be achieved. It is the same with trading. If you just don’t have the talent and capital, you will never make it, no matter how much effort you put in. So it is not realistic to expect the impossible. But again, you will never know what will happen until you try. And just like amateur musicians who play only for their enjoyment and occasionally for family and friends, there is nothing wrong with pursuing an activity if you find it fun and inherently rewarding. Trading can be the same way. If you enjoy making investments, then do it. As long as you don’t lose money that you cannot afford to lose, then what is the harm? As long as trading does not interfere with other aspects of your life, why not enjoy studying the markets? Trading is like many aspects of life. Some people have expensive hobbies that they cannot afford, and pursuing a hobby that becomes like an “addiction” that consumes your life may be harmful. But if you consciously decide to pursue studying the markets because it is fun and inherently rewarding, there is no reason not to continue. As long as you don’t get hurt or hurt anyone else, why not do what you want?
Wednesday, August 27, 2008
Sunday, August 17, 2008
Self-Focused and Sad
You can’t enter a peak performance mental edge when you are in a bad mood. You may not necessarily need to feel happy, but you certainly can’t feel overly sad, frustrated, angry or depressed and expect to cultivate a winning, mental edge. A recent study in Psychological Science shows how feeling sad while focusing on your inner experience can hinder you ability to find your mental edge.
Professor Jennifer Lerner at Harvard University’s Kennedy School of Government studies how emotions impact judgments. She and her colleagues (Cryder, Lerner, Gross, & Dahl, 2008) showed how a combination of focusing on oneself and feeling sad can produce biased perceptions of the value of a commodity. In their experiment, university students viewed either a relatively drab documentary or the emotionally charged scene from The Champ where a young boy pleads with his father not to die after sustaining injuries from a boxing match. Several studies have shown that not only do people feel sad when watching this scene, they actually start crying. A separate aspect of the study was a manipulation of self-focus. Participants’ focus was shifted inward so that they were overly absorbed with their personal experience. At the start of the experiment, all participants were given $10 for showing up. At the end of the experiment, participants were offered an insulated sports water bottle to purchase. Participants were asked to make a bid on the water bottle. Participants who were not focused on themselves and not sad said they would pay about 50 cents for the water bottle, but the participants who were sad and overly focused on their emotions and personal experience valued the water bottle at $2.50, which is about five times more than what people who were not sad and self-focused bid. These results highlight the impact of focusing on the experience of feeling sad rather than maintaining an objective state of mind. When one is sad and self-focused, one’s judgment is distorted.
When you feel sad, you are likely to remember past setbacks, and you are also likely to have a negative view of yourself and a pessimistic outlook. It’s much more useful to take any setback in stride. When life goes against you, don’t mull over it too much. Life is naturally going to beat you down, and you should expect it. Rather than wallow in self-pity, immediately search for a quick, effective solution. Setbacks are inevitable. Rather than stew, take decisive action and move forward. Don’t blame yourself. Accept responsibility and consider the message of the serenity prayer: Accept what you can change and change it, and don’t get bogged down by things you can’t change.
Professor Jennifer Lerner at Harvard University’s Kennedy School of Government studies how emotions impact judgments. She and her colleagues (Cryder, Lerner, Gross, & Dahl, 2008) showed how a combination of focusing on oneself and feeling sad can produce biased perceptions of the value of a commodity. In their experiment, university students viewed either a relatively drab documentary or the emotionally charged scene from The Champ where a young boy pleads with his father not to die after sustaining injuries from a boxing match. Several studies have shown that not only do people feel sad when watching this scene, they actually start crying. A separate aspect of the study was a manipulation of self-focus. Participants’ focus was shifted inward so that they were overly absorbed with their personal experience. At the start of the experiment, all participants were given $10 for showing up. At the end of the experiment, participants were offered an insulated sports water bottle to purchase. Participants were asked to make a bid on the water bottle. Participants who were not focused on themselves and not sad said they would pay about 50 cents for the water bottle, but the participants who were sad and overly focused on their emotions and personal experience valued the water bottle at $2.50, which is about five times more than what people who were not sad and self-focused bid. These results highlight the impact of focusing on the experience of feeling sad rather than maintaining an objective state of mind. When one is sad and self-focused, one’s judgment is distorted.
When you feel sad, you are likely to remember past setbacks, and you are also likely to have a negative view of yourself and a pessimistic outlook. It’s much more useful to take any setback in stride. When life goes against you, don’t mull over it too much. Life is naturally going to beat you down, and you should expect it. Rather than wallow in self-pity, immediately search for a quick, effective solution. Setbacks are inevitable. Rather than stew, take decisive action and move forward. Don’t blame yourself. Accept responsibility and consider the message of the serenity prayer: Accept what you can change and change it, and don’t get bogged down by things you can’t change.
Saturday, August 16, 2008
Your Way is the Only Way
“Man looks into the abyss. There’s nothing staring back at him. At that moment man finds his character, and that’s what keeps him out of the abyss.” What a great line from “Wall Street.” It’s worth repeating and elaborating, since it reflects a key idea in the struggle to achieve a peak performance mindset.
The literature on reaching peak performance has been influenced by Abraham Maslow’s studies of self-actualization. Originally studied by Carl Jung, self-actualization is a tendency for self-fulfillment and a desire to reach one’s potential. But people tend to get stuck psychologically. Rather than look inward, they look outward for definition. They care what others think. They try to please their parents, spouses, bosses, and friends. This often leads to a state of denial and stagnation. People try to seek out glory, money, status or fame. Self-actualizing people, in contrast, accept themselves, and go their own way. That’s why the quotation from “Wall Street” is so powerful. It reflects a basic human motive to look inward and find oneself.
Going your own way is difficult. Most people are not used to going their own way. Indeed, many institutions encourage people to conform and label people who go their own way as “rebels,” “selfish,” and even as “sinners.” From an existential point of view, however, there’s nothing wrong with going your own way or living your life according to your own values as long as you don’t hurt anyone else, so don't be afraid to go your own way. In the end, it's the only way you will find your winning mental edge.
The literature on reaching peak performance has been influenced by Abraham Maslow’s studies of self-actualization. Originally studied by Carl Jung, self-actualization is a tendency for self-fulfillment and a desire to reach one’s potential. But people tend to get stuck psychologically. Rather than look inward, they look outward for definition. They care what others think. They try to please their parents, spouses, bosses, and friends. This often leads to a state of denial and stagnation. People try to seek out glory, money, status or fame. Self-actualizing people, in contrast, accept themselves, and go their own way. That’s why the quotation from “Wall Street” is so powerful. It reflects a basic human motive to look inward and find oneself.
Going your own way is difficult. Most people are not used to going their own way. Indeed, many institutions encourage people to conform and label people who go their own way as “rebels,” “selfish,” and even as “sinners.” From an existential point of view, however, there’s nothing wrong with going your own way or living your life according to your own values as long as you don’t hurt anyone else, so don't be afraid to go your own way. In the end, it's the only way you will find your winning mental edge.
Thursday, August 14, 2008
When You Are Stuck, Start Small, and Build Momentum
If you are ambitious, you have a strong desire to succeed. But this usually means you put too much pressure on yourself, and one can often break under the strain. When the pressure is on, we can feel stuck. We may procrastinate or even feel a little depressed. Working with the proper mental edge demands that one set realistic goals and take specific action to achieve them
When we set goals that exceed our skills, we know deep down that we can't reach them. We believe we will fail even before we try, and so we just give up. When we are obsessed with reaching a high performance standard, we feel uneasy. When this happens, it's necessary to relax, and set more modest goals. Rather than stress yourself out, you can think of goals that you can easily reach and try to build momentum after some initial success. For example, you may set a small goal and see if you can achieve it. Dr. David Burns suggests trying to act mediocre. When we set a modest goal and work hard to achieve it, we experience initial success, which elevates our mood and allows us to get out of a rut. A modest goal is easy to achieve, and will lead to personal satisfaction upon completion. It will get your mind going and you will start to feel motivated.
Once you achieve a little success, you will start the ball rolling and start to act more freely and creatively. You'll find that you can transform a slump into a productive work session. So don't get discouraged. Set modest goals, and get to work. Getting out of a mental slump and into a peak performance mental state can sometimes be a matter of starting small and building momentum.
When we set goals that exceed our skills, we know deep down that we can't reach them. We believe we will fail even before we try, and so we just give up. When we are obsessed with reaching a high performance standard, we feel uneasy. When this happens, it's necessary to relax, and set more modest goals. Rather than stress yourself out, you can think of goals that you can easily reach and try to build momentum after some initial success. For example, you may set a small goal and see if you can achieve it. Dr. David Burns suggests trying to act mediocre. When we set a modest goal and work hard to achieve it, we experience initial success, which elevates our mood and allows us to get out of a rut. A modest goal is easy to achieve, and will lead to personal satisfaction upon completion. It will get your mind going and you will start to feel motivated.
Once you achieve a little success, you will start the ball rolling and start to act more freely and creatively. You'll find that you can transform a slump into a productive work session. So don't get discouraged. Set modest goals, and get to work. Getting out of a mental slump and into a peak performance mental state can sometimes be a matter of starting small and building momentum.
Wednesday, August 13, 2008
Free Anger Management Workbook
Some of my readers have discovered that in my professional life as a research psychologist I developed an anger management treatment at the University of California, San Francisco. My friend and colleague Dr. Patrick Reilly and I wrote a manual for clinicians and a workbook for clients. So far, over 1 million hard copies have been distributed by the United States Department of Health and Human Services. Even more electronic PDF copies have been downloaded. Some readers have asked for a copy of the workbook. You can have a free copy of the workbook by downloading it at the link http://www.kap.samhsa.gov/products/manuals/pdfs/anger2.pdf
I hope you find the workbook useful, but please keep in mind that it was meant to be used by clients receiving cognitive-behavioral anger management treatment, so if parts of it seem a little difficult to use, you may want to consider finding a cognitive-behavioral mental health professional in your area to help you out.
I hope you find the workbook useful, but please keep in mind that it was meant to be used by clients receiving cognitive-behavioral anger management treatment, so if parts of it seem a little difficult to use, you may want to consider finding a cognitive-behavioral mental health professional in your area to help you out.
Concentration
Focused concentration is a fundamental element of a proper mental edge. Dr. Ari Kiev (2002) observes, "concentration links discipline, desire, motivation, and satisfaction to achievement." In today’s busy world, however, concentration is often a lost art. Multi-tasking is the norm. We hold meetings over cell phones as we drive to work. We search the Internet while we watch the evening news. It’s hard not to believe that we must absorb as much data as possible until we are on the verge of information overload. But the human mind has limits. Although it is possible to engage in multiple well learned tasks simultaneously, when it comes to important tasks, it is better to devote your full attention to your immediate experience.
Do you find it difficult to concentrate? Perhaps it’s a reflection of your personality. While in school did you have trouble studying in a crowded library or on noisy bus? Are you easily frustrated? Are you constantly on edge and fighting to keep your mind on the task at hand? It's easy to concentrate when we are in a quiet room and when we are calm and at ease. But how well do you concentrate under stress? What if you are trying to meet deadlines? How well do you do then? It's easy to become shaken and lose your ability to concentrate. When you aren't fully focused on your ongoing experience, however, it's easy for self-doubts to creep into your consciousness. You may start having second thoughts and may want to sabotage your trading efforts.
Rather than allow yourself to get distracted, it's vital to focus on the moment. Focus on the process of trading in the here-and-now. Don’t mull over past mistakes or worry about what may go wrong in the future.
The more you can stay focused on your ongoing experience, the greater your mental edge. But how can you concentrate more easily? First, it's useful to remember that concentration takes psychological energy, and your supply of psychological energy has limits. If you want to maintain concentration, you must be rested and relaxed. Get proper sleep and nutrition. If you're tired or hungry, you won't be able to keep your mind focused on trading.
Second, it's important to control your stress levels. Stress depletes psychological energy. Even when you are excited rather than agitated by stress, your psychological energy is depleted a little bit each time you encounter an event that gets your adrenalin pumping. It’s vital to deal with the usual background stressors that deplete psychological energy. Family hassles, chores you have to complete, and similar stresses and strains that take up space in the back of your mind may deplete psychological resources without you knowing it. Get rid of as much stress as possible.
Concentration is critical to achieving the proper mental edge. But it’s difficult to concentrate when under stress. By taking precautions, however, you can stay calm and focused and sharpen your mental edge.
Do you find it difficult to concentrate? Perhaps it’s a reflection of your personality. While in school did you have trouble studying in a crowded library or on noisy bus? Are you easily frustrated? Are you constantly on edge and fighting to keep your mind on the task at hand? It's easy to concentrate when we are in a quiet room and when we are calm and at ease. But how well do you concentrate under stress? What if you are trying to meet deadlines? How well do you do then? It's easy to become shaken and lose your ability to concentrate. When you aren't fully focused on your ongoing experience, however, it's easy for self-doubts to creep into your consciousness. You may start having second thoughts and may want to sabotage your trading efforts.
Rather than allow yourself to get distracted, it's vital to focus on the moment. Focus on the process of trading in the here-and-now. Don’t mull over past mistakes or worry about what may go wrong in the future.
The more you can stay focused on your ongoing experience, the greater your mental edge. But how can you concentrate more easily? First, it's useful to remember that concentration takes psychological energy, and your supply of psychological energy has limits. If you want to maintain concentration, you must be rested and relaxed. Get proper sleep and nutrition. If you're tired or hungry, you won't be able to keep your mind focused on trading.
Second, it's important to control your stress levels. Stress depletes psychological energy. Even when you are excited rather than agitated by stress, your psychological energy is depleted a little bit each time you encounter an event that gets your adrenalin pumping. It’s vital to deal with the usual background stressors that deplete psychological energy. Family hassles, chores you have to complete, and similar stresses and strains that take up space in the back of your mind may deplete psychological resources without you knowing it. Get rid of as much stress as possible.
Concentration is critical to achieving the proper mental edge. But it’s difficult to concentrate when under stress. By taking precautions, however, you can stay calm and focused and sharpen your mental edge.
Don't Feel Down: Look for the Silver Lining
These days, it’s easy to feel down. The economy isn’t doing very well, and perhaps family and friends are experiencing hardship. It may seem trivial, but it’s useful to look for the silver lining. Here’s a study I read recently that shows the value of looking on the bright side.
When things aren't going right, it is useful to look on the bright side: Remember that things could be worse. When you get a $100 parking ticket unexpectedly, for example, you might as well think, "At least I didn't get a $200 ticket or get towed." It works to think positively. A study by Dr. Chris Davis, a professor of psychology at Carleton University, and his colleagues illustrates the usefulness of looking on the bright side. Participants were asked to imagine they had just experienced a major setback. Some of the participants were instructed to look on the bright side in that they were asked to consider the fact that matters could have been a lot worse. Other participants were asked to consider how the situation could have been much better. The mood of the participants was measured and compared. Research findings clearly favored looking on the bright side of things. People who focused on how matters could have turned out much worse felt happier after a major setback than people who focused on how events could have been more favorable. So if you want to be happy after you encounter a setback, look on the bright side.
How you look at a setback strongly influences how you recover from it. If you view a setback as a dreaded event, and imbue it with strong personal significance, you'll feel so emotionally overwhelmed that you will be tempted to engage in avoidance and denial. Rather than taking decisive action, you will waste precious psychological resources denying the reality of the situation. It's better to take setbacks in stride, find solutions, and move forward. Don't mull over what went wrong. Instead, figure out what you can do next to improve to solve problems. Many people spend all their time coping with emotions. They may deny the trouble they are in, for example. This is a passive approach that is rarely effective. Research demonstrates that it’s much better to take an active, problem solving approach. Whenever you feel beaten down, it’s more useful to distract yourself from thinking negatively and focus on what you can do to change the situation in which you find yourself. You may want to get more information, or develop a specific plan of action. But whatever you do, don’t get stuck. Don’t mull over the possibilities too much and start thinking, "Why did things turn out so wrong?" It's vital that you stay focused on taking active steps to solve problems. Think like a scientist. Pretend you are merely solving a mundane problem, like finding the solution to a basic math problem. Figure out what you can do next. Don't question your abilities. Self-doubt is a complete waste of time and energy. Look on the bright side for a moment, optimistically search for ways to pick yourself up off the ground, and take decisive action.
When things aren't going right, it is useful to look on the bright side: Remember that things could be worse. When you get a $100 parking ticket unexpectedly, for example, you might as well think, "At least I didn't get a $200 ticket or get towed." It works to think positively. A study by Dr. Chris Davis, a professor of psychology at Carleton University, and his colleagues illustrates the usefulness of looking on the bright side. Participants were asked to imagine they had just experienced a major setback. Some of the participants were instructed to look on the bright side in that they were asked to consider the fact that matters could have been a lot worse. Other participants were asked to consider how the situation could have been much better. The mood of the participants was measured and compared. Research findings clearly favored looking on the bright side of things. People who focused on how matters could have turned out much worse felt happier after a major setback than people who focused on how events could have been more favorable. So if you want to be happy after you encounter a setback, look on the bright side.
How you look at a setback strongly influences how you recover from it. If you view a setback as a dreaded event, and imbue it with strong personal significance, you'll feel so emotionally overwhelmed that you will be tempted to engage in avoidance and denial. Rather than taking decisive action, you will waste precious psychological resources denying the reality of the situation. It's better to take setbacks in stride, find solutions, and move forward. Don't mull over what went wrong. Instead, figure out what you can do next to improve to solve problems. Many people spend all their time coping with emotions. They may deny the trouble they are in, for example. This is a passive approach that is rarely effective. Research demonstrates that it’s much better to take an active, problem solving approach. Whenever you feel beaten down, it’s more useful to distract yourself from thinking negatively and focus on what you can do to change the situation in which you find yourself. You may want to get more information, or develop a specific plan of action. But whatever you do, don’t get stuck. Don’t mull over the possibilities too much and start thinking, "Why did things turn out so wrong?" It's vital that you stay focused on taking active steps to solve problems. Think like a scientist. Pretend you are merely solving a mundane problem, like finding the solution to a basic math problem. Figure out what you can do next. Don't question your abilities. Self-doubt is a complete waste of time and energy. Look on the bright side for a moment, optimistically search for ways to pick yourself up off the ground, and take decisive action.
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