How To Debug Your Brain

It’s super late over here in Spain – way past midnight – however I just caught up on a few comments in the prior thread and just couldn’t keep myself from writing this post. Damn you guys – I was supposed to catch up on some sleep! Anyway here is a nugget that is extremely crucial to your trading future and it is one I don’t recall ever being covered either here or anywhere else.

Apparently some of you regulars had a rough day riding the swings today and you’re probably not alone. One of you guys mentioned that crude had ‘saved his ass today’ and another responded that gold did the same for him. And then they both held hands and walked into the sunset together [cue romantic music]

HOLD IT RIGHT THERE!

Very careful with the wording here, my dear steel rats, as your own internal feedback mechanism may subconsciously sway you to look at crude or gold more favorably in the future. It’s not crude that was saving you ass today, grasshopper – it was YOUR ENTRY on an energy related symbol that resulted in the presumed rectal salvage operation. See the difference?

Two reasons why I’m such a stickler about these things. First up – I’m German – what the heck did you expect? Almost half of all Monty Python skids are based on either British or German anal retentiveness. However there is madness to my method as they say. Over the length of my twisted existence ample opportunity for self reflection has equipped me with a pretty good sense of how the human mind works hard to get itself into trouble further down the line. Almost compulsively it is constantly establishing new connections, new paths linking various regions comprised of ideas, emotions, smells, impressions, fears, desires, etc.

If you keep repeating certain behavioral patterns your brain will over time establish those patterns as learning experiences. Remember when you sat in the driver’s seat for the very first time, carefully testing out the paddles and hoping to not kill yourself and your instructor on the first round around the block? Now compare that with last Friday evening when you were racing down the freeway after work following the GPS whilst balancing a cup of coffee in one hand and a mobile phone on the other? Oh yeah and you had the boom box shatter the rear window whilst mentally practicing your twirking routine (that’s you tradingmom). The only reason why you’re able to perform all these things without thinking is because your brain is very good at memorizing and automating actions/activities over time. I don’t recall exactly but I think over 90% of all the things we do every day are automated. It’s crazy if you think about it but we’re literally running on cruise control most of the time.

Now back to trading. So if you keep thinking to yourself ‘crude saved my butt today’ then you are on a path that may lead to prejudice/bias further down the line. Positive experiences can over time condition you positively toward a particular instrument – I know that from personal experience. You may even get ‘lucky’ and catch a few good campaigns in a row on one particular symbol. Then you start taking bigger risks on that one perhaps because you ‘had such a good run’. When things go the other way you may even rationalize away trading mistakes like not observing your stop. Why? Because you have developed a personal relationship with crude/gold/natgas/EUR/USD – all your favorite symbols. How dare they treat you like that?

The opposite can also spell true – you may catch a few bad campaigns in a row on one symbol and then swear yourself to never touch that damn [fill in symbol of your choice] never ever again. Same mental misfire as the positive reinforcement – you may just have caught a bad period on that symbol. So just wait for a better opportunity and always remember that you don’t have to make back your lost money with that particular symbol. It doesn’t owe you anything – the market doesn’t either.

Positive Reinforcement

The best way to debug at least the trading regions of your brain (I’m kidding – there is no such thing) is to constantly have your debugger running. Watch what you say and what you think – establish positive habits instead of feeding the reptile part of your brain. So if you catch yourself saying ‘I hate this xxx’ then it’s time for some immediate refactoring. Perhaps talk to your trading buddy and reinforce the notion that it wasn’t the symbol that produced that loss – it was YOUR ENTRY. You owe that one, my friend – yup, it’s all you – nobody else’s fault or responsibility. Just like the winners, remember? Those you are always happy to own – aren’t you?

So in a nutshell: What you are saying and what you are thinking does make a difference. It is important that you always keep frame and that you immediately take corrective action when you realize that you are slipping. We are all TA members – Trader’s Anonymous – and every day is a new challenge. You will always be an addict of negative self reinforcements – you just cannot help it, it’s the way humans are wired (me as well – so relax). The good news is that we can also make ourselves addicted to positive actions – via positive reinforcements. A good example are people who regularly hit the gym, even if they don’t feel like it on a rainy day or a bad night. Overcoming resistance repeatedly programmed your brain to trigger peptides producing positive emotions associated with physical training. Except perhaps this guy:

Okay, Franz – just… just put the bar down. I swear I didn’t eat your damn protein bar. Please don’t hurt me?

Let’s face it people – deep inside we are all trading monkeys with bananas – on moonshine. Our brains are simply not wired to be doing this kind of thing. And financial Darwinism does a pretty good job of regulating the number of participants without compunction or mercy. The fact that you’re still here – reading this – means you may just be one of the drunk banana chomping monkeys that gets to meet Trixy, the hot new chimp in cage #3. But be careful, rumor has it she’s into banana options – or was it binary options… well, same difference.