Chapter One: Shifting Our Viewing

Why is it that great trades come from the soul and not the ego?  

When we generate a trading idea from the ego, we become attached to it.  It becomes our view.  We naturally look for evidence that supports our view, allowing confirmation biases to blind us to contradictory information.  In an important sense, when we trade from the ego, we no longer trade to make money.  We trade to be right.  

When we trade from the soul, on the other hand, ideas come to us.  They are the product of creative insight and inspiration.  Trading from the soul requires an open mind, not a mind that is already made up.  If our heads are filled with our ideas and our needs, what room is left for processing evolving market information?

Moving beyond our narrow selves to access the soul is the essence of spirituality.  This typically requires a radical shift in our viewing.  Seeing ourselves (and markets) differently refreshes our perspectives and opens the door to new opportunities.  The essence of trading is a search for meaningful patterns.  If we were to look for meaningful patterns in our conversations with a loved one, we would clear our minds, focus our attention, and truly listen.  We would open our selves up.  

That happens in good trading as well.  

Let's explore how.

The Parable of the House

Imagine you have just purchased a large new home to impress your friends.  You want to make the home as lavish and attractive as possible.  Wouldn't it be great, you think, if you could create a stunning effect for guests entering the front door?  You paint the living area dramatically and purchase expensive rugs and furniture.  You find the most color coordinated wall hangings and spend hours positioning each perfectly.  

The time finally comes to invite your friends and bask in their wow! reaction.

They like it, but no one is stunned.  Their praise is polite, but not effusive.  One comments that the living room looks like a hotel lobby.  Somehow you get the feeling that wasn't said as a compliment.

Chagrined, you search for yet other wall coverings, furnishings, statues, and collector pieces--rare pieces, exotic works--and arrange these with care.  Surely now your space looks distinctive and mansion-worthy!

So you invite more friends.

Again people politely compliment your home, but no one's breath is taken away.  What's worse, something seems different.  Some of the visitors to your home seem distinctly unimpressed.  They no longer perceive beauty.  

They see clutter.   

Moreover, it appears that your friends and neighbors now view you differently:  no longer as a discerning collector and decorator, but as a hoarder.  They feel sorry for you.  They feel awkward.  Before long, no one wants to visit.  The new place starts to feel like a house, not a home.  You're alone in your large space, surrounded by clutter.  You feel despondent.  Still, a nagging voice in the back of your mind beckons:  if only you obtained a better couch, more dramatic lighting, rarer antiques...

By now you've probably figured out our little parable.  We so wish to prove our merit, succeed in life, and advance our station that we add one responsibility to another; one activity after another.  Eventually we get to the point where our lives are so cluttered with things to do that we barely have time to enjoy life.  Nearly 60% of working adults with a child report that they experience stress frequently and lack the time to get things done.  A recent study found that 40% of adults look back and regret their life choices.  What starts as a desire for a full and successful life too often yields chaos, clutter, and an utter lack of fulfillment.

How can we change such a situation?  Our living rooms don't need more adornments.  They need a new vision, a new purpose.  But how can we re-new our saturated lives?

One Unexpected Starting Point:  Repentance

This may sound strange:  Many times, change does not begin with inspiration.

Rather, change starts with horror, disgust, and guilt.  

In other words, the first step in doing better is feeling worse. 

By nature, we don't like to feel bad, so we seek comfort.  We yield to the familiar voice that says we can just buy one more piece of furniture, one more wall hanging.  Routine is comfortable.  Comfort keeps us in our routines.  A great deal of being stuck in life (and trading) consists of staying comfortable.

Emotional pain propels us out of comfort and routine.  We usually don't change because we want to.  We change once we recognize--powerfully and emotionally--that we need to.

Let's return to our parable and explore this.

Suppose our despondent homeowner views the situation with fresh eyes, notices the cluttered walls and shelves, and cries out, "How could I have gotten to this point?"  The realization hits:  "I can't live this way any more.  I'm doing more and more of the same things and getting further and further from happiness.  The more I try to impress people and attract friends, the more I end up being alone.  I'm spending way too much money and all it buys me is misery!"

Radical change often begins with painful self-appraisal and the uncomfortable recognition of being on the wrong path.  An important gateway to change is becoming so disgusted with our patterns that we desire nothing more than to exit our fruitless loops.

Consider the alcoholic.  He continues drinking as long as he's in denial.  He drinks, he loses jobs and friends, he feels guilty temporarily, and then he drinks again to feel better.  The addiction is an endless loop.  How does he change?  He hits bottom.  He loses everything and becomes so disgusted with the mess he has made of his life that he comes to AA meetings, takes a fearless inventory of what he has done in life, and shares this with others.  Horrified by the opportunities he's lost, the people he's hurt, and the financial consequences of his drinking, he becomes willing to make amends and commit to a life of sobriety.

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Perspective:  Alcoholics Anonymous

It is no coincidence that AA is grounded in a belief in a Higher Power.  AA tackles the ego's resistance to change by connecting us with something larger than the ego.  For the religious person, it's a connection to a Higher Power, but even for the secular participant, there is an attachment to the larger group: the recovering community.

Participation in AA begins with the frank acknowledgement that, "I am powerless against alcohol."  It then proceeds to that "fearless moral inventory" and efforts to make amends to all damaged by the addiction.  Think about it:  every step in AA is a move away from ego and a humbling acknowledgement that we have lacked control and we will always lack control.

It is the giving up of control/ego that opens us to the love of community and the support of the Higher Power.  How ironic is this?  It's when we most relinquish control that we begin to regain control of our lives!  This is why the AA handbook refers to the goal of the process as "spiritual awakening."

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What brings a person to a psychologist?  What leads a person to go to church and seek salvation from sin?  Why would someone refrain from eating and spend a day of penance at a synagogue?  It is when we feel the discomfort of the gap between real and ideal--between the person we are and we person we know we can be--that we are roused to action. Discomfort thus becomes a powerful gateway to renewal.

Take a look at most traders' journals and reviews.  They may express frustration or desire for improvement, but rarely do they reflect pain.  When we enter a state of repentance, change becomes an imperative, not a mere desire.  As with the house owner in our parable, traders are most likely to make radical changes when they recognize--deeply and emotionally--that they cannot continue on their present course. 

From this perspective, the problem is not that traders let their emotions interfere with their trading.  Rather, the problem is the absence of pain!  We make one mistake after another, lose one opportunity after another, take one outsized loss after another--and somehow we go forward, willing somehow, some way that we'll do better.  But it's like an empty New Year's resolution: there's no urgency behind it.  It's the pain of seeing what we can be and realizing how far we're falling short of this potential that arouses us to meaningful action.  

Usually, it takes unusually painful consequences to get us to the point of experiencing humbling repentance and the need for change.  But what if we can accelerate this process before we do permanent damage to ourselves and others?  What if we can sort through the clutter of our ego-saturated trading before we blow up our accounts and dash our dreams?

Shifting Viewing by Altering Construing

When two colleagues and I reviewed evidence-based approaches to counseling and psychotherapy for an academic text, a mind-blowing conclusion stood out:  

Every major approach to psychology  changes how we view self, others, and world by introducing new experiences under heightened states of consciousness.

In other words, there is no expansion of life without mind expansion:  Renewal begins with new viewing.

Good therapists help people heighten their awareness and--in that new state--experience and understand themselves differently.  The apt term introduced by Alexander and French is "corrective emotional experience."  Successful approaches to helping create powerful emotional experiences that open the mind to fresh possibilities.

We change our doing by shifting our viewing.  And we shift our viewing by altering our construing.  When our homeowner hits the point of despair and realizes that change is imperative, new energy enters the system and fuels a novel life direction.

This is a key to lasting change.  What, on the surface, seems like despair and negativity actually represents a complete reorganization of perspective.  It is that new viewing that provides the gateway to fresh doing.  Hitting bottom energizes us to find new solutions.  Later in the book we will learn two other paths to radical change:  the paths of joy and quiet.  The common ingredient to all of these is a major shift in our states of awareness.

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The Repentance of a Market Wizard

Jack Schwager's Market Wizards series of books provide an interesting human window on the lives of successful traders.  One of those Wizards experienced success during the first several years of his trading career and started managing money for investors.  This led to a "macho-type" trade in the futures market that went against him in a dramatic way.  His accounts lost much more than half their money in that single trade.

As Schwager recounts, that ego-driven trader was one of the most famous of all Wizards:  Paul Tudor Jones.  He felt "totally demoralized" and said, "I was so depressed that I nearly quit."

He didn't quit, however.  Instead he said to himself, "Mr. Stupid, why risk everything on one trade?  Why not make your life a pursuit of happiness rather than pain?" (p. 123).  Out of that "cathartic" realization, he fully embraced discipline and money management.

After many subsequent years of success, Schwager asked Jones if he now felt more confident than in his early years.  Jones' answer was illuminating:  he indicated that he was now more "scared" than ever, because he knows how "ephemeral" success can be in markets.  "I know that to be successful," he shared, "I have to be frightened." (p. 126).

This was not a simple change from one trading strategy to another.  This was a change of a spiritual nature, from the ego to the soul.  In ego mode, the young trader can be overconfident and risk-seeking.  In soul mode, the wiser trader focuses on having a life that is "a pursuit of happiness."  What makes Jones a Wizard is not simply a P/L number, but his ability to turn crisis into self-renewal.

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Repentance is only one way of shifting our viewing by altering our construing.  Here's a very different example.  A metaphor found in many spiritual traditions is that life is a classroom.  Recurring challenges are lessons we're meant to master in our unique curriculum.  Life's difficulties are thus not roadblocks to our development, but actual paths to our development.

When I embraced this framework, something interesting happened.  During moments of challenge and frustration, I found myself slowing down, invoking the Teacher of my classroom, and saying simply, quietly, "Thank you."  From this perspective, problems are gifts!  They are opportunities to advance our growth.

The Jewish tradition describes Rabbi Nahum, who lived a difficult life beset with poverty and illness.  His response to adversity was to proclaim Gam Zu L'Tovah:  This, too, is for the good!  What he meant was:  The  challenge I'm now experiencing is here for a reason.  It is here to improve me.  What a special opportunity!!

With such a perspective, frustration readily gives way to gratitude.  I can actually look forward to situations that throw me for a loop.  As a good student in life's classroom, I eagerly await my next lesson.  It is difficult to overreact to mistakes and setbacks when we embrace them with appreciation, as valuable life lessons.

This is quite relevant to the trading world, where taking losses is central to our success.  How many good trade ideas have I had where the market did not move as expected?  Gam Zu L'Tovah!  The inability of the market to do the expected provides information.  Sometimes the losing trade enlightens me about my trading and what I need to do to better structure risk/reward bets.  Sometimes the losing trade tells me something important about the market itself.  In those situations, if I keep an open mind, a trading opportunity frequently appears in the opposite direction.  That's a trade from the soul, not the ego.

A key step in this shift of perspective is a slowing down--a refocus of attention.  Instead of stoking fight-or-flight arousal, the challenging situation leads to a heavenward turn of attention--and that places us in a zone.  It's a zone I recognize well from self-hypnosis and meditation:  profound calm, heightened focus.  Once in that zone, we can process events differently and evoke the warmth of joy and thanks.  Immersed in a sense of gratitude, we bypass the old loop of frustrated, reactive behavior and approach the situation constructively, with a newly opened mind.

Repentance takes us to a new place by so immersing us in our flaws and their costs that we find fresh motivation to make radical changes.  Gratitude takes us to a new place by so immersing us in the positives of our lives that we become inspired to live up to our best selves.  Radical pain can bring radical change; radical joy can do the same.  When we shift our viewing, we become able to shift our doing.

Radically.

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Resources

Here are 20 selected videos on gratitude from the Positive Psychology Program site.  Note a common theme among the talks:  happiness doesn't make us grateful; it's gratitude that brings happiness.  Instead of seeking happiness in the future, we can benefit by finding gratitude for all we've been given to this point.

A common intervention in positive psychology research is the keeping of a gratitude journal, prompting us to identify things we're grateful for each day.  An interesting experiment would be the construction of a gratitude-base trading journal.  Many trading journals are filled with accounts of everything that went wrong in trading.  In a sense, they become anti-gratitude exercises.  How could your trading journal contribute to your ongoing happiness?  By highlighting opportunity?  By highlighting what we have done well and wish to continue doing?  

Here's an interesting framework from a Christian perspective that links repentance to positive emotional experiences of hope, forgiveness, and gratitude.  We shall explore this later in the book:  from the deep anguish of self-evaluation can emerge energizing positive states.  There is a significant difference between repenting and beating oneself up.  True repentance is a release, not a punishment.

A fascinating research summary from Scott Barry Kaufman finds that emotionally extreme experiences--positive and negative--tend to be the ones we judge to be most meaningful.  In part, this is the case because powerful experiences trigger contemplation.  We tend to look at life (and ourselves) differently after emotionally impactful events. 

In this book we explore the paths of joy and repentance as ways we can access new energy and break our routines.  Yet another path, we shall see, is the path of radical peace.  Our inner chatter is our ego.  When we learn to still our minds and bodies and cease the inner chatter, we find, within our quiet: the soul underneath.  Here are five ways of achieving quiet from Thich Nhat Hanh's work.  The goal of these is to completely ground us in the present moment, so that we're not swayed by the pain of our past or our desires for the future.  Useful resources for meditation are offered by Nhat Hanh's foundation.  Note that prayer, conducted properly, is yet another pathway to quiet and fresh perspective.  

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Changing Our State Of Consciousness

The insight that changes in our states of mind and body can spark radical shifts in perspective (and action) helps to explain the power of repentance, quiet, and gratitude. Once we enter a unique state of consciousness, we gain fresh energy combined with fresh awareness.  That fresh energy and awareness are what renewal is all about.

This is also why routine is so dangerous.  It is safe.  It is secure.  For those reasons it keeps us operating in old modes of awareness.  We never gain fresh perspectives when we are bound by habit.  In routine, we lose access to the storehouses of energy that connect us to our distinctive strengths.  (See this article for a discussion of this important idea.)

There's an important takeaway from all of this:

If you are going to make real changes in your trading, reviewing your trading needs to involve a true re-viewing of your trading.  

If we process our trading in the same states of mind and body that characterize our daily lives, then we will see the same things, think the same things, and ultimately do the same things that we've always done.  We can't be in the same old mindset and expect to do great new things.

Suppose, however, you review markets in the spirit of a treasure hunt:  you embark on an adventure to uncover opportunities you hadn't noticed before.  Or suppose you reviewed your trading in the spirit of making amends and asking for forgiveness.  What fresh motivations and perspectives might you unleash?

For many of us, our trading accounts are our cluttered homes.  What we desperately need is to find our inner quiet; review our trades and trading statistics in detail and truly experience the horror of betraying our potential; and fully appreciate what we do well and embrace it with gratitude.  Out of that energized awareness, we can replace the clutter with what is meaningful.

Our great enemy is routine.  Many times, we know what we're doing wrong, but we keep making the same mistakes. Indeed, that is the way of life's curriculum.  If we fail to learn from the first lesson, we get a second and a third and a fourth:  one painful opportunity after another to commit to a different path.  Is that failure, or is that something to be grateful for:  a curriculum that is trying, trying, trying to teach us the lessons we need to learn to be successful?

Fresh construing creates new viewing and that can lead to new doing. Change begins with corrective emotional experience.  Renewal becomes possible when we turn from the old in an enhanced state:  enhanced focus, enhanced emotion, enhanced drive.  Old ways keep the ego intact.  Fresh experience is our pathway to soul, and that is our path to renewed trading.

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Perspective:  Emotional Creativity

As traders, we generally think of creativity as the ability to generate new ideas.  Creativity, however, operates in all life domains.  Artists display creative perception.  We can also achieve emotional creativity.  

Emotional creativity is the ability to respond to familiar situations with new and different feelings.  Indeed, there is reason to believe that much of our ability to think more creatively is grounded in our ability to feel creatively.

When we move past the ego and respond with the soul, we access different feelings.  Spirituality is a pathway to emotional creativity, which in turn opens us to creative life options.  This, perhaps, the is most important takeaway of all: There can be no transformation without emotional transformation.  Before we can create new life paths, we have to create new experience.  

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Think about it:  the ego doesn't want to change.  The ego wants to be right.  We don't change because we want to; we change when we perceive, from the depth of our souls, that we need to, that we must, that what is ahead of us is so much better than what we've been experiencing.  Does your trading process reinforce ego or does it bring you in contact with soul?  When we are soul-full, we are inspired.  All great shifts of viewing and doing are ultimately paths toward the energizing impacts of inspiration.  In the coming chapters, we will explore those paths.

KEY TAKEAWAY:  Our emotional experience determines what we process and how deeply we process it.  We need routines to make our trading as reliable as possible, but when we want to make changes in our trading, we have to exit routine and generate empowering emotional experience from learning and understanding.  When we view markets, we want an open mind, quieting the chatter of our ego needs.  When we re-view our trading, we want an energized, inspired mindset.  We cannot change if we remain in the same physical, cognitive, and emotional states that led to our mistakes.

PRACTICAL EXERCISE:  When you review your trading, visualize your mistakes as your enemies, summoning your competitive instinct to battle those.  Visualize your successes and your best trading as your inspirations, summoning your gratitude and appreciation.  Before you start trading the next day, review your review, reactivating those emotions and carrying them forward into your day, giving emotional force to your goals for the day.  Goals without emotional force are merely good intentions.

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NEXT PAGE:  CHAPTER TWO

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