In the first two parts of this series, we used a variety of visualization techniques to simulate good trading. In this third and final part, we are going to use the same advanced visualization techniques, but in different ways that can also serve to help our trading. Rather than simulating good trading, we are going to use visualization tools for new purposes: to undo bad trading results; to manage emotional states; to set goals for the future.
Visualization Basics
We know that visualization works because your brain equates images with the real thing. Thus, mental practice reinforces real, physical practice, improving the decision-making circuitry involved. In this part, we are going to expand this—because your brain has trouble telling the difference between imagined and real images, we are going to invent certain experiences in order to persuade our brain to bring about what we want to happen or to change what happened in the past. Instead of reinforcing our decision-making circuitry for something we are doing, we are overwriting stuff that we don’t want to happen or creating entirely experiences that we do want to happen.
“How” this works is quite interesting. To put it bluntly, your brain is a learning machine—it is always soaking up information, drawing conclusions or generalizations and taking action. Most of these happen without your conscious awareness. Oftentimes, these generalizations do not serve you or your trading.
For instance, imagine that you have a position on that’s losing money and you begin to experience the usual symptoms of stress – sweating, tunnel vision, heart pounding, etc. You are like a deer in headlights. Obviously, you didn’t make up your mind in advance to become stressed and to watch your decision-making powers wilt away. Instead, your brain just did it automatically. The generalized fear you have of losing money is acting up, without your control and it’s hurting your trading.
This is where advanced visualization techniques come in. With the right tools, you can easily deprogram yourself from these automatic reactions—negating the unconscious generalization that hurts your trading results. Ultimately, the goal is to reprogram oneself so that, in the future, your brain will make the right unconscious decisions and work towards your goals.
It’s one thing to talk generally about visualization techniques. Now, we are going to plunge into different settings. What each has in common is that we are using the same tools of visualization, but in slightly unconventional ways that are specific to the setting. Before, we had used visualization as a very blunt instrument—as a generalized tool for practicing trading excellence. Now, we are going to use it with surgical precision. The idea here is that by understanding how our brain works, we can use visualization in a very specific way to induce a very specific result—but ultimately, one that is more powerful.
Three Case Studies
Case Study #1: Undoing the emotional impact of bad trading and its results
A common experience for traders is that after a run of bad trading decisions, or a string of poor results, we begin to lose our confidence and encounter negative and inhibiting self-talk. Perhaps all traders go through periods of disappointing results or making mistakes. Sometimes, we just sail through it naturally without any ill effects. The problem arises when our brain makes unhelpful generalizations that lead to self-criticism and a lack of confidence. As any trader will attest, this can seriously undermine one’s game and make it difficult to get back in the groove.
If you have had a really bad run and are feeling depressed, then you can confirm: it’s one of the most disempowering feelings in the world. It’s like getting the stuffing kicked out of you in a fight or being fired unexpectedly from a job. It’s downright unpleasant. But once we have gone through the initial emotions, the next step is to pick ourselves up again and get on the right track, to making good decisions and being profitable.
The best first response is to stop trading immediately and to review the trading before and during your bad run. You may have been deviating too far from your trading style or risk management practices. Before getting started trading again, make sure to have those methodological questions squared away. Then, start trading only with substantially reduced size, so that the P&L swings will carry less emotional impact. As always, good trading fundamentals dominate.
But sometimes good fundamental trading skills are not enough to recover from a bad run. Once you are back to trading, you may be afraid to take risk, or you may be stuck in a self-critical rut. Whatever it is, you want to get back in the game and to have all of the psychological resources that you need to succeed.
We will do a visualization exercise that takes away the emotional sting of bad trading results and thereby helps you to get back in the game. As we covered in Part 2, changing the way that an experience is represented can alter the emotional impact. What we want to do is to change our memory, so that it takes away the emotional pain associated with bad trading. We follow this set of instructions:
- Get nice and relaxed, preferably in a sofa or a good chair. Do not do this in bed—you don’t want to fall asleep!
- Breathe in and out deeply and get into a slow, deep, comfortable rhythm
- Access the memory of your bad trading result, after you started to have those unresourceful feelings. Get specific about the exact moment that triggered those feelings. Was it when you hit a certain dollar figure drawdown? Was is when you had a certain % drawdown in your equity? Or was it when you had your 19th trade in a row that lost money? Whatever it was, make sure you are specific and clear about it.
- Have in your mind a representation of that feeling bad state. Get an idea of how you look when you are in that state—how you are depressed, or angry, or whatever. For instance, do you slump your shoulders a certain way? Is It obvious on your face that you are depressed? Get a firm idea of that picture in your head and all of the sounds and feelings that come with it. Call this Bad Picture.
- Now, imagine how you would like to be. Most importantly, you would like to be feeling balanced and empowered—able to continue trading. You would like to be in an ideal state for trading, poised, confident, etc. You feel motivated. You are “over” your losses and ready to devote your focus to trading well and not necessarily to making money. Make this image really compelling by making it bright and close-up; change everything else around to turn up the emotional impact. Call this Good Picture.
- Now, go back to the trigger point for when your bad feelings begin. Start with Bad Picture. Put a bright dot in the middle. Let that bright dot expand, quickly, replacing Bad Picture with Good Picture as it expands outward. Good Picture will completely cover up the old one. You are overwriting the triggered response to your losses by substituting good feelings in the place of bad feelings.
- Repeat this process ten times, making sure that the Good Picture remains as compelling as ever.
- Test. Go back to the trigger memory in your mind. If you still get bad feelings when you think about your bad trading run, then repeat this process a few more times until it works.
This process is adapted from the book “NLP: The Technology of Achievement”, which details the processes used in sports and in therapy to improve performance and clear out unresourceful psychological feelings.
Case Study #2: Reversing unresourceful emotional states
The previous case study is one example where we need techniques to manage our emotional state, in order to stay empowered and resourceful after a bad run of trading results. However, it is by no means the only situation where we would need to do manage our results.
There are numerous possible stresses to our trading: We could be getting over-exuberant; we could have life events like the birth of a child, death in the family or divorce that are impacting our emotional state and thus our trading; we could be distracted by something unrelated to our trading at work.
While there are innumerable possible distractions, the solution is always the same—we want to return to the most powerful, useful emotional state for trading in order to make the best decisions possible. Thus, we need a universal exercise that shows us how to get in the right state.
The first part of this is identifying exactly when we were in our most resourceful state ever. Maybe you had experienced it one day, coming back from a really restful vacation, where you felt completely focused, switched-on and in-the-zone. Perhaps it was after a yoga or meditation session, where you felt a certain kind of clarity that you hadn’t before. The famous psychologist Mihaly Csikszentmihalyi called this “flow”, when you are completely absorbed in an activity and distractions just seem to drop away. Athletes call it being “in the zone”.
It is possible that you haven’t experienced this kind of state in relation to your trading, either because you’re just starting out or because you haven’t build the kind of confidence and self-assurance that comes with success. Thus, you’ve only encountered “flow” in the context of athletics, where you became totally absorbed in the activity. Nonetheless, this is a good analogue for what you to achieve in trading: immersion, brisk decision-making, an absence of internal “chatter” interfering with your performance. It could even be from school, where you very well-prepared for an exam and you just sailed through it effortlessly. The key is to find a period of peak performance and effortless, spot-on decision-making that you would want to replicate at any given time.
Once you have identified your idealized peak performance state, then you want the necessary tools to get into that state whenever you need it. That way, you will have the tools to reverse any unresourceful emotional states. That is exactly what we are going to practice.
The series of steps:
- Get nice and relaxed, preferably in a sofa or a good chair. Do not do this in bed—you don’t want to fall asleep!
- Breathe in and out deeply and get into a slow, deep, comfortable rhythm
- Reconnect with your experience of peak performance. Go back and remember what you felt like, what you seeing and hearing. It could be that you were hearing nothing – that’s ok as well. Get to know in detail all of the various feelings of that experience. If you think that something could still be better, then tweak that experience by varying the representation of some parts of the representation to alter their emotional impact
- While experiencing that peak performance state—we will call it “peak performance you”—imagine yourself but with a big circle underneath. See yourself standing above that circle, experiencing the feelings and experience of peak performance. Make that circle big, brightly-colored, pulsing with some kind of light—just so that it’s well-marked and stands out in your mind.
- Now see your body stepping out of that circle, but leave all of the feelings and experiences within the circle. That way, the feelings and experience have become separate from “peak performance you”. Now, this whole peak performance state can be accessed just by stepping into the circle.
- Imagine yourself in a trading situation where you want to get into the peak performance state—for instance, starting your day out the right way or trying to keep your cool after a couple losing trades. Imagine you, with all of your trading knowledge, desire to succeed and experience. We will call this “Trading You”.
- Imagine “Trading You” stepping into the Peak Performance circle. Connect with those feelings and experiences of peak performance, and how they would boost your trading. Imagine “Trading You” as a peak performer, absorbed in the flow of trading.
- The next step is to set this up for use any time that you want. Step out of the Peak Performance Circle, and return to being just “Trading You”. Choose a trigger for the experience of Peak Performance—it could be a phrase that you say to yourself, like “Get in the zone”, or a simple gesture, like tapping yourself on the back of the hand twice. Use your trigger and step into the Peak Performance Circle. Now step out, returning to Trading You, and fire the trigger and step into the Peak Performance Circle.
- Repeat a few times—you should be able to access the Peak Performance state whenever you desire.
Case Study #3: Setting Goals
One of the most widely known uses for visualization is to simulate experiences that we would like to achieve- not just playing well at a sports competition, but also receiving a gold medal at the Olympics or kicking the game-winning goal. We know how visualization works as mental practice– we are firing the same neural pathways as the actual physical experience. By doing a mental run-through of how we would like to do it, we are reinforcing this in real life.
For goal states that we would like to achieve, the mental process works a bit differently. If we are just imagining ourselves receiving a gold medal at the Olympics, then aren’t we just practicing bowing our heads so that they put the medal on correctly? Is that what we want? Of course not.
What we do want is for the goal experience to draw us powerfully, to encourage us to undertake the actions necessary to achieve it. That requires a different, specialized visualization exercise.
While a visualization exercise can have some pull on us towards a goal’s achievement, the key is to explicitly link the goal’s achievement in the future with the actions necessary to reach the goal, starting from today. In effect, we are pre-programming our brain with a course of action that can be followed, all the way up to the goal. That way, the steps to take at any point are simple, and we have imagined walking through them all successfully, all the way up to our goal.
The key to this process is understanding how your brain represents time—its past, present and future. Once we understand that, we can manipulate that to induce our desired outcomes—for instance, a goal that we have achieved at a certain time in the future.
The first step is to understand that your brain stores its past and its future in a certain relationship to the future—and we are going to work with that relationship. Otherwise, how would you be able to distinguish between events that happened in your childhood and your to-do list for tomorrow? Once we get how our brain stores events or items that are in the future, then we can use that knowledge to implant certain goals in our future, as if their success were already pre-ordained. Better yet, we can fill in the area between now and the goal with all of the things that we did to accomplish our goal.
Before we start the exercise, we need to discuss how to set goals. Well-formed goals need several criteria in order to be accepted by your brain and spur action
- A precisely described target that you have achieved. Saying you want “to be rich” is very vague. Instead, name a certain monetary sum that you would associate with being rich. Or you can state a performance goal but be a bit less specific about how you got there. 25% per year for four years would mean a cumulative gain of 144%– set that as your goal, because 25% per year, *every year*, would be harder to hit.
- Defined date. Saying you want to make $10 million is nice, but you don’t want to do it 40 years from now. Rather, say “I want to make $10 million by Dec 31 2014”. That helps your brain get specific about it. Note: it has to be somewhat realistic. Trying to make $1 billion by tomorrow is not going to be perceived as realistic by your brain and will be rejected!
- Proof. How exactly will you know that you have accomplished it? It could be a brokerage statement with that exact monetary figure. It could be you moving into a new house that cost roughly that sum of money. Or it could be you receiving a statement from your administrator demonstrating the performance figure.
- A representation. Roll all of these into one image/representation. For instance, if you had set your goal as achieving a $10 million brokerage account by Dec 31 2013, then you could imagine yourself at home, on the computer, printing out the statement that shows your account value with the date printed on there. Then make sure to get into the feelings that would accompany it—satisfaction, contentment, confidence, triumph, etc. Really work all of the accompanying feelings into that representation. In his wonderful book “The Science of Getting Rich”, Wallace Wattles calls it your clear “compelling mental image”—compelling because you want to be IN it.
Now we are going to practice working our well-formed, richly described goals into our future.
- Get nice and relaxed, preferably in a sofa or a good chair. Do not do this in bed—you don’t want to fall asleep!
- Breathe in and out deeply and get into a slow, deep, comfortable rhythm
- As you become more relaxed, take a moment to reflect on some memories from the past. It’s helpful if they have concrete dates—for instance, the first birthday that you can remember or The key question here is- where are they physically located in relation to you? Are they to your left? Behind? Become familiar with where past events are located and what the continuum looks like—is it a straight line, a curvy line, etc? We call this our “timeline”.
- Now become familiar with where your experience of the present is in relationship to the past. Is the present right in front of you? How much space does it occupy on your timeline?
- Do the same for your future—figure out where the future is in relationship to the present? Is it in front? To the right? And figure out how far it stretches—can you only conceive of events a few days ahead, or are you one of those people who has everything already planned out for years to come?
- Become aware of how your brain stores representations of events in the future. What does a goal look like? Maybe you have some goals already that are compelling—being a spouse, being a parent, retiring? If those goals are compelling to you, then you will want your trading goal to be represented the same way.
- Now that you have mapped your timeline, you are going to embark on a little journey. Imagine your timeline and that your body floats up, above your timeline. Now float through your future to the exact date when you want to have achieved that goal.
- Float down into the time and imagine yourself experiencing the goal state- i.e. experiencing the wealth, abundance, comfort and happiness of the goal state. Make the representation compelling!! Make the pictures big and bright; the sounds, enticing; the feelings, irresistible.
- Now, look back from that future moment, to all of the actions that you took to reach that state. Imagine some of the various milestones along the way. If you had imagined reaching a certain net worth, then imagine being ¼ of the way there, ½, etc. For this part of the exercise, it is important to watch yourself doing it, rather than being in the pictures.
10. Watch yourself performing the various actions, like the work that you did every day, the preparation, the psychological work, etc. and see yourself doing it at various points along the way. The reason for this is to reinforce the idea of what you were doing every day, or at regular intervals.
11. Also, imagine yourself having made any changes that were necessary to accomplish your goal. While in the goal state in the future, you could imagine yourself as being a better version of you, through having improved in certain ways or having overcome personality flaws. While you may not be able to identify when exactly those happened, by the time of your goal, those changes will have occurred.
12. Now float back to your present. Contemplate the future and your future goal should pull yourself more powerfully.
This is a visualization exercise that you can do many times and have it get better every single time. Each time you can update the goal image and make it more and more compelling. With every run-through, you can fill in more and more details for how you got there.
These techniques are widely used in the therapy context. Two authoritative guides to the topic are “Timelines and The Basis of Personality” and “Adventures with Timelines”.
Conclusion
This marks the end of the three-part series on visualization. Hopefully, this has given you, the reader, a comprehensive overview of visualization and its relationship to trading. We covered a lot of ground, all the way from what visualization is to sophisticated techniques for its utilization. Above all, remember to practice the techniques as outlined in this piece—otherwise, you will be missing the main benefit.
For those who do practice the techniques, I would love to get feedback. What were your experiences? Did you feel good or comfortable doing the techniques? Were they useful? Have you tried any experiments that work better? Let me know! Email me at bruce [at] howoftrading.com
By Bruce Bower | www.howoftrading.com | Twitter: @HowOfTrading
