ForexSpirit

One of the hardest areas to tackle and improve as a trader is our own psychology. Often times we don’t even know where to begin. It is just as well that there is a thriving personal development industry out there that any aspiring trader can tap into.

One of the main works in the domain of personal development is Maxwell Maltz’s Psycho-Cybernetics. This pivotal book was written in 1960. The ideas and concepts contained within the book have been expanded and built upon by other luminaries in the personal development field but the genesis of these ideas can be traced back to Maxwell Maltz’s own observations and research and the way that he tied them together in this book.

Maxwell Maltz combined his own interactions with his patients as a plastic surgeon and the published work of other psychologists of the day to put forward some very interesting observations about our own self-image.

Our self-image is everything

Our self-image is how we think about ourselves and it has a huge influence on how we interact with people and the world around us.

The very simple premise put forward in this book is that if we change the way that we think about ourselves then we change our interaction with the world around us. Changes within flow to become changes outside.

How do these changes come about? Maxwell Maltz introduces the idea of our mind and body being a servo-mechanism. That is our conscious mind comes up with a plan of action which is then passed off to our sub-conscious. Our sub-conscious figures out a way to complete the task that it has been given. The servo-mechanism put forward in the book has since been shown not to be the actual arbiter of change but I still find it a useful metaphor for the process of how our self-image has such an impact on our lives. In fact I like to equate it to the fly-by-wire systems found in modern aircraft (probably because I’m a bit of an aviation buff).

I like to think of our sub-conscious minds as the fly-by-wire system and our conscious mind as the input to that fly-by-wire system. When a pilot is flying a modern aircraft and he moves the joystick or throttle controlling that plane he is not directly moving the aerilons or other control surfaces of the plane (as was the case with airplanes in WWII for example). Instead the pilot’s input is passed into a computer system which interprets the pilot’s request. The computer system determines what the best response is to the pilot’s input based on the current state of the aircraft. It is the computer system that ends up moving the aerilons and other control surfaces on the plane which in turn affects which way the plane is flying.

In the same sort of way, I like to look at the conscious mind passing input and information to the sub-conscious mind. The sub-conscious mind takes all the information and then runs with it.

One of the keys to understanding why this process works is that the sub-conscious mind is unable to make any distinction between fact and fiction. The sub-conscious mind sees everything that is passed to it as reality. An often used example to demonstrate this is: imagine that you have a citrus fruit such as an orange or a lemon in one hand. In your other hand is a knife. See yourself cutting the fruit in two. Pick up one half of the fruit and squeeze it. See the drops of juice dripping from the bottom of the piece of fruit. By know you should feel your mouth moisten as your glands salivate. Your body isn’t able to tell the difference between reality and what you are imaging. Your body has reacted as if the orange or lemon is real.

By being careful and precise with the information and ideas that is passed to the sub-conscious mind we can direct the repertoire of information that it works with.

Understanding this mechanism allows us to greatly influence how we lead our lives. If we continually imagine what our lives are to be and who we want ourselves to be, these thoughts are filtered through our conscious mind to our sub-conscious. Since our sub-conscious does not know the difference between reality and our desires, if our future desires are continually being fed into our sub-conscious then our sub-conscious will make sure that all its decisions and outcomes are consistent with that viewpoint.

An example of how I put this idea into practice every day is with when I perform my daily meditation session. As part of every meditation period I repeat a simple mantra where I see myself as a consistent, profitable trader. That I am a professional trader who follows his trading plan and who does not hesitate in taking a loss according to that trading plan. I believe that by internalising these thoughts, by repeating them over and over again, that my sub-conscious mind sees that as reality and my all trading decisions are consistent with this outlook. I also often imagine what sort of trader I will be in six or twelve months. What progress will I have made? What will be the size of my trading account? What will my trading environment look like and what will my trading routine be? How will it feel to be able to spend more time with my wife and family? I visualise all the answers to these questions as if it were reality now. I see my possible future as the present.

By imaging these scenarios I aim to have my sub-conscious mind work in concert with those ideals, so that all my best efforts move me closer to having my thoughts become actual reality.

Spirited trading

The book lays out steps and ideas that can be applied to any area of your life. This of course can include trading. One chapter in the book struck me as being particularly apt to the trading arena. This particular chapter focuses on tackling challenging situations and overcoming adversity. The author offers three points to aid you in turning any crisis into a creative opportunity:

The first is to practice as much as possible before undertaking the task for real. Practice of this nature can be performed by a trader in many different ways. One obvious example is to take advantage of the demo account offered by your broker. You can follow your trading plan just as well with a demo account as with a real one. Once you achieve a certain level of comfort using the demo platform, only then should you move to a live account. Use a broker that allows you to deposit a small amount of money and to use very small lot sizes (micro lots or smaller preferably). It is a whole different ball game trading with real money versus virtual money. It is perfectly okay to start with a small live account. Trading real money has its own set of challenges that just don’t exist when you are solely using a practice account. Your mind and emotions react differently when your hard-earned cash is on the line. Just think of it as practice for the much larger account you really want to trade. It is only when you have become fully accustomed to trading with real money that you should even begin to think of funding your account with additional capital.

Mr Maltz also gives plenty of examples where people were able to improve their performance at a given task (such as shooting free throws in basketball) by just thinking about completing the task successfully for ten or fifteen minutes every day. There is no reason why this approach shouldn’t be able to help you with your trading. Close your eyes and visualise in your mind’s eye putting on a trade and it being successful. Imagine the initial conditions of the market meeting your entry criteria. Visualise putting on the trade. See the market continuing to move, eventually hitting your profit target. How do you feel after you’ve entered the trade and the market ticks up and down? What is your reaction as your profit target is met? How about imagining a losing trade?

The second factor to keep in mind when faced with a challenging task is not to make a mountain out of a molehill. Don’t let anything overawe you. Any difficult obstacle in front of us can be very quickly brought down in size when compared to the many global dilemmas that exist all around the world, such as poverty, war, famine and natural disasters. In the vast immensity of the universe in which we inhabit, across all of time and space, any particular problem that we currently face is pretty small. It might be important to you, and there’s nothing wrong with having that importance be there, but at the same time, no individual issue will result in the end of the world if you don’t successful conquer it today.

The third and final key to successfully conquering a difficult challenge is to properly motivate yourself before you attempt the undertaking. Focusing on the task at hand and getting ‘worked’ up beforehand are an important part of having the necessary fortitude to see the challenge through.

The book provides the following examples:

Many people have made the mistake of habitually interpreting the feeling of excitement [when confronted by a crisis situation that you have practiced for] as fear and anxiety, and therefore interpreting it as a proof of inadequacy.

Any normal person who is intelligent enough to understand the situation becomes “excited” or “nervous” just before a crisis situation. Until you direct it toward a goal, this excitement is neither fear, anxiety, courage, confidence, or anything else other than a stepped-up, re-inforced supply of emotional steam in your boiler. It is not a sign of weakness. It is a sign of additional strength to be used in any way you choose. Jack Dempsey used to get so nervous before a fight, he couldn’t shave himself. His excitement was such that he couldn’t sit or stand still. He did not, however, interpret this excitement as fear. He did not decide that he should run away because of it. He went forward, and used the excitement to put extra dynamite into his blows.

Experienced actors know that this feeling of excitement just before a performance is a good token. Many of them deliberately “work themselves up” emotionally just before going on stage. The good soldier is usually the man who “feels excited” just before battle.

Many people place their bets at racetracks on the basis of which horse appears to be the most “nervous” just before going to the post. Trainers also know that a horse which becomes nervous or “spirited” just before a race will perform better than usual. The term “spirited” is a good one. The excitement that you feel just before a crisis situation is an infusion of “spirit” and should be so interpreted by you.

I found this quote to be particularly apropos, given the name of this blog. There was no particular reason (that I can think of now) as to why I used the word spirit in the name of this blog, ForexSpirit. If anything, the word was just stuck in my head after reading The Spirituality Of Success by Vincent Roazzi.

I now like to think of the blog as being “spirited”! Of my trading endeavours being akin to a racehorse pent up and energised just before the race is about to start. Of harnessing that energy to push my trading success to new and lofty heights.

I can heartily recommend this book to any aspiring or already successful trader. It focuses on one of the hardest aspects to work on for any trader: that of their own psychology. Psycho-Cybernetics contains many useful insights into our minds and outlook on life. You should be able to apply one, if not many, of the techniques contained in the book to bring improvements to your thought processes and as a direct result, you will see improvements in your trading profits.

Everything important in our life, our happiness, the perception of ourselves and of others, how we interact with the world, is a direct result of our own self-image. We are the sole master of our own mind.

You are the only one who can change your thoughts. The simple beauty and eloquence presented is that by simply changing our own self-image, by using our own thought process, we can dramatically impact how we live our life, as well as the joy and happiness that we get out of our life experiences.