Janice Dorn, MD, PhD
Neuropsychological Trading Coach
Janice Dorn, M.D., Ph.D., has been a full-time futures trader since 1994. Doctor Janice holds an M.D. in psychiatry and is board-certified by the American Board of Psychiatry and Neurology in general psychiatry and addiction psychiatry. She holds a Ph.D. in brain anatomy. A graduate of Coach University, she is a pioneer market psychiatrist and financial neurobehaviorist. Doctor Janice has written over 500 articles on the financial markets and coached over 600 traders worldwide. She is the Global Risk Strategist for Ingenieux Wealth Management Group, Sydney, Australia.
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If you can't sleep, then get up and do something instead of lying there worrying. It's the worry that gets you, not the lack of sleep. ...Dale Carnegie
One of the common ways that traders and investors sabotage themselves is through worry. It seems there is always something to worry about. Even if there isn't, we scurry around looking for something. Many of us are driven by the need to read everything, interpret every piece of news, wait for the next tragedy to happen or scour the media for anything that reinforces how bad things really are. It is human nature to look for the shocking, the disturbing, the threatening. The reason for this is that our brains are wired like the brains of cave men. Cave men hunted, ate, slept and bred. They were in constant fear of attack from a deadly animal or ambush from another tribe, so their lives were ruled by fear and worry.
Even though we have come tens of thousands of years from those days, our brains have changed very little. At this time in our culture, we are riddled with fear and anxiety. Since the hideous events of 9/11, our lives have changed in ways we might never have imagined. The media feeds on this with its breaking news, scrolling terror-threat colors and just about anything that hits right at the rat brain system to increase our vigilance, fear and anxiety. We are a nation of worriers living in an age of anxiety. Just look around you and observe how many times a day worry comes into your mind and the minds of those around you.
One of the ways that worry presents itself in trading and investing is the question "What if?"Once your money is in the market, something akin to alchemy happens: It takes on a completely separate identity from what it was before it entered the markets. That money is now attached to some position, be it a stock, commodity, currency, option or future. Everything has changed, because that money is now in the realm of risk.
It is important to remember that when we trade, we trade our beliefs, and we buy and sell risk. Having put the money into risk, we now have an excuse to worry about it. That is when the questioning, doubting, anxiety, worry, scanning and vigilance increase. That money has now taken on an entirely different character, because it is attached to something that is out of your control. Or at least you believe that it is out of your control. After all, anything can happen. The markets can tank, bad news can come out about your position, a short-selling attack could occur, some analyst might downgrade your position, the company might pre-announce something about earnings that would take the stock down, and so on. Anything and everything could happen, and it often does. So, you worry.
What can you do about this? The answer is simple, but for many it is not easy: You manage your risk. How? Set stops appropriate for your worry threshold and size your position so that you can sleep at night. If you do not implement these two measures, you are likely to find yourself in a state of constant and continual anxiety. You will begin a journey into crazy-making by trying to find out as much information as possible about your positions. You will read various message boards, watch every tick of your position, ask others about your charts or the fundamentals, find yourself in a position of defending and being possessive of your positions, and get into information overload. It is somewhat like being tossed from stem to stern in a boat that is moving through very rough waters.
Everything you worry about uses brain capacity, which is bioelectric and energetic. Thus, by failing to manage risk through position-sizing and setting stops, you are setting yourself up for brain-drain. Energy that you could put into activities that nourish and enrich you, such as time with family, exercise and relaxation, will be consumed by worry about your positions.
Each of us is bombarded constantly with information. As John Lansing, our brilliant technical analyst leader at www.trending123.com, and I have told you on numerous occasions, everything is breaking news. All you have to do is watch business and news channel TV for a short time, and notice how often the words "breaking news" appear. Even those people who are muting the business channels take them off mute when they see this phrase. Why? Because these words imply a sense or urgency—i.e., that something really significant is happening. Most of the time, this breaking news is just so much sound and fury signifying nothing. One day, it will be truly breaking news of significance, and we think that each breaking news "blip" might just be the big one.
Our thinking brains have limited capacity to deal with this noise, so we default into the emotional rat brain and make decisions or perceptions based on feelings. This is what happens when people get scared out of good positions and hold on to bad positions. The old brain doesn't know how to think rationally, so it makes emotional choices. In the markets, emotional choices are almost always wrong. So, because of emotions, we panic in or panic out and think about it later in a calmer moment. It is at this time, when we are out of the markets and in a place of new-brain thought that we start to question what we did based on our emotions. It is this questioning that leads to self-doubt, anger, fear, regret and more worry. This cycle of behavior is vicious and counterproductive to growth as a trader or investor. Worry begets worry, and it takes a toll on every aspect of your life.
What can you do to get through this and become immune to the emotions of worry and anxiety, which torment you and lead you to do things you then regret, leading to more worry and anxiety?
Next time, I will give you some techniques you can use to help you overcome this and get on the path to more seamless and disciplined trading. These techniques, if applied properly, have the power to change the way you think and feel about your trading and help you overcome the vicious cycle of worry. It's always something, but it doesn't have to be. The choice is up to you!
As a rule, men worry more about what they can't see than about what they can...Julius Caesar
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