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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We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is that discipline weighs ounces while regret weighs tons…Jim Rohn
How many times have you asked yourself this question, “If I had this trade to do over again, what would I change?”
As much as you want the answer to be, “I would do it completely differently,” that is not the right answer. The right answer is, “I would do it exactly the same way.” I realize that this may sound extreme and counterintuitive, so I will attempt to explain the reasoning behind this.
The purpose of trading is to make money by learning to execute with consistent discipline. We learn by making mistakes. If we did not make mistakes, we would not learn anything, and there would be no advancement of our trading skills. How incredibly simple is that?
Think about your last trade for a moment. Was it a winner or a loser? If it was a winner, what did you do about it, how did you study it and what did you learn from it? If it was a loser, what did you do about it, how did you study it and what did you learn from it? The process is exactly the same with winners as with losers. The outcome, however, is somewhat different. We learn more from our losing trades than from our winning trades. We brag and thump our chests over the winning trades, just as the caveman did when he went out to hunt and brought back a wildebeest for his tribe. He was the great one, the proud warrior, the bringer of animal protein and maybe a candidate to be the head of the tribe in years to come. He was full of hubris. He didn't have to explain anything, and sat around the campfire recounting his amazing skill as a hunter. He was a big, bulging bag of braggadocio!
This will continue until that fatal and inevitable day when he slumps back to his camp without a dead animal for them to eat. Now, he will be shunned, and the tribe will turn against him. The once-great hunter is not all that great anymore, and the tribe has no food for the week. He is now at risk for being shunned and shamed. He is full of regret but cannot let the others see it.
Why?
If he shows his tribe that he has made a mistake or not done something right to get the food that week, he will be marinating in regret and at high risk that the tribe will chose a younger, faster member to go out and hunt next time. This is not acceptable to the great warrior hunter. He cannot fathom the possibility that another man would take his place. He can't be proud, because he brought back no food.
What does he do? He makes excuses. Every excuse possible is put forth: It rained too hard that day; someone did not sharpen his spear properly; he was “that close” to the wildebeest, and something frightened it away; it got dark faster than he expected, and he had to stop hunting, etc. Excuses, excuses and more excuses are used by the hunter in order to not feel regret. He does not take personal responsibility for his inability to bring home the wildebeest meat. He puts blame on everyone and everything except himself. This is what is called avoidance of regret.
The brain of the caveman is almost no different from the brain that we have today. Despite our progress and the exponential acceleration of technology, we are still stuck with that same primitive rat brain that wants to garner as much pride as possible (puff up the ego) and avoid as much regret as possible (deny, rationalize, blame and project). The rat brain absolutely refuses to take personal responsibility and is unable to differentiate between luck and skill. It just wants it all, wants it now and doesn't want to hear any excuses for not getting it.
It is this same rat brain that causes you to take small profits (ego gratification and amassing of pride) and hold on to losers (avoiding regret and making excuses for hope). The caveman did not have computers, complex algorithms, program trading or the financial markets. We do. This is the challenge we face every day. Our task as traders is completely opposite to that of the caveman. Our challenge is to look regret in the face and not deny it, but rather learn from it. We want this regret because it is the way we grow and develop as traders. We don't want to hang on to it or wallow in it; rather we want to use it in the service of learning. Feel the regret, make the change, learn from it and move on.
Likewise, we must be cautious about the pride that comes from patting ourselves on the back for the gains we make. Of course, everyone loves gains, and we are in this business to make money. However, it is critical to understand that each trade is a learning experience and each trade stands on its own. If you do not make mistakes and take losses (get a wildebeest some weeks and then not get another one for a week or more), you do not learn. If you make nothing but winning trades (get a wildebeest every time you go out hunting), you do not learn. Making money is a byproduct of trading consistently with discipline. Discipline comes from practice, and practice leads to learning. Learning results from making mistakes, admitting them and correcting them. It really is that simple.
I will write more about this as we go forward. For now, I hope that you find some lesson here and that you begin to understand a little more about the journey to trading mastery. Those of you who are sports fans or who have studied the lives of famous traders will find many similarities to the hunter and his search for the wildebeest. I would like to hear about these from you—both from your personal experiences and from the careers of famous athletes who rose, fell and rose again, and what they learned to put them back on the path to greatness.
Regret for the things we did can be tempered by time; it is regret for the things we did not do that is inconsolable…Sydney J. Harris
Until Next Time,
Good Trading and (Revitalized) Brain On!
Janice Dorn, M.D., Ph.D.
janice@thetradingdoctor.com
P.S. Every week, I send you a Trading Wisdom designed to make you better, smarter, more balanced traders. Today, I want to ask you, “How are you doing?” Please join me and your fellow traders at the message board and tell us which of my Trading Wisdoms have been most helpful in getting you on a path to profitable trading. How have you used my methods and insights to make big money or avoid huge pitfalls? Tell me what you think, and your favorite Trading Wisdom may be featured in my upcoming book! Stop by today!
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