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.
|
If people can explain most occurrences to their own satisfaction with minimal and local changes in their existing conceptions, they will rarely feel the need for drastic revision of these conceptions…Daniel Kahneman
Over the past few months, the intensity of depression, frustration, anger and uncertainty among traders has been palpable. I have my own simple sentiment indicators for assessing the collective psyche of market participants. The more phone calls and e-mails I receive requesting coaching or other guidance, the closer I see us near a tradable bottom. Additionally, as the news flow becomes more and more negative and the constant hammering of bad news into the rat brain reaches a point of pure babble, I begin to get a true tinnitus in my left ear. This signals to me that we are likely close to a tradable bottom.
As I wrote early Thursday morning in the Trading Wisdom section of the Message Board, there are, in my opinion, several reasons that traders and investors have lapsed into what can best be called a manic-depressive state. The markets have been bipolar, with periods of euphoria alternating with periods of abject depression. This is what happens, and what has happened since the inception of public participation in the U.S. stock market.
The 1792 Buttonwood Agreement set the stock market into motion, but it wasn't until the 1920s that the general public began to actively participate.
The zeitgeist of the "Roaring Twenties" and the unbridled recklessness of thousands of people claiming their stake in Wall Street's big game contributed to the disastrous crash of 1929 and the Great Depression.
What I am saying here is that, since its inception, markets have gone through periods of mania and depression in ever-changing cycles. Change is the only constant, both in our lives and in the markets. Change usually implies uncertainty, and uncertainty makes many people uncomfortable. We want to know the future, and we want to have everything laid out in front of us; we want a place for everything and everything in its place.
Ultimately, we want to be in control of our lives, and we don't like begin subjected to inconsistency, irrationality or uncertainty. We also like to move forward with our lives and dislike the feeling of standing still and allowing circumstances to unfold as they will. On some level, we feel that as long as we keep moving, everything is going to be alright. Most of us enjoy human doing as opposed to human being.
How does this preference for motion impact how we interact with the markets?
(1) The markets are range-bound. It feels like they are going nowhere, and we feel trapped in a situation where we sense that there is no movement. Since the markets have not definitively broken out to one side or the other, they are not satisfying our desire for direction and movement. No one wants to be static or feel caged. We want to be free to roam about—both in the markets and in our personal lives. It's like watching Shakespeare's Macbeth, when he says, "It is a tale told by an idiot, full of sound and fury, signifying nothing." We feel trapped and uncertain, not knowing if we should be long or short, in or out, happy or sad. We will do everything to avoid this feeling of stagnation.
(2) We are experiencing a type of collective post-traumatic stress. This is due to the financial catastrophe that shook the markets in January and led to unprecedented intervention by the Federal Reserve to prevent what could have been the largest market crisis in history. It was a financial Katrina that destroyed massive amounts of wealth and left many shaking in its wake.
(3) There is far too much negative information coming from the media. As I have commented on various occasions, the media is driven by the mantra, "If it bleeds, it leads." The more fear that's generated, the more people hang on every word and await the next talking head or the next rumor or the next shoe to drop. It's all awful news all the time. The rat brain loves this, and it craves more, so it goes out and actively seeks bad news so that it can reinforce itself. The permabears are no better than the permabulls, but their message is more powerful. Why? Because fear is stronger than greed. Moreover, the permabears package their writings in intellectual terms that appeal to many traders. The permabulls are seen as bimbo cheerleaders, and the permabears are seen as intellectuals. This is how it has been since the inception of the markets, through every one of the ever-changing cycles.
I urge each of you to examine yourself in light of the three factors above. It is important to understand that, in life and in the markets, you have choices. It is not about what happens to you, but rather what you do with what happens to you. I urge you to stay strong, positive and focused. There will always be change, and it takes a flexible and nimble mind to prepare for times like these and allow you to ride through the uncertainty with minimal drawdown. I encourage you to reflect on the past to learn from it, rather than focus and obsess about it.
It always looks darkest just before the dawn, and now is not the time to give up. Now is the time to prepare for a wonderful today and a brighter tomorrow.
The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew...Abraham Lincoln
Until Next Time,
Good Trading and Brain On!
Janice Dorn, M.D., Ph.D.
janice@thetradingdoctor.com
P.S.—Take a sneak peek at my new book, Personal Responsibility: The Power of You, published in January, 2008, at www.personalresponsibilitybook.com.
|
