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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"Time is the substance from which I am made. Time is a river which carries me along, but I am the river; it is a tiger that devours me, but I am the tiger; it is a fire that consumes me, but I am the fire"...Jorge Louis Borges
The majority of human beings conduct themselves as if they intend to live forever. In essence, there is no systematic or productive review of the past, no real or meaningful planning for the future and minimal learning from the present.
Sigmund Freud posited that the unconscious mind does not have a notion of time, and that our deepest needs and wants remain, for the most part, unchanged throughout life. When you think about this, it is a compelling confirmation of the saying that most people lead lives of quiet desperation and die with their song still inside of them. They don't take time to find out the words or lyrics to their song, let alone try to sing it.
Crowd or mass behavior is even more primitive and impulsive than that of any one individual, since crowds tend to pay less attention to time. An individual alone can at least be aware of time, especially,when feeling lonely or longing. In a crowd situation, there is only the moment and there is no limitation on time. It is as if whatever is happening can and will go on forever (Party like there's no tomorrow). Eventually, the music stops, but crowds...in the heat of the moment, have no perception of time or limitations.
Gustave LeBon, the French philosopher and politician wrote a masterpiece entitled "The Crowd" wherein he describes a collective mind-set that is completely different from what that individual would feel, think or do in isolation. Freud believed that attitudes toward group leaders stemmed from childhood feelings toward the father--some combination of trust, fear, desire for approval and imminent rebellion. Group- think of this type can be regressive and infantile to the extreme. This is what explains, on a larger scale, panic buying and panic selling.
Mass mentality is magnified in real-time stock trading rooms. The perceived necessity is to be part of this crowd by saying something which the individual believes to be clever or insightful or original so that one is not invisible, but makes one's presence felt. This type of behavior can, if not modulated and regulated, go on for very long periods of time (since crowds have no real time perception) and result in escalating behaviors as various members of the crowd struggle for dominance or simply to be heard, seen or recognized. It is noise and more noise. In order to be recognized as part of the group, individuals may resort to verbal or physical behaviors which would not be recognizable to those who know them apart from the crowd situation.
In the case of a "virtual" crowd, such as a trading room, the verbal exchanges can take on even greater intensity, since one is ( for all intents and purposes) anonymous in cyberspace. The primitive, aggressive portions of the brain overpower the newer, more developed areas of the brain- sometimes in ways which even the individual does not believe. How many times have you heard someone say, or seen someone type "Did I really just say that?" The individual is in disbelief that he or she allowed and could not control primitive impulses and deep-seated thoughts. "Oops...sorry, I didn't really mean that...or..I can't really be saying that, can I? or "what was I thinking" or "oops, wrong room LOL." The use of emoticons and music further cloud and deceive and add even more cacophony and tachistoscopy.
This situation is exacerbated further by the volumes of information, disinformation, misinformation and media verbiage that attack the trader every day. With few exceptions, this is deception, smoke and mirrors. The primitive (rat) brain, designed for flight or fright is attuned constantly to the possibility of attack, thus highly paranoid to and vigilant for the many types of deception that are perpetrated on a daily basis in the financial markets. The rat brain reacts with fear, greed, anger, retribution, sarcasm and loathing of self and others. The new brain ( cerebral cortex) filters the information, makes a logical decision about its importance and then responds. Sometimes,the best response is to do nothing. Great traders know when to react and when to respond and are acutely aware of the difference between reacting and responding.
Time and price are facts of economic life. Because ontogeny recapitulates phylogeny, people repeat behaviors and cycles repeat. Windmills of your mind are simply never ending or beginning on an ever-spinning reel. The brain is a "time machine," assert Duke University neuroscientists Catalin Buhusi and Warren Meck. Understanding how the brain tracks time is essential to understanding all its functions. There are cycles of weather, the moon, politics, commodities, currencies, stocks, sectors and just about anything that you can imagine.
Unfortunately, the majority of traders are unable to recognize these cycles because they are blinded by noise. It is only when a traders are able to separate from the noise that they achieve the clarity of mind to recognize cycles and cycle changes. It is only by attending to the three major factors in the market ( time, price and pattern) that the trader's mind can become noise-free.
How many times has John said that everyone should watch the TV show NUMB3RS? Did you ever wonder why John is almost continually preoccupied with looking at numbers to guide you in the right direction to maximize profits and minimize losses? One way to attempt to filter the noise and look for order in the markets is through numbers.
It may be of interest to you to know that the work of Isaac Newton (1643-1727) and Leonardo Da Vinci (1452-1519) lie at the heart of the numbers in the markets. Newton's Law: for every action there is an equal and opposite reaction is the basis for the AB=CD parallel movement pattern of Gartley ( ask our ES traders about bullish and bearish Gartley patterns and the Gartley butterfly).
W.D. Gann, one of the most brilliant market technicians and mathematicians, wrote extensively on time, price and pattern. Gann ( who was born in 1878 and started trading in 1902) stated that time has the strongest influence on the markets because " when the time is up, the trend changes."
The essential premise behind Gann's use of charts to predict price was very simple: history repeats.
Many things have changed since 1452. The markets have become more complex, global, computerized and trade essentially 24 hours a day. The herd mentality is at work on a much larger and highly magnified scale. Deception is rampant and highly sophisticated.
But human emotions have not changed. Greed and fear are the same now as they have been from the dawn of civilization. Those who win consistently more than they lose have learned to self-regulate the forces of greed and fear. They have learned to harness the power of numbers. They have learned that time takes time, and that a trade keeps working until it doesn't. They allow time, price and pattern to play out.
Successful traders park their emotions at the door and trade the numbers. They realize that when the time is up, it is up and they are able to get out ( with a profit or a loss) and get ready for the next opportunity. They know that time is on their side, and they are prepared for it.
"If you make speculation or investment a business, you will probably be able to accumulate a fortune over a number of years. But- if you go into it to gamble and expect to make it all on one deal, you will lose all your money and have nothing left but hope"...W.D. Gann, How To Make Money In Commodities
(Dr.Dorn's comment: You cannot use hope to buy shares of stock, contracts of futures or anything else traded on the financial markets)
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