At first, I was confused as to why Jack Schwager would interview a hypnotist in The New Market Wizards. As the interview with Robert Krausz progressed though, I realized that he was discussing the same kind of trading psychology that Dr. Van Tharp and Charles Faulkner had discussed.
This exploration of the subconscious mind and how it can help us, or hold us back, ended up being incredibly interesting in terms of both trading and life in general. Once again we see a Market Wizards interview that spends almost no time discussing actual trading strategy, once again stressing the importance of the mental aspect of trading.
Top Five Quotes From Market Wizard Robert Krausz:
“I found out a long time ago that one of the most damaging things a person can do is to harp on past mistakes. If you’re constantly repeating to yourself, ‘I shouldn’t have done that,’ it’s like a cartwheel going over the same tracks. Eventually, the negative message gets so embedded in your psyche that it becomes very difficult to change your course of action.” – Robert Krausz
This is something I struggle with in all aspects of life. l obsess over things I did wrong years ago and how my life could be different if I had made better decisions. I agree with Krause that this is a very destructive force, however I don’t know how to change my way of thinking. The more I try not to think about certain things, like mistakes, the more I tend to focus on them.
This has had a severely negative impact on my trading. The only potential solution I have found, short of one-on-one counseling with Dr. Van Tharp, Charles Faulkner, or Krausz, has been reading through Trading In The Zone by Mark Douglas. This book takes a head on approach in dealing with these mental issues.
“The more closely the conscious mind is aligned with the subconscious, the easier it is to generate winnings. To keep those winnings, however, your subconscious mind must believe only one thing: that you deserve your winnings.” – Robert Krauss
This is an interesting concept that we have seen come up with a few other Market Wizards. While everyone will say that they believe they deserve to win, it is interesting how many traders later realize that there is more too it. It is very interesting to hear first hand accounts of traders who dig deeper into their subconscious and find out that they don’t really believe that they deserve to win.
I fit into the category of most traders in that, on the surface, I believe that I believe I deserve to win. However, when you start breaking down my insecurities and self-confidence issues, it is entirely possible that there is something down there holding me back. Perhaps it all stems from my mother patronizing me every time I got excited about building a business. But then again, that could all be bullshit, too.
“Some people lose because they feel they don’t deserve to win, but more people lose because they never perform the basic tasks necessary to become a winning trader.” – Robert Krauss
I like what Krausz does here, basically calling out people who don’t put in the work and then blame it on their subconscious issues. This is why I would like to reserve judgement on my own mental capacity. It is also entirely possible that I just haven’t done enough homework to be successful. It is also possible that I just haven’t yet found a strategy that meshes well with my personality.
According to Krausz, these basic tasks are more likely the reason for my lack of success than the mental aspect. I find this to be encouraging because I can take steps to improve on these basic tasks. The mental aspect is a bit more complicated to deal with.
“I learned that people’s perceptions of reality and true reality are not the same thing. It’s a person’s belief system, not reality, that really counts. The more I worked with hypnosis, the more I realized how often our lives are warped and misdirected by invalid beliefs that have their origins in childhood. These beliefs frequently cause people to live their lives with a distorted view of reality.” – Robert Krausz
Krausz uses a good example to illustrate this point. He describes a young child, who gets yelled at for picking up his dad’s tools. After the child grows a bit, he tries to help dad with a tool, but there is a bad memory associated with it, so he is hesitant. Dad sees this and tells the child that he just isn’t good with tools. The child gives up on using any tools because he was told he isn’t any good with them.
This is a very simplistic example, but you can see the idea. Now picture that example the way real life happens. There were probably 30 or 40 small memories regarding tools that all played into the childs feelings. When associated with trading, you could see the example being applied to everyone who ever told you that you can’t make money in the stock market, or that you aren’t smart enough. This could lead you to believe that you will never be successful, even though you can’t recognize that believe consciously.
“What causes lack of confidence? What causes fear of loss? What causes poor execution? NO TRADING PLAN! This is the basic feature that separates losing traders from winning traders. Lack of confidence disappears in direct relation to the validity of a back-tested trading plan.” – Robert Krausz.
This was my favorite quote of the interview, because Krausz provides us with a solution. His solution is to achieve confidence and eliminate fear through back-testing. That is such a simple, yet totally brilliant concept, and is a big part of the reason I am focusing on system tradying.
The discretionary element of the system I had been trading could never be back-tested, therefore there was always room for that doubt to creep in. Moving into a more systematic approach is giving me the ability to remove those doubts because I can prove the long term success of a given system. That is extremely powerful and motivating for me.