In this week’s show I chat with Denise Shull and we have a fascinating conversation around the science of emotions feelings and trading.
Denise is well known for her book, Market Mind Games, and the work she does with traders integrating the science of neuroscience and decision making.
Time and time again we’ve explored on this podcast the importance of integrating emotions and feelings into our trading.
Unfortunately there’s still a school of thought out there that still believes we can somehow compartmentalize or suppress our emotions while we trade.
Although this line of thinking is well meaning i think it can be very damaging to many traders.
The reality as Denise mentions on the show, is that it is biologically impossible to have thoughts without emotions.
So rather than try to set aside emotions we should harness them to better understand not only our own behaviours but the intentions of other market participants.
Ultimately trading is a lot like a global poker game.
So rather than try to predict solely price, understand that the determination of price might be more of a social question than one of mathematical probabilities.
If that’s the case then your ability to tap into your emotions and feelings can indeed become a psychological edge.
What appears to be relying on your thought is actually easier to accomplish by making friends with your feelings than trying to stay enemies with your feelings because the feelings tend to get bigger and more intense and will eventually win the battle.
[04:44]Houston: Welcome everyone to Episode 24 of Trading Edges and today’s guest is a Trader Performance and Psychology Coach; she’s also the author of I think – a really ground-breaking book called Market Mind Games which came out back in 2012. I’ve been a long time follower of hers and I’m really excited to have her on the show today. So, on today’s podcast – we have Denise Schull. Hi Denise – welcome to the show.
[05:10]Denise: Thank you very much.
[05:12]Houston: Of course, it’s great to have you on. So, I always ask our guest just to give everyone a bit of a background on how they got into trading, so why don’t we start there. So, how did you get into trading, and how did you get in the world of actually studying Trading Psychology and then getting into coaching traders?
[05:28]Denise: Well, I often forget to say this first part but my father was a very serious buy and hold investor so, I was exposed to the market from at least grade school but he really did buy and hold – he didn’t sell anything. And then when I was in Chicago, in my late twenties, I played volleyball with a group of guys who were floor traders; so I kind of found out about trading and the Chicago floors from then but I then went to graduate school intending to either be a psychologist or be a researcher and I did a Master’s Degree in Neuro-Science – basically Neuro-science in how unconscious thought happen – that’s it essentially. Chicago has a program you could design on your own so…
[06:15]Denise: I was doing that, when these guys from the floor were the first guys to go upstairs as it was called back in 1995 and they said, they had tried to get me to come on the floor and buy weather futures …and I was like what on Earth is a weather futures? But in any event, I agreed to keep track of their P & L intra- day and as it turns out it was in a prop firm and they had a training program and sure enough within a few months I found myself trading. An so, I finished my Master’s Degree but didn’t go on for the PhD and then traded for a few years – traded for a company called Show & Tell and then moved to New York to put together a prop desk in a NASDAQ market making firm. So, the whole neuro-science thing was just like this other career that had nothing to do with the trading for quite a few years.
[07:20]Houston: And how did you find yourself integrating those two – because now it seems like a natural for now that it has progressed along a bit but how did that come about?
[07:31]Denise: So, in 2003, I was trading at a prop firm but I was also taking classes at an Institute for Psychoanalysis – which there are a lot of in the world but people just don’t realize it, they’re under the radar – in the evening, the Institute knew about my Masters Paper and they ask me if they could publish it and I said yeah well, great I will be really honored except its neuro-science and now it’s like decade old. So, in any event, we ended up updating it and while I was doing the research, the basic decision research was showing that no one could make a decision if they lacked emotion. So, there are people who – parts of their brain which generate emotion is damaged in a way that they have no emotion; and so those people can’t decide what to wear, what day to make an appointment – they can’t make a decision at all. And, I was like “well, darn- all this training psychology about take the emotion out of it and if you could literally do it, then you wouldn’t be able to make a trade and I was like that’s a problem. Like, we have to somehow figure out how this really works so I was just talking to another trader that I knew about it and he said “you’ve got to write an article” and I was like “yeah, who’s going to publish and article by me and the next thing I knew he hooked me up with an editor and I wrote an article about what I knew about emotions and risk decisions and that just kind of took on a life of its own but the core of what I think makes the difference as traders said” Oh, I thought it was just me – I thought I was the only one and I didn’t want to tell you.” And so then I knew I was basically on to something and so I kept reading the research and talking about it and writing about it more and more people ask me to talk about, write about and here we are.
[09:32]Houston: Yeah and what I appreciate about your work is that it’s not just academic- it’s kind of steeped in, you know the world of trading so it’s one thing to just pick up a blank paper that just talks about maybe, emotional – how the emotions works maybe inside the brain but to actually layer it on t trading and to create a trading perspective of that back ground, you really made it come to life for me anyways. So, what is the work that you do with traders look like now – do you coach, I guess who do you coach and what kind of work do you do – can you describe that?
[10:03]Denise: Well, yes I – I think of it as teaching and coaching or training and coaching (Houston: okay) and first of all, it’s the whole gamut of traders – from bank traders to hedge fund traders to I like to call them semi-professional traders or independent professionals but at its core it’s about developing and emotional awareness that germane or specific to risk. Now implicit in that is a self-awareness that can be used outside of trading and then to break that down, it’s becoming aware and being able to categorize all the sorts of different feelings one has in trading (Houston: yeah) and then knowing more which feelings are intuitive or unconscious pattern recognition and should be paid attention to and which feelings mean that you need to manage your risk, at which point that which is probably mostly you.
[11:11]Houston: I find that interesting because for a long time – and the message is still out there that we need to control or maybe in some way repress our emotions but it seems like the tide has kind of turned a bit now – people are a lot more receptive to this message that you know what we need to be actually listening to our feelings and emotions. When did you feel that kind of tide turn – have you noticed that as well?
[11:36]Denise: I’ve definitely noticed it, I mean I did my first webinar in 2006 (Houston: yeah) January 2006 no less and so exactly ten years later – it’s so different. But I think the tide changed just in the past couple of years, you know 2013 – I mean, I’ve seen articles and I’m not going to be able to cite them but I’ve seen articles on LinkedIn for example. I know I saw one about how you have to use emotions in your decision making and related to that is like, in 1995 there were probably five papers published on emotion in the research and last year there were five thousand.
[12:28]Houston: Right; yeah and I really find it amazing because like you said the kind of speed of change is kind of happening so quickly because the research is advancing so quickly that even just a few things that you read maybe less than five years ago seem to be out of date now so the old model of how we think about the brain and such is not necessarily true anymore, right? (Denise: yeah) It’s kind of a triune model of the brain, for instance.
[12:53]Denise: I mean, you’ll still hear all kinds of people talking about your old brain and your limbic system (Houston: right) but scientists at the forefront don’t talk like that. They say it’s a completely integrated, reciprocal system and you really can’t have though without emotion and you might be able to have emotion without thought because there is evidence that emotions actually stems from your brain stem and there are children who have no more brain than brain stem and they appear to feel emotion but for the purposes of judgment and decision making, you really can’t pull apart thought and feeling and use one without the other. (Houston: yeah) And so, the whole old brain idea is – old.
[13:49]Houston: So, getting brass tax though, what’s the applicability there? So, you said, you know we really can’t make a decision without actually involving our emotions –so, how does that really, you know, how should we be thinking about that as traders, so…?
[14:03]Denise: Well, it means that for one effort to set aside your emotions and purely that – like I’m going to set aside this emotion is probably ultimately going to be ineffective and that appears to be because at its core the emotion is some sort of signal or some sort of piece of information (Houston: right) that some part of your brain wants you to have. So the better, more effective way is to say I’m going to try to be aware of all of the different feelings that I have and understand the pieces that are informational; so those pieces would be about the here and now and in research terms that called integral emotions – integral to the decision. And, you know there are other feelings I have that are incidental or not germane to this decision and those feelings maybe other things in your life going on or it could be about things from the past but it’s much more effective to try to invite the feelings in or to invite the awareness to them as opposed to try to set them aside and ultimately, it becomes easier to do what seems like rely on your thought (Houston: right) what appears to be relying on your thought is actually easier to accomplish by making friends with your feelings than trying to stay enemies with your feelings because the feelings tend to get bigger and more intense and will eventually win the battle.
[15:49]Houston: So true, so true. And what is it? What model do you use to do that? Is it a model just cultivating awareness in the beginning so you could be able to recognize the feelings and emotions as they begin to pop-up real time? What’s the model that begins to develop that awareness?
[16:07]Denise: First you have to decide that you want to do it; second of all, you have to be willing to tolerate discomfort and maybe – I’m trying to recall the messages now – that might not be all that attractive to you (Houston: right) with the realization, you know that as much as feelings and emotion can be emotional, because they can come from so many sources, so many provocations or instigators or different sources and so when people have spent lifetimes setting all this data aside, it’s kind of a spaghetti bowl at first (Houston: right). So the model is really acceptance and investigation and I have a coaching client that I likened to – it’s like learning a new sport and that sport being complicated like golf. (Houston: okay); there’s a lot of nuance that you gain awareness on.
[17:34]Houston: Yeah, and then, so like – in other words during, let’s say a trading day – is it just like a trader kind of tapping in, just kind of checking in with themselves on a regular basis to see, you know what those feelings and emotions, like you call them – that you put in an emotional context – does that idea just making sure that you can understand what’s happening there, so you don’t just run kind of unconsciously throughout the day and just react to what comes up?
[18:04]Denise: Well, I think one ought to be monitoring themselves almost as much they are monitoring the market because at the end of the day, the profitable trades are, you know a combination of the market and your ability to execute (Houston: right). So there is a very athletic like energy dimension to it; so knowing what feelings are operating before the trade, during the trade and after the trade, for the next trade, during the trade after the trade and the more one can get into the habit of knowing what feelings they’re having in real time and then where they’re coming from. So, which ones feel informational and then which ones feel like impulse or reactionary; so it’s easy for people to start out feeling a little nervous and so then they don’t take the first trades and then they’re frustrated because they missed something – they’re going to trust their intuitions or they really want to be right and then they miss it, they frustrated and then with the frustration then they tend to take a second look at marginal trades (Houston: yeah) but really it’s because you didn’t process the first trade that you didn’t take but you really didn’t take it because you didn’t process the fear or believe in the pattern recognition that you had so it’s like having one feeling leads to an action which leads to another feeling which leads to another action. And the way to interrupt that cycle is to get really inquisitive about it and believe it or not just verbalizing that – saying I’m nervous this trade isn’t going to work – has the ability to take the nervousness down a notch. I’m not sure why this really works from a brain point of view but there’s a growing body of evidence that simply says verbalizing feelings and getting it right (Houston: yeah), getting the label right so I talk to people about coming up with a spectrum so, let’s say in the hedge fund world – it’s a conviction spectrum – outside of the hedge fund world, it might be a confidence spectrum but they’re the same thing so (Houston: okay) and on one hand you’ve got fear anxiety and doubt (Houston: yeah) and on the other hand you’ve got confidence or over-confidence and there maybe multiple points that more than I have mentioned but knowing where you are and then being able to actually physically experience that feeling and put a label to it even if it’s just you talking in your own head or maybe you typing out (Houston: yeah)that process, like putting that constant check in repeated verbalization, making it a habit will actually reduce the number of times you act on the feeling – or should – start to disconnect. See, the whole misunderstanding of feelings is coming from the misunderstanding that feeling and doing, they’re not one thing (Houston: right) – they are two psychologically different things; and they don’t have to be connected. Then the problem is a lot of feelings have a lot of energy but they often times have a lot of energy simply because they are not felt or because they have current and historical meaning associated (Houston: right) but when you pull it all apart, the energy is reduced and it’s easier to recognize the informational feelings.
[22:03]Houston: That makes a lot of sense because I’ve done that myself – just kind of trading out loud and that’s what I call it – I just basically talk to my screen all day as I trade and I’m just verbalizing and seeing all the expectations that are coming out of my head and I’m curious too – why that works but I feel like kind of releasing some of the gas out of that valve (Denise: right); it just feels that way.
[22:29]Denise: Yeah, so there are various experiments and they’re mounting now and it’s called emotion differentiation and emotion granularity and there’s evidence saying that the more people are able to get granular about their feelings then the more their feelings will bias them (Houston: right). So, I think you know that we’re a far ways from understanding even like how language really works (Houston: Right, yeah) and how language is connected to our psyches – we just….
[23:06]Houston: It’s just the tip of the iceberg – right? And then so, how far – let’s say you begin this awareness around your feelings and emotions as you trade during the day or whenever you trade; do you also subscribe to maybe getting even deeper or going out of like you know maybe a psychological perspective or understand these deeper things that are causing these emotions or feelings in the first place; do people need to go to that level and say alright, you need to de-program that stuff because it’s, you know creating these kind of limiting beliefs or those types of things. Do you subscribe to that level of, you know…as well?
[23:48]Denise: I do- so that master’s degree – that master’s thesis is called The Neuro-Biology of (inaudible[23:54]) Compulsion and I always say that to say that I was into the deep stuff but when I first started coaching I wasn’t so much expecting to go to that level – I thought it was more about fear and anxiety in the moment about the trade (Houston: right) or fear of missing out which is really fear of future regret. But one of the first, one of the early clients that I had – he called me, he was trader and he called me and said, you know I have this long standing problem that I have not been able to solve . I make money- I make like thirty grand a month but I start everyday down somewhere between five and ten thousand dollars – I cannot stop it and if I stopped it, obviously I would make a lot more and I just – probably because I had the psychoanalytic training – I just said, well lets know about your life story. He told the story of being born to an impoverished mother and not having a father and how difficult life was when he was little and then he became an athlete and he had coaches take him under his wing and he was successful. So, he had this rags to riches story of his life (Houston: yeah) and I said well, after I few times, I didn’t tell him when I first realized but after a few times I said – I think all your feelings about your rags to riches story, it’s like you’re re-living them every day and he was dumbfounded. I think, I had no sooner said it than he was sure that was it (Houston: yeah) and we’d been working together maybe six weeks and I remember this very clearly we started this in May and in June he made a hundred grand (Houston: wow) and he basically had like three years of making more or less thirty grand (Houston: yeah) and it seemed to me that once he recognized how this was connecting for him, he just didn’t need to do it as much. It‘s usually not that easy for people (Houston: yeah) but the reason I tell that story is because it’s so clear but also because whatever it is that we do over and over and over again – it seems like inexplicable- almost certainly has a connection to meaning that we developed, you know when we were children or teenagers (Houston: right) and so as you start to be able to see that getting frustrated in the trade and feeling stupid or upset per say, you know has to do with something that your mother never being happy that you got a B+ or once people start to recognize these historical echoes – I do think they are fractal in the way they work out but you start to be able to cut the problem off at its power source (Houston: yeah). So I think people can make progress without going there by dealing with fear of future regret primarily, but I think if people are willing to go there, they can really solve what seem prior might have seemed to be an unsolvable problem.
[27:39]Houston: And it sounds like it’s repetitive and it keep happening over and over again and maybe it has to be connected to something that like you said might have meaning to you and be useful to you in the past as some kind of coping mechanisms or what not but it may not serve you any longer (Denise: Yeah) Yeah, and so what kind of exercises or practices do you share with your coaching clients around kind of improving that emotional regulation; what are things that they can be doing – is it just a matter of checking in on a regular basis, what else can they be doing to make sure that they are not you know, not being overly influenced, so that those feelings are turning into actions?
[27:23]Denise: Well, the whole physical dimension of trading – so sleep, exercise, diet, breaks – it seems like it’s a mental endeavor with you at the screen but that mental endeavor is actually a very physical endeavor and so if you’re not well rested or you’ve got too much caffeine or you haven’t taken a break – your physical body is supporting your perception and judgment is compromised so, if the system supporting your perception and judgment is compromised then you’re perception and judgment is unlikely to be as good as it could be (Houston: yeah) and certainly all of those physical things will cause you to feel, feel things more intensely or misinterpret their meaning. So, for example, lack of sleep is associated with misperception of rest (Houston: right) and what it means is that it doesn’t seem like that big of a risk; like, when you are well rested versus when you’re not well rested – the same exact decision will seem like less risk when you’re not well rested. So, I haven’t been able to do this yet and I don’t know if I‘ll be able to do it in my lifetime but I think the research is clear that for a hedge fund that would put a nice nap room in, as well make it a good thing to use it (Houston: right), the performance would go up. And it’s so antithetical to work and I’m amazed in my coaching how people do have the work hard mentality (Houston: right) influencing trading and poor financial management (Houston: yeah). Like, it’s really more of a work smart question than a work hard question.
[30:30]Houston: And even though we know that intellectually, we still do it.
[30:33]Denise: Yeah – well, largely that’s – oftentimes there’s pressure (Houston: right), there’s that feeling and many of us were given a feeling that we had to be working hard (Houston: yeah) and then there’s also the idea that if I’m not in the market I can’t be making money. You know that’s really a misnomer because, if you’re in the market you can also be losing money (Houston: right), and so if you’re not in the market at a good time for your psychologically it’s sort of like playing a sport with a broken leg – it s worst, not better.
[31:04]Houston: So true. That’s a very, very keen observation; I think traders are biased for action that many times we get in our own way – we’re trying to do too much.
[31:15]Denise: Yeah, yeah, and yeah. It’s really hard to get people to dial back and pick their best trades; people like to be involved and they think of these other trading psychology teachings which say you have to be in every trade – like you really don’t have to be in every trade. (Houston: yeah) A computer can be in every trade – so a computer can trade a statistical system, human being literally can’t do it so it’s just you know – it’s kind of a waste of energy that’s likely to lead to not so great results.
[31:49]Houston: So what other kind of habits can people kind of be cultivating to improve their emotional edges – so you talked about getting proper rest, proper nutrition and taking care of the body – do you see any other attributes from any peak performers that you work with?
[31:04]Denise: Well, I do think that you know, talking to someone about it helps – I don’t mean that to be self-serving from a coaching point of view but I think it’s a fact (Houston: yeah) that with this odd form of information that’s often hidden by most, that talking to someone about it brings insight(Houston: yeah) so likewise I mean, many people report that forms of meditation help them and that can be kind of standard meditation but it can also be other forms of just solitary activity that will allow you to be in touch with yourself – you know, riding a bike…
[32:49]Houston: Go for a nice walk.
[32:50]Denise: Yeah, just something that allows peace and quiet and for you to be able to hear what’s inside of yourself (Houston: right) but the clue is to start to integrate these things on a regular basis so they become a habit (Houston: yeah) but to do that people have to believe that it’s important to judge decision making in market risk (Houston: right) and it’s really easy to forget how important that is when it seems like this probability numbers game.
[33:29]Houston: Right, so talk more about that – since you speak about that in your book, you know about the perception that it is only a probability’s game and if I just take enough trades and have a positive expectancy then everything should just work out but we end up being the ([33:44]naudible) factor there.
[33:48]Denise: Yeah, yeah – so here’s the – there was a meta-analysis done on people looking on probability distribution what that means, you know is a study of a bunch of other studies. What they found was that the very first thing that happened when people look at probability distribution is that their brain appear to project a feeling so, like you don’t know that – you know , you’re not looking at some sort of probability and thinking: is it a good idea to do this or not? Unconsciously, you’re thinking if I do this it will feel good (Houston: right) so starting to become aware of – if I do this, how do I think I will be able to feel and comparing potential feelings. If I stay in this trade how will I feel; if I get out of this trade how will I feel and, as opposed to what will happen and how much money will I make – that’s the risk management piece of it. The question you actually asked me though was about the social piece of it so, at the end of the day like all any one actually cares about is an accurate prediction of what someone else will pay for whatever you’re long or whatever they’ll sell or whatever you’re short in the future (Houston: right). If you could know the answer to that, you’d throw out all your charts or all analysis – like if you could just know. Five minutes or five hours it’s going to take someone to pay this for Apple or that for oil or whatever; so the brain research shows that, that social recognition is actually what’s really happening in people who are good in predicting where price is going (Houston: yeah). So, you can also get overt or specific without predicting other people so I have had traders who make maps of who they think they are trading against and make it a habit to say what other people or groups are perceiving or feeling or what other people or trading groups are likely to do in reaction to this or that event (Houston: yeah). And it doesn’t give you an absolute answer; it just puts you consciously in the kind of thinking that your brain is doing unconsciously anyway.
[36:17]Houston: Yeah, it’s also that theory of mind approach that you’re basically thinking what the other side – what they are doing.
[36:26]Denise: Yeah, if I’m gonna get in line here what is gonna make someone buy this or will someone buy this from me for more (Houston: right) – what is the price point to go up? What other trader do I know that will pay more for this tomorrow; that’s a totally different question and you have to look at it a totally different way. Like to think about it feels different than to think about the price point.
[36:48]Houston: And would you …because it seems to me like if you’re thinking about that – is that not also taxing for me to think about the decision making perspective of having to make that many judgment calls about alright – what do I think these two people are, are they hiding orders over here, are they waiting for me to get out there because it just introduces another whole stream of information that you’re going to have to think about.
[37:19]Denise: Well, if you really have to think about all the possibilities – yes; but I submit that you don’t really have to do that. Because unconsciously your brain recognizes that markets are social prediction – you know that it’s another person, you know it’s a global poker game, right (Houston: yeah). So, your brain recognizes that so I think just opening up your thinking to what your brain is recognizing – it’s not that you have to the absolute accurate answer (Houston: yeah); it’s opening up your awareness to the fact that there is an answer to the social question and if you know what your unconscious is perceiving chances are, you’re likely to make a better judgment call.
[38:15]Houston: Yeah, that makes a lot of sense.
[38:17]Denise: And, if you think about it, all you really want to do is you want to cut out some of your worst trades and you want to extend some of your best trades (Houston: yeah); and so, like no one tactic is the perfect answer for doing that but if a tactic helps you cut some of the worst trades short, help you keep some f the best trades longer the difference multiplies relatively quickly.
[38:46]Houston: Yeah, absolutely.
[38:48]Denise: There’s a game – like in other words, it’s at the psychological edges that makes a difference in the mathematical edges of your profitability.
[39:10]Houston: I like the way you put that and you know about, you know how it is that you want to feel when you trade and you know, you wrote – I can’t remember if it was an article, a blog or in the book about how in trading there’s a good chance you’re going to feel bad – like a seventy percent that you’re going to feel bad. And I read that and I was like yeah, yeah – that’s absolutely true and that’s why I feel bad most of the time; so can you share that idea?
[39:28]Denise: You know, I didn’t really realize this until I started coaching people but the bottom line is you’re almost always going to feel bad because the losers are going to make you feel bad most of the time – maybe not really bad but at least a little bit and if a trader thinks that a winner is usually going to make you feel bad because it’s the rare – at least on some level – it’s a rare occurrence that you get a really great point and you get most of the move and you don’t feel like you could have gotten more or you could have given up less (Houston: right) so people think “oh winners should make me feel good,” then they have a winner and they don’t even realize that they don’t feel good because they think they are supposed to feel good and then they don’t really feel that good – they are frustrated with it on some level and then they don’t realize that feeling and so that feeling leads to another action and that action is usually another trade and that helps them get back some of their winner (Houston: right). So, if you just go into it without realizing that you’re going to feel somewhat disappointed a lot of the times – then you’re less likely to act out the disappointment and it’s less likely to be as disappointing because you actually know it and youre expecting it.
[40:50]Houston: Yeah – it’s a funny game of expectations right- if you just let yourself know upfront that there is a very good chance that whatever happens – I’m not gonna feel great; and so be willing to accept that. I think that’s a big differentiator, a big distinction there.
[41:04]Denise: Well, and then it also reduce the chances of when you feel disappointed of feeling even more disappointed.
[41:12]Houston: Yeah, like you need to go back in and prove something (Denise: Yeah, yeah) to make myself feel better somehow.
[41:17]Denise: Yeah, so then the energy of the disappointment doesn’t present such a risk.
[41:24]Houston: Yeah, and so do you ever give guidance to people or how should people feel when they trade? Is it from this Zen-like state or is it like, or do you just say hey, have whatever feelings you want to have – what’s your take on that?
[41:41]Denise: Well, you have whatever feelings you have and then if certain feelings are really hard not to act on or, they’re causing you to make really repetitive mistakes then let’s figure out ways to really deal with those feelings (Houston: yeah) so that you can recognize those feelings you do want to act on (Houston: right) because it’s a different kind of experience but I’m way less about trying to intentionally, purposely create like a positive state of mind than I am about helping people remove the negative because then I think – what’s left is the positive.
[42:32]Houston: I like that.
[42:33]Denise: I think when you have to focus too much on trying to have a positive – you miss the messages of the negative and it just gets bigger and louder and messier…
[42:43]Houston: Yeah, and you do have people who are in positive affirmation mode all day long. I think it’s maybe going on the other end of the spectrum which maybe that balance is about somewhere in the middle.
[42:57]Denise: I mean there are all kinds of pop psychology; there is even academic psychology about positive thinking but you know I think it ends up failing most people. One reason it fails is when it fails early on, you don’t realize that the modality is wrong – you think it has a tendency that doesn’t work for people, it has the ironic effect of making the person feel bad about themselves.
[43:31]Houston: Even worst, yeah.
[43:33]Denise: And then they feel like, oh I’m really supposed to be positive but I can’t be positive (Houston: right); it’s a really slippery slope. Yeah – it’s a really slippery slope.
[43:42]Houston: That’s a great point. And so, how do you tie in – I’ve seen you write about what you call emotion analytics – so how does this kind of tie in or does it tie in where you kind of track your emotions overtime or your feelings overtime and seeing like what’s working and what’s not working?
[43:59]Denise: I mean it goes back to this intuition or impulse or integral or incidental and then within incidental you have feelings from the last trade, feelings from something else going on in your life in the moment or feelings from your past (Houston: yeah). And being able to mitigate the influence of those incidental feelings so that you’re left with more intuitive which are more unconscious pattern recognition of effort to acknowledge the feelings and you can say that inkling of a feeling that I should get out of this trade now (Houston: right) is accurate as opposed to that it’s just the fear of just missing out or the fear of giving back (Houston: right). And again, like I said – it’s not about getting it perfect, it’s just about it helping you get better at the edges because it becomes – it builds on itself too (Houston: yeah). You get a tiny little bit better in parceling up of feelings and choosing which ones to act on and which ones mean you when you walk away from the screen and every time you do that and it helps your bottom line it starts to get a little bit easier (Houston: yeah)to do it more. Again, back to the golf analogy – it’s like small muscle training.
[44:23]Houston: Yeah and maybe you can just – we can talk about this topic a little bit more because I was talking to Steve Ward on the podcast last month and you know he has references recorded in his book where he quotes your book about just the difference between a real intuition and a feeling of impulse. You talked about it there already so, what is that difference – people are always talking about developing or cultivating their intuition but some people just can’t seem to tell the difference between what an impulse is and what a true intuition is – do you have some thoughts around that; how do you tell the difference between the two?
[45:58]Denise: Intuition is very calm, for one; it’s just like you know your phone number (Houston: yeah) you know the sun rises in the east and you just know; and it doesn’t really have much energy associated it’s just that you have to do it (Houston: yeah) and impulse tends to have energy associated with it because it’s really about acting out some feeling. Intuition is actually more about knowledge (Houston: okay) some people call it feeling knowledge (Houston: okay) and impulse is about resolving a feeling.
[46:37]Houston: I like that, okay. And then how do you cultivate intuition – do you have any ideas around that? Alright – so let’s say I want to be a more intuitive trader, do you have any thoughts around how you begin to develop that area although it’s kind of that feeling knowledge?
[46:52]Denise: Well, I think you track it, you know you have to keep track of when you think you’re having an intuitive feeling and then f you’re right or not (Houston: right). I once did an exercise – I turned off everything on my screens but the price ladder for a week and I just watched the price ladder and then I’d go into the other room and I’d say where I think it’s going to be. I’d be gone for five or ten minutes and then see what it’s going to be and it’s astounding how you could be right; and you don’t even know how you right and so that’s very trading specific but you can also do it outside of trading but keep track of when you feel like you know something (Houston: yeah); something that’s a felt knowledge and how often is it accurate (Houston: yeah) because it’s about becoming aware of it and then having confidence in it.
[48:06]Houston: Yeah, because I think a lot – I can speak for myself, I think I’ve recognized similar situations that you just talked about there, where we can have that feeling that the price is going to go a certain place so then you just don’t have the cohunes or the will to actually to get it done.
[48:17]Denise: Yeah, yeah.
[48:18]Houston: But I guess it’s like you said – alright, let’s just play this game and let’s just track it and see.
[48:23]Denise: I think there are market replay tools, so I do think you know, getting yourself into situations that can answer these questions without pressure (Houston: yeah) so like my exercise of just watching the price ladder for days which turn into a week and when you don’t feel like you have to make a trade or get it right, you know, so you’re sending time studying yourself essentially.
[48:49]Houston: Yeah, I like that a lot. Yeah – well, we’re getting towards the end of the show so maybe I’ll just ask a couple of quick questions before we wrap things up here so I very curious; you do a lot of writing and you have a great book, what are the top recommended books that you recommend to traders – it doesn’t have to be trading related but I’m just curious, so you have any favorite book that you often recommend to traders?
[49:21]Denise: Well, just about anything David Eagleman writes and the first one being Incognito (Houston: okay) – that’s my big recommendation.
[49:42]Houston: That’s okay – Incognito – excellent, thank you.
[49:46]Denise: And then now it’s so much about – there’s all this stuff now about how we think with our gut (Houston: right) so back to the whole health thing and finding what diet works for you and what sleep pattern works for you and what break patterns works for you (Houston: yeah); although there’s a zillion books I could recommend there but I’m not giving you one specific book…
[50:13]Houston: Any favorites you want to throw out there?
[50:17]Denise: Naw, because another thing I’m coming to realize is that diet in particular is very individualized (Houston: absolutely) so I’ll make a generic recommendation.
[50:31]Houston: That’s so true p we have had talks about this in the podcast in the past about diet being such a key influencer and each person is so different (Denise: yeah, yeah); yeah…
[50:39]Denise: I just encourage everyone to figure it out.
[50:44]Houston: You’ve just got to play with it; I play with a number of different diets myself – right now I’m doing ketosis which is kind of keto-genic. I’ve done everything in between but, you’ve got to figure out what works for you and don’t be o dogmatic because like you said it’s so individualized.
[50:56]Denise: Yeah, yeah.
[50:59]Houston: And maybe you can share, do you have projects that you’re working on that you want to share with the audience or is there anything that you‘d like the audience to check out before we wrap?
[50:09]Denise: In the near future, we’ll be coming out with a social cognition trader brain exercise with Bloomberg Trade book; it will be kind of a fun thing that I’m putting in the newsletter and on Twitter. We’re doing a talent assessment for the Trading X-factor which is related to the social cognition and self-awareness and we’re working on adding to the course work that we have on our website but I can’t guarantee an availability date
[51:41]Houston: Okay and I believe now you have four courses – is that right – from level one to level four, is that right?
[51:47]Denise: We just actually change – I’m re-doing one and finishing up another so I think there’s really only tree on there right now.
[51:59]Houston: Okay, awesome and if people have enjoyed our conversation today, where is the best place they can stay in contact with you, follow you, read your stuff?
[52:24]Houston: Awesome; we’ll definitely post those links on our resources page that will go along with this podcast but Denise, I just want to thank you for your time today; I know we’re right at the end of our time today so thank you so much for appearing on the show.
[52:38]Denise: Thank you for having me.
[52:40]Houston: Absolutely, and as usual for the audience, you can find the show notes from today’s podcast, the transcript and all the resources including the books – the one book that Denise mentioned here – by going to thetradingedge.org /episode24. Denise, thank you again – it was a real pleasure.
[52:59]Denise: Thank you.
[60:00]Houston: Absolutely. Bye now.
therethinkgroup.net – Denise’s website
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