It’s That Time of Year II

BarroMetrics Views: It’s That Time of Year II

Have you experienced the cycle in Figure 1?

It’s brought about by the fact that we trade with incomplete knowledge in an environment of uncertainty and ambiguity. When I first started trading, the solution suggested was to trade like a robot, ’emotionless’. Unfortunately, we now know that doesn’t work.

In recent years, there has been a move ‘to accept our feelings but to not necessarily act on them. In short, taking the info emotions bring, assessing that info, and then deciding whether or not to act on them. Denise Shull and Rande Howell have been at the forefront of this approach. I liked the questions they raised, but wanted more than the solutions they offered.

Perhaps now that is on offer.

Dr Gary Drayton has published a book, ‘Trading Mindfully‘ . He takes a ‘new’model for therapy (Acceptance & Commitment Therapy [ACT]) and applies it to trading. In effect his book is a manual for self-coaching. I found the work excellent and recommended it to a number of my friends and students. I’ll post a review in the new year.

The questions that arose after working through Dr Drayton’s book were:

  1. Does ACT  work? If so, how does it work?
  2. Where can I find out more about it?

The short answers:

  • Yes. A number of research studies have been carried out see, for example, http://en.wikipedia.org/wiki/Acceptance_and_commitment_therapy 
  • The best primer I found was: ACT Made Simple. The one drawback is, unless you plan to be a therapist, the US$25.00 for a Kindle is an expensive price tag given that you’ll be using only the first few chapters. Still, ACT Made Simple provided me with a contextual understanding of Dr Drayton’s book.

Now, traders have access to a simple method for integrating their emotions into their trading structure. Like most worthwhile endeavours, to do so will require work. On the other hand, if your results are less than you would like, can you afford not to at least consider ACT?

viscious-cycle.png

FIGURE 1 ‘Vicious of Ineffective Trading’

Thanks to Trading Mindfully