BarroMetrics Views: Our Unconscious Motivators IV
In this past week, I have been focusing on identifying our unconscious motivators. The key one is the one I label our ‘default future’; unconscious, automatic responses learnt in our childhoodl the stuff that governs our default responses which, unless identified and dealt with, will continue to provide the same responses – responses which may or may not be appropriate. Since our default future falls into the ‘what we don’t know, we don’t know category’, how do we identify it?
The easiest way is to observe our stated outcomes, our behaviour and our results. If our behaviour does not lead to our outcomes but we persist with the behaviour, you can bet your bottom dollar that some unconscious response is at play.
For example, you’d have a screaming pointer of a response at play if your goal is to attain consistent trading success, and yet you continually breach your trading rules.
I have chosen this example because it allows me to bring in the two human traits I wrote about on Wednesday:
- The Impulse/Risk Manager decision-making process and
- The Fixed/Growth Mindset.
But before I get into that, let me bring in one more important variable. Denise Shull rightly promotes the idea that as long as we are executing our trades (as contrasted with a computer executing our rules), we must allow for some form of discretion. In some quarters, this may be seen as a breach of rules but she likens it to a coach giving his team the play and having the quarter-back make the on-the-field decisions. A good example of this took place for me on FOMC night.
I had decided to sell the ES if:
- I saw volume at 896 and
- The volume occurred no earlier than 10 minutes after the rate decision was announced.
Well, right on the button, strong selling volume came in and at 899, I decided that the strength of the volume meant that at 896 we’d see the volume that would trigger the sell signal. So, I took the trade and got filled at 898.75. If I had been proven wrong, I’d have exited the shorts.
Denise is right, if we don’t allow some room for our discretion, we are doomed to not ‘following our rules’ in situations which not following is the ‘correct’ thing to do.
Which brings me to the next point. My dominant decision-making process is that of a Risk-Manager which is why I have better trading results as an 18-day swing trader than a da-trader. But there are times (usually in the execution of a trade) that I act more like a Impulsive decision-maker and I am OK with that – as long as I exit the position, if the market fails to do what I was looking for.
So, if you are someone who is not ‘following your rules’, check to see your decision-making style. (an aside, most ex-floor traders, for example, fall into the Impulse category). If your style is the Impulse mode, then make sure you do some pre-planning as this will help your intuition. Then just execute on your intuition BUT after executing, check the reward:risk, benchmarks etc. If the trade does not qualify, just exit. Don’t anchor your entry price – just exit. In other words, the decisions normally made by the Risk Manager before the trade are carried out by the Impulse Trader after the trade.
An acquaintence recently told me: “You know… there’s one simple reason why most people don’t make the improvements in their lives they long for: The reason is that nothing is going to change in their lives if they don’t take conscious actions to make a difference. You’ve got a choice: Either go after the knowledge and opportunities that will make a difference in your life…or stay where you are.”
The problem is it is only now that we are discovering how to identify and change ‘what we don’t know, we don’t know’. And until we do that, until we change that to ‘we know what we don’t know’, all the innovations and discoveries will not make one iota of difference.