BarroMetrics Views: The Four Rooms of Change
In Brilliant Decision Making, Robbie Steinhouse provides a modified Claes Janssen’s Four Rooms of Change, called Change House. There is some controversy about Change House Theory – see http://www.andolin.com/fourrooms/en/about-the-change-house/index.shtml
Claes’ model is in Figure 1 and Robbie’s model in Figure 2. Robbie’s model speaks to me. His ‘Room of Contentment’ represents making a decision with which we are satisfied and one that the market rewards by moving in the direction we want without threatening our stop.
Then we move into the ‘Room of Denial’. The market is sending signals that it may move against position. But we deny reality, preferring instead to focus on our expectations. It’s almost as if because we have expectations, the market MUST provide the result, ‘it owes us’!.
If we are wise, we’ll face reality and enter the ‘Room of Confusion’. In facing reality we have to accept that our trading idea may no longer be valid or it may be one that needs adjustment. This acceptance means we need to start from a ‘I Don’t Know Position’ – from a ‘confused’ first position.
Resolution of the confusion will lead us to the ‘Room of Renewal’ where we again start with the idea that we have a handle with the new market structure and thus we’ll come up with a strategy that will again lead us to the ‘Room of Contentment’. Who knows? It may happen – as long as we maintain the ‘Contentment – Confusion – Renewal’ loop, we may eventually sun on the Sun Deck.
But the path may not be so smooth. Instead of facing reality, we may choose to deny it. If we do that, we’ll eventually enter the ‘Cellar of Despair’. Some of us never emerge and give up trading; but those that do and those that learn from the experience become better traders.
FIGURE 1 Four Rooms of Change
FIGURE 2 Change House