In this article, we will discuss developing a positive attitude toward trading. This method is known as a solution-focused approach and is currently the quickest way of acquiring a positive attitude. It was described by a famous psychologist working with traders – Brett Steenbarger.
The advantage of the solution-focused approach is the technique of solving the problems much faster than usual. Also, I want to emphasize the simplicity of the method – you can apply it on your own. It is so appreciated by traders because they know the value of time.
How problems emerge
The method is based on the idea that problems are generated by a person’s mind, and we look at ourselves through them. Let us discuss an example.
A trader who works intraday had several losing days in a row. They failed to follow their money management rules and thus lost all the profit made for several weeks. Before they made the last losing trade, they had slept badly which made them feel even worse and break their trading discipline. They promised themselves that they would sleep well that night but a too large emotional load prevented them from it. In the morning, after a cup of coffee, they made their mind never to repeat their previous mistakes; however, they were afraid of entering the market lest they make a wrong step. They again thought that it was due to their bad sleep and decided to have a good rest. Nonetheless, that evening, their mistakes and missed opportunities kept nagging on them, hence they failed to sleep well again. Then they decided that they suffered from insomnia and started looking for treatment.
However, from the point of the solution-focused approach, the problem was not the trader’s insomnia but their impression that they could not sleep. Such conclusions you make on your own form a negative thinking style, and you start acting based on the label you have put on yourself. As soon as the trader decides that they are a bad expert, or suffer from depression or insomnia, they start interpreting all events and acting from this point of view.
In our example, the trader destroyed their own sleep which immediately deteriorated their work. When they noticed their problem with trading, they blamed insomnia for this; and since then, even if they slept badly once, they will regard it as confirmation of their illness and explain their losses by this fact.
This way a person becomes more and more confident in their problem. A usual course of negative events that earlier was interpreted as normal is now taken as a problem. This leads to emotional distress that further aggravates the situation.
As for traders, such a situation is no surprise for them: they have long known the times of constant profits or losses. Even knowing the statistical probability of such a “coincidence”, they, nonetheless, interpret it as a train of fortunes or misfortunes. Being sure of either option, they change their trading style respectively, changing the size of orders or deciding on excessive risks that they would not afford otherwise. Such violation of their own rules leads to a decrease in the deposit in the end.
The devotees of the solution-focused approach are sure that many human problems do not actually exist but are created by people’s minds. This is just a side effect of the process of looking for the sense of some event. Say, a sequence of random events may be regarded as a chain or intertwined patterns, which makes you think there is a problem while in reality, nothing has changed, and life remains on its usual course. People, traders in particular, are prone to inventing all sorts of problems in the chaos of life.
Why many self-improvement methods never work
In trading, market players use large leverage and admit that they need to be a step ahead of the market to succeed. Also, they know that emotional problems may lead to a violation of the trade discipline and bring significant losses. Naturally, traders get interested in various self-improvement methods and psychological techniques for balancing your mind.
We all know how numerous such techniques and methods are; however, from the point of the approach in question, ordinary methods only aggravate the problem. Let us figure out why it happens.
Back to what we have written above. The trader suffering from insomnia may decide to get rid of it by a doctor’s advice or on their own by some relaxing methods or pills. These methods are good, but it might happen that they will not only solve the problem but only aggravate it.
Trying to cure insomnia, the trader will put all effort into getting rid of the symptom on the surface. The more attention the person pays to the symptom, the more they believe that it is the root of the problem. In other words, the patient tries to cure the symptom instead of the disease, the consequence but not the reason.
Another example. Imagine the trader has a tutor who gives them advice on what to do in bad or losing time. This might include limiting losses, changing tactics, changing the principles of placing Stop orders, etc. The recommendations matter much less than the fact that they only convince the trader: bad times happen, there is no way of avoiding them. The problem is, indeed, there, no one is protected, hence they need to know how to deal with it.
Or, for example, the trader exits a profitable trade too early, at the moment when several candlesticks appear in the opposite direction. They might realize that it is just a pullback but keep closing orders regularly.
According to the solution-focused approach, all recommendations, advice, and life-hacks aimed at solving the resulting problem only aggravate it. Most problems appear by chance but, no matter how weird it may sound, they are worsened by our all actions aimed at solving them.
But what to do in the above-mentioned case? Instead of preparing yourself for a problem, you should design an additional strategy for the periods of trend reversals. Thus the trader will be ready for possible losses but their readiness will be explained by real market data; they will know about the periods of statistically real and normal decreases in their trading results. This will rid the trader of excessively dramatizing the situation; they will not waste their time looking for a problem where there is none.
Looking for solutions: a view from another side
The solution-based approach helps avoid the traps described above. When you just ask yourself: “How should I solve the problem?” - you concentrate on exterminating the top (your mood, imbalance, habit, etc.). The solution-based approach goes another way: it does not make you concentrate on the accumulated negative but accentuates the other side of the issue – its positive side and the aims that the person wants to reach. In other words, the main goal is not to exterminate the problem but to show alternative solutions.
Another example, A couple decided that at the current stage, with all those problems, it had no other way than to divorce. They drove so far from each other that there was no other solution. The woman reproaches her partner for neglecting her, having no time for her, running from family issues to his trading. As for the man, he thinks that at the moments when he needs concentration to make a correct trading decision, she keeps distracting him with some household chores. All in all, the main wife’s argument is: “You never listen to me”, while the main reproach of the husband: “You do not let me work”.
The key phrase here is “never”: such wording makes them sure that a divorce is the only solution because none of them makes any steps towards solving the problem.
What does the solution-focused method tell us to do? You might ask the couple: what do you both do when you are not fighting? Obviously, you cannot fight all day and night long? You may go further and find out what they do when they are happy: how they behave, what they talk about.
These questions are based on the presumption that out of the framework of the conflict they do something together and do it right. You may resolve the conflict if you find out what exactly they do when they are not fighting, i.e. when things are going well. The solution should be implemented in their behavior: the problem will be solved from inside but from outside. This will unite them and help to move on together and reach their goals.
The pair from the example might tell us that they successfully furnished their home or planned holidays. If they find such uniting activities and goals, even if they perform them separately but united by the final aim, they will get rid of the idea that the second party “never” cares. Thus they will acquire a new positive attitude to their relationship and the problem will be solved by focusing not on the painful side but a pleasant one.
With trading, it is the same. Imagine a trader who finds out that they are scared of opening a trade, which means they will never trade well. The solution-focused method recommends looking for exceptions. Instead of thinking that they “never” trade successfully, recall the situations when you did it right. What made those trades successful? Finding the answer, concentrate on the positive sides to increase the number of successful trades. The goal here is not to get rid of the problem but to learn to act in the way that once proved successful.
If we go back to our first example with the trader with insomnia, let us put it this way: what trades did they make when they slept normally? The answer may suggest certain trading methods that will entail better trades and emotional balance. The essence of the method, as you may see, is to find the ways on which the trader will feel as at the time when they were successful.
Using the method in trading
In trading, the method may be used as follows. The trader analyzes the trades made during a certain period: a week (for short-term trading), month, year, etc. Profitable and losing trades are equally scrutinized. For profitable trades, the question is: what exactly did I do right? Remember the steps you figure out (write them down, pin to a wall at your workplace), and feel free to use in trading. The idea is to form a successful working mode based on your own previous experience.
Start every workday by recalling these empirical rules. Make demo-trades or plan your work based on your rules. Practice makes perfect, and soon you will use your rules automatically.
Concentrating on the actions that yield success will improve your results and help to avoid make-belief problems.
Another way of using the solution-based method is to find the most successful trade of the day. This is not necessarily a trade with the largest profit – it may boast the highest potential that you indeed made or could make by the rules of the trading system. Singling out and writing down the conditions and reasons for such trades secures these trading methods in your mind. This makes you perform a certain set of actions in certain conditions automatically, i.e. create better conditions for better results in the future.
The solution-focused method cannot be called a heal-all. Some grave situations may require additional help. Such a way as analyzing your worst trades will help define your weak points and eliminate them to avoid the largest possible losses. This method is unique in the sense that it will help the trader find and create their own successful model of market behavior. The trader will be able to find a foothold in their previous successes to reach the desired goal and get rid of the dependence on other people’s advice.
The “problem chain” according to the method
- Most problems emerge due to a sequence of undesirable events, or just one such event might happen but it will be so major that it attracts the trader’s complete attention.
- Such an event or their sequence might be absolutely random but people tend to interpret them as something meaningful and find the reasons for their appearance.
- Upon finding the problem, the trader puts all effort into solving it.
- Such a course of action only makes a person more sure that the problem does exist; the attempts to solve it only aggravates the problem – this is called a vicious circle.
- With time, the problem becomes a state fact, i.e. the trader gets used to its presence and forms a negative attitude.
- The trader keeps the problem in mind and acts respectively, influencing their work.
- Choose a moderate lot so that the size of your position did not make you feel uncomfortable and nervous.
- Work with standard trade size. If you never alter it, you will learn to trade automatically sooner.
- Limit the number of trades and enter the market only when the signals or patterns are perfect.
- Enter the market only if the continuation of further development of the trend is confirmed; only be sure where to place a Stop Loss.