Cognitive Behavioral Therapy and Trading. Part 2

[info_block align="right"]CPT methodology emphasizes the present and what specifically you are able to change right now, in the present moment, rather than worrying about the past or future.[/info_block].

In the previous installment on cognitive behavioral therapy and its application to trading, it was mentioned that by reviewing and assessing your strengths and weaknesses, a trader can shift the focus to positive psychological attitudes instead of negative ones with the help of cognitive behavioral therapy (CBT).. In particular, case studies were discussed where, instead of destructive thoughts about their trading, an individual was able to develop a new, much more productive behavioral model and put it into practice, thus changing their behavior and consequently improving their trading results.

Briefly recall that Cognitive-behavioral therapy (CBT) is a is a rather effective technique that is usually used by psychologists to help people suffering from various forms of disorders, such as excessive anxiety, and even in cases of gambling addiction (gambling), which is quite common in the trading environment, as well as in many other psychological problems.

However, it is not necessary to have a disorder in order to use CPT techniques in practice. It is enough to understand clearly what aspects of your thinking and behavior you want to change.

These behaviors may include:

• Inconsistency in trading;
• Violation of the rules of your own trading system;
• Improper trading account management;
• Poor trading discipline;
• Emotional or impulsive trading;
• Dishonesty with yourself or other people;
• Systematic overtrading.

Basic principles of cognitive-behavioral therapy in brief

• Your thoughts, behaviors, and feelings are interconnected and influence each other. If you change even one of these three elements, you inevitably change the others.
• CPT methodology emphasizes the present and what specifically you are able to change right now, in the present moment, rather than worrying about the past or future.

The previous article gave concrete examples of how you can change the "thinking" element of the CPT triangle by analyzing your beliefs and identifying destructive thoughts and psychological attitudes that have no basis in reality. After this analysis of beliefs and then replacing them with positive and realistic ones, it will be easier for you to change your behavior as well, which is exactly what we will talk about in this article. But before you continue reading, I highly recommend that you read the first part.

7 major destructive habits of a trader

So, the definition of disruptive trading behavior.

Before you can begin to work on changing your negative trading behavior, you must analyze your own habits. It is important to realize that many seemingly "bad" trading attitudes do not need to be completely eliminated from practice. It is very often the case that they just need a little tweakingAs for behavioral patterns, each trader has what is called "his own skeleton in the closet", and everyone's situation is different, always requiring an individual approach. As for behavioral patterns, each trader has, as they call it, "his own skeleton in the closet", and everyone's situation is different, always requiring an individual approach.

Let's assume that you are determined to fight against the difficulties in trading. You have already rethought and analyzed your trading attitudes and are determined to get serious about correcting them. Here is a rough possible list of things that a novice trader encounters most often in his work, and what he would like to change in his behavior:

• I'm trying to recoup my losses immediately or maximize my gains.
• I justify breaking the rules of my system by telling myself that I simply used a "discretionary trading method" in this trade.
• I can't stand inactivity and end up overtrading as a result.
• I am too impatient and go straight to trading on a real account instead of taking the necessary time to study the trading system and test it.
• Sometimes I enter a trade with more funds than my money management rules allow.
• I can't wake up early in the morning in order to trade during the most active and productive hours for trading.
• Often when I'm planning to tackle a task, I'll break my plans at the last minute and switch to another activity.

Now that you have more or less sorted out the list of things you would like to adjust, you can start working on the changes themselves. Ideally, such a list should prioritize the tasks, and the most important and complex. More general behavioral problems may move to the bottom of the list. In this example, the main problem of the person who made the list, if it actually existed, would be discipline problems.

Changing negative trading attitudes with CPT

The main point of cognitive behavioral therapy is action. By working to change the negative beliefs that drive a person's behavior, he or she can also begin to change the behavior itself. This will require some effort and willpower, but change is always difficult, especially when it involves our own attitudes.

You may suddenly feel that trading is a waste of time and that it is simply impossible to be disciplined, or that if you do not trade actively, then in this case, you can earn nothing at all, and if you do not immediately return everything lost, it is impossible to save your deposit. Systematic work with these and similar attitudes makes it possible to get rid of them.

Our beliefs are predominantly formed on the basis of experience gained through actions. Repeated mistakes gradually create in a trader a distorted view of his own trading, which contributes to the emergence of internal feelings that encourage him to continue making mistakes. A vicious circle is formed. By changing his behavior, even if it seems difficult at first glance, a person begins to create a new, more positive experience. This experience will help him to have new experiences, eventually leading to a change in his entire behavior pattern in the future.

Returning to the example list, and given that it is written on the principle of "from simple to complex", you can climb it like a ladder, from bottom to top, starting with the simple. This will allow you to gradually move on to more complex tasks without encountering serious difficulties at once. In addition, small but confident successes at the beginning of the path will create a motivational base for the continuation of the movement. You start by systematically building discipline, taking on a task you can accomplish, and thus convincing yourself that positive change is more than real.

Let's look at some examples

And here it is very good that the gradual path to change does not start immediately with trading related problems. Changes in other areas of life can go easier. It can be something as simple as making a to-do list for the next day and trying to stick to it, not being late for an appointment, etc.

It would seem how simple everything is! But it is such simple and everyday trifles that result in more disciplined trading. Gradually, automatic execution of decisions is formed, it becomes a habit, and cognitive behavioral therapy techniques are aimed at forming such a habit in a person.

This is a great example, because in this case the changes include simple, concrete solutions for each day, and there are a huge number of techniques and there is no need to list them here. Instead of waking up early only on trading days (which can kill any desire to trade at all), you can develop a habit of getting up early every day. Learning to get up early is already very good in itself, regardless of trading. How much has already been written on the topic of early rising and, as a consequence, increasing productivity! This applies to absolutely all aspects of life, and of course, trading is no exception.

Changes in one thing will create positive changes in the whole system.

Using the best and most active time for trading, the trader will make more successful trades, thus consolidating the positive result. Trading opportunities that were previously missed can now be fully realized. Now that the number of profitable trades has increased, there is no longer a sense of scarcity. This allows you to move on to solving more complex tasks on the list.

Harder habits

This is another item on the behavior correction list. It is closely related to the one that talks about breaking the rules of the trading system under the excuse of "discretionary" trading. Both items involve trading when there are no real trading opportunities. Working on changing this behavior can be done either by involving third parties or by setting some rules to be strictly followed.

For example, instead of entering a deal immediately, at the first impulsive desire, you can set yourself the condition of its mandatory check for compliance with the rules of the trading system. For this purpose, a short list of evaluation criteria is compiled, usually from four to six, depending on the system and trading tactics used by the trader, and a potential deal is checked against each item. Thus, during the time of analysis the first emotional, impulsive desire subsides and the rational evaluation of the situation comes to the forefront, which is what was required. A trader should understand each of his deals and be able to logically and concisely explain his actions at any moment. Otherwise, serious problems may arise.

Change your life - change your trading

This practice is good because in the process of learning new forms of behavior a person inevitably begins to form new, positive psychological attitudes, and not only those directly related to trading. Everything in our life is intertwined much more closely than it seems sometimes. A human being is a kind of a system of communicating vessels, and by developing discipline in one area, he inevitably becomes more disciplined and collected in all areas. Similarly in trading, a positive change in one area leads to better trading results in general.

What is the ideal result? It is when a person changes his thoughts and actions, he will start to see real results. Personal transformation is a very complex thing, but it also brings the most significant and meaningful results to a person in the process of not only professional development, but in various aspects of life.

The only way to achieve all the positive things that a trader's job can provide is to continuously and painstakingly work on yourself.

I hope these two articles will help you conquer your own internal obstacles and move forward in your trading career, for everything is in your hands!

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