Oct

3

 It was a cool, crisp morning as I climbed into my black Toyota Tundra "Rock Warrior" pick-up. I was sporting my "Adrenaline" t-shirt and work jeans. My feet were shod in 8" Danner boots. I popped on the radio and quickly changed the station from conservative talk to country music, and took a gulp of a coffee from my thermos. I wasn't in any particular hurry, but once on the highway, I was quickly doing 80, and then 90 mph. After all, it was a beautiful day, I was riding high, and I was feeling good! And although, I have a perpetually heavy foot when driving my truck, I've never been stopped on the interstate. I believe the state troopers can relate to the blue collar working stiff, and will give them a pass, more often than not.

This is in sharp contrast to the way I comport myself when driving the family SUV. I drive much more conservatively, even if the family isn't in the vehicle. And, the same phenomenon is present when I drive one of my children's (purposefully) under-powered vehicles. I've come to realize that my mood and demeanor while driving, is affected by my proximal environment, which includes the car I drive, the music I play, the lighting conditions and even my core beliefs. In the pick-up I'm the cowboy, and in the SUV I'm the family guy. I'll probably be doing the speed limit when listening to classical music in the Lexus, but be speeding along at +90 while listening to "Highway To Hell" in the truck, except on those days when it's raining or overcast and the light is flat as pancake; this cowboy is inevitably knocked-out of his emotional saddle.

Understandably then, it's wise to be aware of, and attentive to, one's environment, mood, and personal convictions - they may underlie inaccurate perceptions of oneself and others. This is directly applicative to how we organize and frame our perception(s) of the market, because a dialectical tension between Bayesian reasoning and the need to be right is constantly there. To simplify the process traders often use schemas to organize and interpret information. In psychology and cognitive science, a schema describes a pattern of thought or behavior that organizes categories of information and the relationships among them. The problem with these heuristic shortcuts, is traders who organize new perceptions into schema(s) have a tendency to leave them unchanged, even in the face of contradictory information. This can cause them to interpret situations incorrectly.

A trader's awareness of his physical trading environment can certainly have an effect on a traders performance, but nothing like the effect of his cognitive focused awareness. An attitude and approach that utilizes the concept of mindfulness, or being aware of and attentive to the current situation and personal moods; and the skills to control intense emotions, and reduce self-destructive behaviors, is always going to be best practice. Emotional predictability and the ability to reframe schemas may be just as important a step in problem solving as analyzing the market itself. In only this way, can one identify and change core beliefs and/or behaviors that underlie inaccurate perceptions of themselves and the markets.


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