Janice Dorn, MD, PhD
Neuropsychological Trading Coach
Janice Dorn, M.D., Ph.D., has been a full-time futures trader since 1994. Doctor Janice holds an M.D. in psychiatry and is board-certified by the American Board of Psychiatry and Neurology in general psychiatry and addiction psychiatry. She holds a Ph.D. in brain anatomy. A graduate of Coach University, she is a pioneer market psychiatrist and financial neurobehaviorist. Doctor Janice has written over 500 articles on the financial markets and coached over 600 traders worldwide. She is the Global Risk Strategist for Ingenieux Wealth Management Group, Sydney, Australia.
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I would do anything to hold on to you.
That's just about anything until you pull through.
You're emotion in motion, my magical potion. You're emotion in motion to me… Rick Ocasek, "Emotion in Motion"
So many traders and investors tell me that their major goal in life is to accumulate massive amounts of money. They crave money so much that they are willing to go to almost any length to learn how to make it from the financial markets. One of the themes I hear on a regular basis is that they have an absolute desire to create "generational wealth." By this, they mean that they want to make enough money from trading and investing so that they and their children and grandchildren will never have to "worry or want for anything material."
This drive to amass money is what I call "the pursuit of profit for the sake of profit." It is going after money for the sole purpose of going after money. In other words, the push towards money is seen as an end in itself, rather than a means to an end. This attitude is one of the most common reasons for trader failure and unhappiness. The major explanation for this is that it involves the ego in decision making and increases emotional attachment to outcome. Said more simply, this is a function of the rat brain that can focus only on wanting more and more and obtaining it as soon as possible.
A large number of research studies around the world over the past 20 years have shown that the constant desire to accumulate money is associated with a variety of physical, mental, emotional and spiritual problems. Those who live to amass money are less satisfied with life, have a higher incidence of mental and physical illness and an overall lower level of happiness and well-being.
It is only natural that those of us involved in the financial community are focused on making money. There is nothing wrong with that per se. We need money to live, eat, have shelter and provide for ourselves and our families. Money is important and, up to a point, critical for happiness. This is where it starts to get interesting. After a certain point (i.e., when basic needs are met and there is adequate money for so-called discretionary spending), quality of life begins to decline. People who make money want to make more money, and this becomes a vicious cycle. The more money that is made, the more intensity and effort are directed to making even more.
It becomes a "reverberating circuit," in the rat brain. Making money leads to the desire to make more money by giving positive reinforcement to the rat brain. Along the way, we work harder and longer hours – often at the expense of experiences that enrich our lives. When money becomes the goal rather than the byproduct of doing work that is enjoyable, emotional stability will begin to erode and suffering will set in.
The best investors, traders and business people know money is important, and they work hard to make it. However, when one studies the lives and philosophies of the great traders it is clear they love what they do. It is not a chore or burden or constant source of stress for them. In some cases, it is actually a type of "flow" experience where time passes very quickly. They have so much fun in the process that they feel happy and content, no matter the outcome.
The late Peter Drucker is but one of many examples of people who have left the world of money to follow their true passion and desire. Drucker walked away from a highly successful career as an investment banker because he was drawn to the behavior of people and not to accumulation of money. He wrote many books and made significant contributions to the world of management and consulting because he followed his passion for learning about personalities and social psychology. As a result, the world is a better place because Peter Drucker chose passion over money.
Traders and investors who focus on money are more prone to make bad decisions due to the abundance of behavioral biases that come into play. Ego attachment is the reason that traders feel that they are good people when they make money and bad people when they lose money. This is a most unhealthy situation because an investor's self-esteem may change rapidly depending on the profit or loss from that trading day. These shifts carry over into the family and social structure of the trader. As a result, there can be frequent disruptions of interpersonal relationships. The brain does not like the discomfort of negative emotions and has devised a number of ways to avoid dealing with them. These include, but are not limited to: anxiety, depression, addiction to drugs or alcohol and a wide variety of defense mechanisms in order to dampen discomfort and heighten self-esteem. Unfortunately, none of these work well for very long. The longer we try to push down or medicate our emotions, the more viciously they will rise up and manifest themselves to the world around us.
Those with a short term focus on making money for money's sake may often find themselves going through wild mood swings even they are unable to explain. These unconscious emotions have profound effects on decision making as they are mediated through the irrational rat brain. In order to get through this vicious cycle, there are specific steps that a trader must take. These involve training the conscious mind (the new brain) to act offensively to recognize and ward off the dangerous emotional undercurrents that undermine the trader in every aspect of life.
Over the next few months, I will expand on this topic and provide specific steps to deal with the undesirable, unpleasant and unprofitable messages the rat brain gives us on a daily basis. In order to really "get" what it means to be a trader and to be consistently successful, it is essential to adopt and learn these techniques for releasing anxiety, learning patience, minimizing excessive risk and learning to lead a healthy, happy and more productive life.
It is critical to understand that you can be a winner and stay in the game for a very long time if you have the passion and are willing to make the commitment to do the work. It's not about the money. It's about the process that goes on within you and the way you think about money that is going to get you to your goals. It is when you begin to focus on changing your thoughts, feelings and actions that the real work of becoming a consistently profitable trader begins.
Success in investing doesn't correlate with I.Q. once you are above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing...Warren Buffett
Until Next Time,
Good Trading and Brain On!
Janice Dorn, M.D., Ph.D.
janice@thetradingdoctor.com
P.S.—Take a sneak peek at my new book, Personal Responsibility: The Power of You, published in January, 2008, at www.personalresponsibilitybook.com.
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