Читать книгу The Way to Trade - John Piper - Страница 20

Chapter 3: THE HUMAN BRAIN

This chapter looks at two brain models which are useful when considering the way traders react to markets and why.

In 1996 I published a series of articles by Tony Plummer entitled “The Troubled Trader” (see Appendix 2). These articles were based on the concept of the “triune” brain. I also read the book Trading Chaos by Bill Williams which proposed another “three part” brain model. Both of these models are useful for the consideration of traders because they identify trading problems and trading solutions.

Actually Bill Williams would say that is the wrong way of looking at it. Problems do not require solutions they require transcendence. Personally I would say that these models are essential and they have allowed me to go one step further and produce the Trading Pyramid. Perhaps that is a form of transcendence.

Background reading to this chapter is The Disciplined Trader by Mark Douglas, the series of articles by Tony Plummer (see Appendix 2) and Trading Chaos by Bill Williams.

First let me explain some of the concepts from the book Trading Chaos. Traditional “problem” solving can create a pendulum effect. A simple example is the discipline loop which traders often go through. We acquire the discipline to follow our trading methodology, we start to make good money, we then get over-confident, we start to diverge from the discipline, we start to do badly, we are humbled, we re-learn the discipline once again, we start to do well, we again become over-confident, and so it goes. This pendulum effect is seen in the real world again and again. To succeed we have to go beyond that state, this means we have to transcend that state. Bill Williams calls this “problem solving” process a “Type One Structure,” transcendence he calls a “Type Two Structure.”

He likens the comparison between these two structures to the difference between Euclidean geometry and the new “Chaos” approach to the world. I have to say I find the links to Chaos Theory in his book somewhat tenuous, but it still includes some excellent material. There is plenty about “fractals” but then they have been around for years.

Structure of the brain

Getting back to the human brain. Tony Plummer’s model is in three parts: the instinctive part, the emotional part, and the thinking part – see Figure 3.1. As we evolved from the primeval swamp, or wherever it was we came from, these parts formed in turn. So the brain stem derives from our reptile heritage and is millions of years old, this provides our instinctive drives. The limbic system derives from our basic mammal heritage and involves emotional input, this too is very ancient. Of more recent development is the “neo-cortex” which involves reflective thought processes and imagination.

The problem is that trading triggers many instinctive and emotional reactions and because these reactions are so deeply buried within the functioning of our brains it is difficult for us to override them. Hence a simple activity, trading, becomes very difficult to do well. In fact this does prompt the thought that by trading we are trying to cram a square peg (ourselves) into a round hole (the trading environment). However true this may be, I would argue that by so doing we learn so much about ourselves that the process (unpleasant though it may be at times) is extremely worthwhile. Money may be the smallest of the gains we make.

I have rather sketched over the “triune” brain as discussed by Tony Plummer because this is fully covered by his article in Appendix 2.

Bill Williams’ three part brain is rather different and gives rise to different considerations. He divides the brain into the three parts: the “core,” the “left hemisphere” and the “right hemisphere”. He doesn’t particularly focus on the negative aspects of each part but more on their positive aspects. This falls in line with his Type Two Structure.

To summarize a lot of detailed material (it makes sense to read the book itself) the function of these three parts can be stated as follows. The “idiot” left hemisphere has strictly limited ability but provides the “programing” for the “core” which goes and does what needs to be done. Of the million bits of information available at any one time the “idiot” left hemisphere (which is normally in charge) can handle around 16 bits, the core can handle the lot. Hence what we do well we do subconsciously because the left hemisphere has trained the powerful core to do the job.

Fig 3.1 The triune brain

So the left hemisphere is “in charge” and here rests the ego which is filled with fear – primarily fear that it may become redundant. So it is always worrying, on the basis that if there is something to worry about it is still needed – illusory though this may be.

So what of the right hemisphere? Here we have the home of the 3 I’s: Inspiration, Intuition, and Imagination (and perhaps also Insight). Some say the power of the right hemisphere is infinite, that it is a direct link to the “God Force” (call it what you will).

In Bill Williams’ model, (which in many ways is a far more appealing concept – thus we may find ourselves believing it more because we believe what we want to believe) there is access to vast resource and we just have to use it by transcending our current state.

The concept of the “triune” brain fits within Bill Williams’ model and subdivides, in the main, the core and the left hemisphere, although the third part of the triune brain, incorporates the right hemisphere as well. But the focus of Plummer’s writing is on the problems presented by the structure of our brains and not how these problems may be transcended.

Personally I feel that the concept of the triune brain and its problems in trading are self evident. Those who have traded know these problems all too well. We do not need to discuss whether or not the concept is right, because we have been there.

We could perhaps say that it is only a model and as such is merely a representation of the true reality. As such perhaps it is merely a useful lie – a concept which we can use but which is not the “truth.” Indeed, yes, but then so is everything, including the chair you are sitting on and the book you are holding in your hands. Everything within your mind is only a representation of the truth.

Bill William’s three part brain is perhaps a little more complex, but there is plenty of evidence for its existence and its usefulness. When we learn to ride a bicycle we go through the process of trying to ride it with the idiot left hemisphere and falling off. Eventually the core becomes trained and after that it is plain sailing. Actually I managed to fall off my bicycle the other day, but we will ignore that as a red herring. We have all experienced, I expect, driving up the motorway and being unable to remember the last few miles. This is because the core has been doing it all for us. Less common is the experience of the right hemisphere taking control.

Bill Williams explains how we know which part is in control:

One of the most interesting characteristics of your intrapersonal inhabitants (the three parts of the brain) is that you can always tell in an instant which one is in command. The way the world looks to you at this moment will tell you exactly which one is in charge. If your life at this instant is a struggle, you are concerned about time and language, you dearly want to do the right thing, and/or you aren’t having fun, your left hemisphere is definitely in charge. If, on the other hand, life is a series of ups and downs, you feel good physically, and you are having a good time, you are operating from your core. If life is absolutely a bowl of cherries and everything in the world seems to be geared to giving you exactly what you want, you are in the right hemisphere.

An illustration of how these three parts interact in the trading environment described in Trading Chaos is reproduced in Figure 3.2. If you trade with only the right hemisphere you will have bad management, so you will lose. If you trade with only the core you will be reckless, or with only the left hemisphere you will be scared. If you trade without the left hemisphere you don’t have the experience, without the core you don’t have confidence, and without the right hemisphere you don’t have intuition. It is when all three parts are working in harmony you get what Bill Williams calls “profitunity.”

Fig 3.2 Bill Williams’ brain model

Source: Williams, B (1995) Trading Chaos, © John Wiley & Sons, Inc.

Trading Chaos

The layout of Trading Chaos is designed to get you there. The book offers five stages, each including different goals, and different tools to help you attain those goals. The five stages are: novice, advanced beginner, competent, proficient and expert. The goals are respectively; to minimize losses, to make money consistently on a one-contract basis, to maximize your profits, to trade your own belief systems, and to trade your states of mind. Each stage offers better tools to achieve these objectives. In this context tools refers to analysis techniques plus your own inherent abilities.

The book doesn’t tell you how to tap the vast potential of your neck-top computer but then this has been the goal of all mystics and spiritual gurus through the ages and is perhaps too much to expect. But if you want to see the Holy Grail, look in a mirror!

I have written this chapter because I believe the more we understand about ourselves the easier it will be to find success in the markets. The chapter may seem incomplete but it will be many decades, or even centuries, before we, as human beings, have a full understanding of ourselves, if indeed we ever do. So do not expect precise answers; and they are probably not even desirable. What you need are subtle signposts to steer you in the right direction (possibly such signposts should be aimed at parts of the brain other than the left hemisphere), I hope this one helps.

SUMMARY

 I discuss two models of the human brain.

 The triune brain (see Appendix 2) offers a guide to why we often make a mess of trading.

 The Bill Williams’ brain model offers a guide to how we might want our brains to function to optimize performance.

 The triune brain consists of three parts, the Emotional, the Instinctive and the Thoughtful. All three have a vital part to play in our lives but the first two can be very destructive when trading the markets.

 The Bill Williams’ model is more physically based, consisting, again, of three parts. In this case the left hemisphere, the right hemisphere and the core. The left hemisphere brings management and learning to the table, the core operational ability, and the right hemisphere, intuition, inspiration and imagination. When all three parts are working in harmony we have “Profitunity,” as Bill William puts it.