Читать книгу Trading Psychology 2.0 - Steenbarger Brett N. - Страница 10

Antti Ilmanen's Expected Returns text is noteworthy for its conceptual framework. In the book, he breaks markets down into “building blocks” and explains returns in terms of the interplay of these drivers. As an active trader, I look at different building blocks than Ilmanen, but the structural approach is similar. Starting with the vast array of technical indicators in the literature, I identify a small, low-correlated set of potential market drivers and assess which are influencing price action during the most recent, stable market period. Basic to this approach is the notion of regimes: What drives price during one period is not what moves markets at other times. When I place a trade, I'm not simply betting that the market will rise or fall: I am also making the key assumption that the stable (stationary) regime that has defined the most recent past will persist into the immediate future.

For example, in the regime for equity indexes that has been dominant during my writing of this chapter, sentiment and positioning have been statistically significant drivers of prospective price action. When equity put/call option ratios have been high and we've seen rises in cross-sector volatility and correlations, we've tended to see bounces in the S&P 500 Index futures. Conversely, low put/call ratios and modest volatility and correlations have led to inferior returns in the index. During other market periods, sentiment and positioning have not been so important to market returns. Factors such as momentum and market breadth have been far more valuable as market predictors. As Ilmanen notes, the drivers of price action change over time. A successful investor finds tools that capture a range of drivers and thereby harvests profits across market regimes.

There are many ways of understanding and assessing market regimes. John Ehlers, who is well known for his MESA work on market cycles, defines the time series of any asset as the result of a linear (trend) component and a cyclical (mean-reverting) component. To the extent that a market is dominated by its linear component, we want to behave as trend-followers. To the extent that a market is dominated by its cyclical component, we want to fade both strength and weakness. Success is not to be found in being either a momentum or a mean-reversion trader; perennial bulls and bears eventually meet with grief. Rather, the key to trading success lies in flexibility – the ability to adapt one's trading to shifting market environments – just as Emil adapted to the altered dining environment.

An important implication of this line of thought is that, once we define ourselves as one kind of trader, we sow the seeds of our undoing. If we identify ourselves as trend followers, we leave ourselves vulnerable to frustration in low-volatility, rangy markets. If we identify ourselves as faders of market extremes, we open ourselves to getting run over by strong momentum moves. When a market approaches the top or bottom of a range, the strategy that had made money in the cycling environment can now lead to ruin in a breakout mode.

Key Takeaway

The short life cycles of market regimes ensure that successful traders will be the fastest to adapt to changing market conditions.

This, for me as a psychologist, has been one of the greatest surprises working with professional money managers: The majority of traders fail, not because they lack needed psychological resources but because they cannot adapt to what Victor Niederhoffer refers to as “ever-changing cycles.” Their frustration is a result of their rigid trading, not the primary cause. No psychological exercises, in and of themselves, will turn business around for the big-box retailer that fails to adapt to online shopping or the gaming company that ignores virtual reality. The discipline of sticking to one's knitting is destined for failure if it is not accompanied by equally rigorous processes that ensure adaptive change.

But how can we be passionately committed to what we're doing in the present and equally committed to leaving it behind as the winds of change begin to swirl?

When Chris and Gina came to my office to work on their marriage, they showed few signs of being a dysfunctional couple. They spoke in calm, even tones and did not engage in any of the bickering or defensiveness commonly seen among troubled couples. Nevertheless, they were seriously contemplating a breakup. The theme they came back to time and again was that they had grown apart. It wasn't the presence of any great conflict that led them to think about separating; rather, it was the absence of the bond they had once experienced deeply. As much as anything, they wanted to know: Where had it gone?

“Love doesn't die,” the saying goes, “it has to be killed.” In the case of Chris and Gina, however, it was difficult to find a murder weapon or even any murderous intent. Both were devoted to their children and household; both held jobs they liked. “We're a great team,” Chris explained, “we have good times on vacations and no one could be better with the kids than Gina. But it just seems that something is missing. We don't go out like we used to, we don't do things with friends. We don't have fun; there's no spark. It's just not the same as it used to be.”

I watched Gina closely as Chris spoke. It seemed she was uncomfortable with what he was saying, but she did not speak. Twice, she turned her head as if in deep thought and looked away from her husband. Finally, curiosity got the better of me and I asked Gina what she was thinking about. She looked a bit embarrassed and explained, “I just remembered that the kids' soccer practice was moved to the weekend.” She turned to Chris, “We're going to have to get my car back from the garage. I'll need it to take the kids tomorrow morning.” Chris didn't miss a beat. He excused himself, whipped out his phone, and dialed the repair shop to make sure they didn't close early on Friday.

Like they said, they were a great team. And I had one helluva difficult counseling case.

It turns out that one of the most challenging periods for couples occurs when children first leave the home. Why is that? On the surface, the empty nest sounds appealing: ample time to socialize, pursue recreational interests, and travel! For couples who have poured themselves into family life, however, the return to couplehood can be difficult. The shared, daily focus on children is now lost. If there is nothing to replace it, suddenly there's no shared focus. Couples who thrive during such a transition are those who define and embrace new lives for themselves. They retain deep family ties, but now within a broader context of personal and joint social, recreational, and career interests. They sustain prior commitments even as they flexibly adopt new ones.

If you were to look closely, you would see that the most successful couples had already begun aspects of their new lives during their mature parenting years. As the children became older and more self-sufficient, the spouses began doing more things together and individually. They were not threatened by the developmental change in the family. Indeed, they anticipated and embraced it. The successful couples planted the seeds for their future.

The same is true of successful businesses. Firms that thrive nurture a pipeline of new products and services while they are committed to making the most of existing offerings. An automobile manufacturer readies the next generation of electric vehicles while still selling traditional gasoline-powered and hybrid units. A pharmaceutical firm knows that best-selling drugs will eventually go off-patent and conducts the research to find the next blockbusters. A baseball club scouts new talent at the same time it does all it can to maximize its current lineup.

We can only master the future if we embrace the fact that the present is temporary. To paraphrase Ayn Rand, successful people and organizations fight for the future by living in it today. For them, change poses a stimulating challenge, not an onerous ego threat. They pour themselves into their commitments even as they flexibly build fresh ones. That is because they create bridges from the old commitments to the new ones. The parents' devotion to their children becomes a new devotion to adult children – and, eventually, to their families. A company's commitment to automotive excellence remains firm, even as the product line changes from gas-powered engines to hybrid and electric ones. Most people won't abandon a commitment to a cherished A in order to pursue a promising but uncertain B. Create a bridge between A and B, however, and suddenly what felt like discontinuous change is now a natural transition.

Bridges are the key to flexible commitment. Unfortunately, there were no bridges in Chris and Gina's marriage.

One of my favorite counseling exercises is to ask people to draw sine waves on a piece of paper, with about a dozen peaks and valleys. I then ask them to list their most positive life experiences at the peaks and their most difficult life experiences at the troughs. The sine waves run from childhood through early adulthood and the present. In a single view, the chart captures the peak and valley experiences of a person's life.

The reason the sine chart is so useful is that people, like markets, are patterned. No one life experience perfectly repeats another, just as no one market precisely replicates past ones. Still there are striking similarities: History, while not repeating, does indeed rhyme. Our lives, no less than any well-crafted novels or symphonies, express themes and motifs.

In the case of couples, we typically have multiple sine charts – and multiple themes. Each partner brings personal themes to a relationship, even as the relationship weaves fresh themes through the lives of the partners. A worthwhile exercise is to ask each member of the couple to fill out a sine chart for the marriage, identifying the high points and low points of the relationship. A comparison of the charts becomes quite instructive: It's possible to see, first hand, the degree to which the couple is on the same wavelength. Each fills out the chart without consulting the other…then we compare charts.

Of course, good psychologists not only listen for what is said, but also for how it's expressed. You can learn a great deal simply by watching people and observing their postures, facial expressions, gestures, and behaviors. One of my clinical supervisors in graduate school used to ask students to watch a videotaped therapy session with the sound turned off. We then had to describe, as the tape played, what was happening in the session. I was skeptical at first – until the supervisor recounted the essence of one of my taped sessions without listening to a single word!

In the case of the sine charts, I watch to see how a person creates the chart. Some people immediately fill out the peaks, others start with valleys. Often, people will spend particularly long periods of time filling out particular periods in their lives – and skip over others. If someone agonizes over identifying a particular peak or valley, there's usually a reason why. An informative variation of the exercise allows each person to vary the frequency and amplitude of the sine waves. It speaks volumes when people draw huge peaks and valleys at certain life junctures, or when they draw multiple peaks or valleys in succession. My own chart drew relatively modest peaks and valleys in childhood; more pronounced ones in college and graduate school; and then a pronounced valley in the early 1980s and an equally significant peak in the mid-1980s; with a return to more moderate peaks and valleys thereafter. No Rorschach test could capture my personality as well as the charting of life-event volatility and direction. Those life-event charts, it turns out, are not so different from market charts.

Watching Gina and Chris fill out the charts told me a great deal about their relationship. Both readily identified peaks and significant valleys in their childhood years, and both identified their courtship and marriage as a significant peak, followed by the big peaks of having children. There were career and health-related ups and downs along the way, but overall their charts were not so different from mine: discrete periods of volatility caused by relationship and career uncertainty followed by the stability of meaningful commitments in both spheres. For them, as for me, crisis led to opportunity: Sometimes we don't bounce higher until we hit bottom.

That, however, was where the similarities ended. After the peaks of having children, Chris and Gina stared at their charts. And they stared. They drew small peaks corresponding to family vacations, job successes, and the accomplishments of their children and small valleys corresponding to financial and job stresses. That was it. What were supposed to be charts of the marriage were anything but. Why? Neither Gina nor Chris could identify any peaks or valleys specific to their recent married lives. They were great as a team, and they did a very efficient job of figuring out when to pick up their car in order to get their kids to the next practice – but that was it. The absence of peaks and valleys had created stability in their lives, and that stability was killing their marriage.

Over years of encouraging people to draw the sine-wave charts of their lives, one observation has stood out: peaks and valleys tend to be relatively proportional to one another. Like markets, people go through high- and low-volatility periods – and it's often the high-volatility periods that precede the greatest long-term opportunities. Consider the life histories of many of the Market Wizards interviewed by Jack Schwager: Not a few blew up early in their careers. It took huge valleys to force the self-appraisals and reorganizations that would eventually generate the significant peaks. This was a major conclusion of Thomas Kuhn when he wrote the classic, The Structure of Scientific Revolutions: The progress of science is typified by periods of gradual, incremental change within a paradigm, followed by accumulating anomalies (observations and questions the paradigm fails to address), and eventually followed by the upheaval of revolution and paradigm change. At those junctures incremental change yields to qualitative shifts: The science takes an entirely new direction.

A small example of paradigm shift in psychology occurred when the reigning framework of psychoanalysis gave way to more active, directive, briefer forms of intervention. Psychoanalysis was – and remains – an elegant theoretical framework with explanatory power. Freud's core idea was that present-day problems are reenactments of past, unresolved conflicts. The goal of therapy was to reenact those conflicts within the helping relationship, allowing the analyst to provide insight into the repetition compulsion. Once patients became aware of their repetitions, they could change those patterns within the therapeutic relationship and, from there, within their other relationships. As you might expect, analysis was a long-term affair, requiring time and effort to achieve insight, wrestle with conflicts within the therapy, and then work through those conflicts in present and past relationships. In the heyday of analysis, it was not unusual for therapy to require multiple sessions per week over a period of years.

Key Takeaway

Change occurs only once the accumulation of problems necessitates the reach for new solutions.

As it happens, people do repeat conflicts and issues throughout their lives – in their marriages and in their trading. What therapists found in their practice, however, were Kuhnian anomalies. Some clients described vexing, long-standing problem patterns and yet managed to change them within a matter of days and weeks – not months and years. Pioneering therapists such as Alexander and French and Milton Erickson began to explore these accelerated change processes and question core tenets of psychoanalysis. What they found was powerful emotional experiences could catalyze relatively rapid change. My life turned around, not because of any grand insight accumulated over years of analysis, but from the single powerful influence of meeting the woman who would become my wife and the children who would form my new family. Anomalies had built to a crisis point in my life, and it was out of the deep emotional recognition of personal, social, and career limitations that I became ready for wholly new commitments.

Once you grasp the Kuhnian dynamic, you can appreciate why sine-wave life charts with few valleys are not necessarily good ones. Mastering the moderate challenges of childhood and adolescence is what gives us the resources to meet the challenges of life's greater valleys. University of North Carolina researcher Angela Duckworth calls this resilience “grit.” It's the ability to get off the canvas after being knocked down and still have a shot at winning the fight. Learning to master the small setbacks gives us the tools and confidence to weather the much larger ones. Without experiences of grit to draw on, there is no bridge-building to the future: Change becomes a threat, not a challenge.

And the peaks? Those provide the energy and inspiration that carries us through life's valleys. Often, peaks come from fresh experience: traveling a new career path, giving birth to a child, taking a very special trip. Those new experiences help us see ourselves and our world in novel ways: They open up new possibilities and bring fresh perspectives. One of my recent peak experiences was a trip with Margie to the Alaskan wilderness. It was beautiful beyond words. More than that, however, the trip cemented our desire to see more of the world and to make that a shared experience. In a very important way, a small boat ride to the base of a glacier helped us reorder life's priorities. That is the power of peak experiences.

So what does it mean when, like Chris and Gina, there are few peaks and few valleys? Between the ups and downs of life, all that remains is routine. The incident in my office was a perfect example. Chris was trying to capture in words what was missing from the marriage and Gina quickly shifted the topic to a child-centered routine. At other times, it was Chris doing the shifting. On one occasion, when Gina voiced a strong desire to keep the family together, Chris moved uncomfortably in his seat, pulled out his phone, and checked his market position. Gina stopped talking, Chris obtained his quotes, and the topic quickly changed to their mutual concern for the children. Nice, safe terrain – and more of the avoidance of change that was strangling the marriage.

The reality for Gina and Chris was that their children no longer needed to occupy dominant mindshare. Their kids were mature, growing up, and increasingly self-sufficient. Leaving home for college was soon to come. Many of the couple's routines, once glue for the relationship, no longer had a purpose. Without anything to take the place of those routines – without a bridge to the future – the couple foundered. The family had changed and they had not. They had a commitment to each other, but that wasn't enough. They needed a flexible commitment.