Give Yourself a Trading Edge Through the Use of Anchors


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Dr. M. Woodruff Johnson

18 Mar, 2010

in Psychology

In college, I was on the track team, and I distinctly remember a very powerful experience during a conference track meet. It was the end of a long day, the last call for the mile relay, with a slight chill in the spring air and overcast skies. In the stands, a radio played a very loud rendition of "Ain't No Stoppin' Us Now." We were neck and neck for winning the conference meet with a rival. You can imagine how motivated we were to bring our "A" game for the win.

The mile relay was the final meet event and our last chance. My teammate, Steve, and I were making our way to the starting line when the coach told us that Jim, our best quarter miler, was sick and the order of the relay would be changed. Steve, a strong competitor, was picked to run last. He usually ran first. He was the second fastest quarter miler on our team, and had already won four gold medals. The coach switched the order, in case Jim came in behind, so we would have three guys to shorten the gap. I was in the 3rd spot and Jason was in the 2nd. There were eight teams in this final's heat, with all the best teams running. The entire team approached the starting line, and the leadoff runner then went to the blocks in his assigned lane. Once the sweats were off and the blocks adjusted, the starter yelled, "ON YOUR MARK!" as a hush settled across the crowd. "GET SET!" The runners raised to a poised position as tension filled the air like a dense fog. "CRACK!" The starter gun pierced the sky and the runners exploded from their blocks. Jim ran his heart out, but his illness took its toll and he came in 4th after the first leg. Jason ran an exceptionally strong 2nd leg, and came in 3rd. When I got the baton, I was about 10 yards from number two and another 15 yards from the lead runner. I came in 15 yards behind the lead, but I was in the 2nd position and not 3rd. It was now up to Steve. He was up against the conference champ in the quarter mile. Steve took the baton and shot off like a canon, catching his rival within the first 120 yards. He then did something unconventional; he passed the leader on the curve, expending more energy. The leader, knowing this, let him pass and ran in his footsteps, slightly behind until they came out of the last curve and into the final straight. The other guy pulled up alongside. They were stride for stride. Steve had given just about all he had, but remembered everything coach taught him about the finish and just as the tape was approaching, Steve flung himself forward to edge out his rival and win the race.

Steve later told me that he could still hear that song, "Ain't No Stoppin' Us Now," in his mind. That excited and euphoric emotional state of winning was "anchored" for him by that song. From that moment on, that song not only triggered his memory of the events of that day, but also the emotional state associated with that event. As a result, he will "re-experience" what he thought, emotionally felt, and did at that event every time he hears that song. This is how anchors work. An anchor, if linked to a feeling state correctly, can be designed to trigger a strong, confident and empowered state to use for peak performance trading. In order to perform to your capacity, you must manage your "emotional state." This is of critical importance, because emotions can and do gravely impact upon your ability to maintain focus and optimal performance during the trade. Any glitch in your emotional state can lead to rule violations and losses. If you feel irritation, guilt, anger, frustration, doubt, fear or greed, you can become distracted and fragmented in your effort, which puts you on the road to self-sabotage. In contrast, feelings of ease, confidence, acceptance, and relaxation, are states more likely to lead to giving your best.

Different states lend themselves to different circumstances.

Some of these states are:

* Confidence
* Trust
* Amused self-assurance
* Curious inquisitiveness
* Relaxed intensity
* Controlled excitement

These are but a few descriptions of countless emotional states that can be as unique as each individual. When you prepare to do anything important, like enter the market, there are emotional states that are rockin' where you feel totally motivated, confident and aligned with your "A" game; and there are others that are full of frustration, confusion and out-of-control behavior. It's important to recognize and choose which states work best for you in those situations where your "A" game is the only acceptable option. And, once you have the state you want, the challenge is to hold on to it through the barrage of circumstances that are out of your control but may trigger a cascade of distorted judgment and leave you seduced by illusions, like the news event that prompts a market reaction against your position, or the economic report that causes the market to surge erratically both up and down. So it is vitally important that when these circumstances present themselves, you stand firm in thought and emotional states that are directed toward consistent results-oriented behavior. Successful traders know how to anchor their emotions and their self-confidence during times of turbulence.

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