Page 21 - Module 2_The_Human_Element

Module 2 - Lesson 3 – strategies for traders

If there is a gap between beliefs about the world and the reality of the world, then the result is likely
to be inappropriate expectations, and hence a divergence between expectations and outcomes.
Such a divergence results in psychosomatic stress and negative emotions. In some circumstances, a
failure to recognize the truth of a situation is likely to yield obvious and dramatic results.

As an example, if somebody is going to make a physical attack on you, it is important to your survival
that you should recognize the threat straightaway.

Treating overt hostility as an act of friendship is a sign either of madness or of saintliness! The
problem, however, is that the gap between beliefs and reality can be very subtle. If, for example,
somebody makes a friendly approach to you, it is not always certain that you will recognize it as such.
You may assume that there is an ulterior motive. It is, indeed, all too easy to mistake a friendly
gesture for a threat of some sort.

These examples are, of course, only two from among many possibilities, but it is obvious that a
divergence between beliefs and reality can be the cause of great discomfort. We have already argued
that the process of goal-setting can significantly reduce the problem but, of course, this does not
eliminate it entirely.
It is still necessary to deal with shorter-term (strategic) objectives; and these objectives may be
expected but not met. The result is likely to be stress.

There are two points to be made here.
First, the emergence of signs of stress (including negative emotions) can be a very useful item of
information. They point unerringly to the presence of a weakness in the strategy for achieving our
goals. For example, a series of losses, which eventually become too stressful, will point to a problem
with the trading system.

The second point, and one that is all too often missed, is that stress and negative emotions may be
related to problems which have occurred in the distant past and, as such, may be inappropriate to
the present. Each of our personal experiences helps to create in us a set of beliefs which we use to
guide our lives.

We have already mentioned that beliefs, which give the world meaning for us, are trapped in a sort
of emotional glue. Some of these emotions are empowering in the sense of channelling energy into
productive use.

Others, however, are decidedly disempowering in that they divert energy from the task of
maintaining a high degree of personal well-being. This is particularly true if the emotions are being
suppressed in some way.

The trouble is that the negative emotions of our childhood are not only suppressed during childhood
but are also easily invoked during adulthood. As children, most of us develop defensive habits to
deal with our specific fears. But these habits are usually inappropriate to the changing world in which
we live.

Hence, when a habit fails to work, very strong emotional reactions are generated. We earlier
analysed three primary habits: fearfulness, pride and control, in the context of specific personality

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