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Trading as Mental Warfare

Trading as Mental Warfare - Trading as Mental Warfare Brett...

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Trading as Mental Warfare Brett N. Steenbarger, Ph.D. www.brettsteenbarger.com Writings on the psychology of trading commonly view emotional conflicts and reaction patterns as impediments to successful trading. Accordingly, they advocate various therapeutic and self-improvement exercises to remove these obstacles. In this article, I propose a very different perspective: trading as a military activity , rather than a psychological one. Specifically, I will draw upon the military writings of Col. John R. Boyd to demonstrate that successful trading requires superior strategic prowess. As we shall see, this implies that one’s growth as a trader may be more fruitfully pursued through systematic “combat” training than through traditional self-help exercises. This military framework forms the conceptual foundation for a research project already under way, in which researchers from the Massachusetts Institute of Technology (Andrew Lo and Dmitry Repin) are working with a successful trader (Linda Bradford Raschke) and a clinical psychologist (Brett Steenbarger) to explore the effects of emotions and training on the real-time trading results of over 100 traders. Epistemology: How We Know What We Know While Col. Boyd is most identified with his OODA (observe, orient, decide, act) framework for decision making in combat, the breadth of his work extended well into philosophy. Boyd was interested in epistemology: the study of knowledge and its acquisition. In this respect, his interests—and his thinking—parallel those of Swiss researcher Jean Piaget. An understanding of Boyd and Piaget’s work will prove helpful in grasping the mind of the trader. Boyd described the generation of knowledge and understanding as a process of creation and destruction. As David S. Fadok explains in his excellent thesis entitled John Boyd and John Warden: Air Power’s Quest for Strategic Paralysis , Boyd equated creation with synthesis and destruction with analysis. In the face of changing realities and new information, people create fresh “mental images” of the world. They analyze new events and information and synthesize these into updated perspectives. In conditions of war, this facilitates adaptation to the uncertainties of battle. Quoting Boyd, Fadok explains that adaptation in wartime requires mental agility : "a process of reaching across many perspectives; pulling each and every one apart (analysis), all the while intuitively looking for those parts of the disassembled perspectives which naturally interconnect with one another to form a higher order, more general elaboration (synthesis) of what is taking place." Students of psychology will find echoes of Jean Piaget’s writings in Boyd’s theory of knowledge. Both men are constructivists: they emphasize the processes by which we assemble our understandings of self and others. In place of creation (synthesis) and destruction (analysis), Piaget referred to assimilation and accommodation. These he
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viewed as twin forces that allow individuals to maintain a dynamic equilibrium of knowledge.
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