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break the rope, yet doesn't even attempt to free itself. The elephant has learned to be helpless, because it continues to think (consciously and/or unconsciously) that its actions are doomedso why try? |
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Similarly, when traders experience doubt and indecision, and if they fail to exert themselves to take decisive action, they are slowly learning how to be helpless! Traders who have learned to be helpless are convinced that their beliefs have no effect on outcomes. They honestly believe that despite all effort, they will never improve, that they are not in charge of their own trading destiny. Thus begins the vicious circle: Traders must change in order to break out of their learned helplessness, yet what they have learned is not to change. |
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The other trapthe approach-avoidance conflictis also best explained by analogy. Hungry rats have an intense desire for food, especially as they grow more hungry, but simultaneously will develop a repulsion for the food if while approaching the food they receive electric shocks in varying amounts. They associate food with the pain of being shocked. The distance that the rats stay away from the food is determined by how hungry they are and the amount of electricity used to shock them. The rats want to approach the food, and simultaneously want to avoid it. The rats will finally approach and eat the food when the pain of the possible random electric shocks is less than the hunger pains. |
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Thus traders fear the random pain that the market can create by making them wrong and by threatening their beliefs and values. However, they desire the pleasure of making money. An interesting thing about profits is that within a short-term time frame a trader's profits will appear to be random. The trader will never know if the next trade will be a winner or a loser. Random profits (or rewards) are highly addictive to the psyche. (Why do you think slot machines are so popular?) In addition to desiring profits, traders like to obtain validation for their beliefs about the market. |
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Traders who develop an approach-avoidance conflict become very indecisive. Like the hungry rat, they will mentally stand a safe distance away from the object of their desire, but as desire increases they will move closer to it. Their focus is on what they desire and fear, and true to form they will eventually enter the trade, forgetting their discipline and possibly getting rewarded, but definitely experiencing mental pain. |
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In order to avoid falling into either the learned helplessness or approach-avoidance trap, traders must change their perceptions of the market. The pain they experience is within their own mind; their perceptions about the market, not the market itself, are generating the pain. To overcome this situation, traders need to strengthen their virtues and empowering beliefs on a daily, consistent basis. |
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