Picture This

“Imagine yourself at a Gestapo tea party where Hitler and other villains, dressed in shiny black vinyl, are seated around the table daintily sipping from tiny little pink rosebud teacups.”

Whenever my dance teacher begins a new choreography, he starts by explaining exactly what the scenario is in his mind.  (As you can see, they’re quite detailed and often a bit, well, disturbing.  But that’s part of what makes him so great!)   I spend the next hour putting myself into this mindset, visualizing in great detail the setting, the people, the costumes.  (And the fact that I’m able to do so easily is equally disturbing.)

At The Trading Triangle in Maui (there’s that phrase again!), John spoke about the power of visualization, asking how many people had imagined something recently.  (My hand, of course, was waving wildly.  Heck, in the past month alone, I’d been in a turn-of-the-century circus, a Gestapo tea party, a British burlesque theater and a lavish Las Vegas show.) There have been numerous books, videos and webinars on the benefit of visualization and imagination so I’ll direct to my beloved readers to those.  (See?  There’s an example of my imagination!  I’m imagining multiple readers!)

Today, however, what I want to approach is the other side of the coin – the DANGER of visualization.

Have you ever had a trade going really well?  It’s such a lovely trade that you start visualizing what the profit is going to look like.  It’s going to be a FANTASTIC trade!  You’re going to make TONS of money!  You can see it!  The power of positive thinking is going to work!

So you start ignoring some negatives and end up making a mistake, or do nothing when the market does something unexpected, or you just flat don’t follow your plan and, instead of a huge profit, you take a small profit or even a loss.

The reality is that sometimes positive visualization can hurt you.  A fascinating series of studies showed that visualizing a positive outcome can trick your brain into thinking you’ve already achieved it.   As a result, your brain doesn’t see the need for additional effort because it believes you’ve already achieved your desired outcome.  In essence, your brain goes on vacation since it thinks the work is finished; it sits back, has a relaxing cup of tea and congratulates itself on a job well done.

But the job isn’t done.  You still need to gather your energy and muster the motivation to achieve your goal.  Your brain may tell you it’s time to party but there’s still work to do.

There are some challenges with this study that I don’t want to get into however the trading-specific conclusion that does resonate with me (and hopefully you, too, my multiple readers!) is when visualization turns to…hope.  Hope can be a trade killer.  Hope rears its ugly head when your trade is in trouble, you’re taking on too much risk but you’re visualizing – HOPING! – tomorrow the market will go your way.

Hope-ville is where trades go to die.

Does this mean that you shouldn’t engage in positive visualization?  NO!  It’s a very powerful and useful tool.  Like anything else, though, you need to know how and when to use it.   For example, instead of seeing great success in your mind, it can be valuable to imagine overcoming obstacles – adjusting under pressure, dealing with huge overnight gaps or (horrors!) trading without coffee.  Think about how you’d handle these obstacles instead of how you’d handle smooth, straightforward, easy trades.

The key to using visualization successfully is not to imagine the most perfect path to success but instead, a more realistic one.  Imagine yourself facing these challenges and overcoming them.

Visualize, don’t hope.

PS: In case you’re wondering, the choreography was to Lady Gaga’s Scheiße.

Written and contributed by Cynthia Sarver, Successful Options Trader of the Month – February 2016