By Brett Steenbarger
1) Situation-focused talk vs. Emotion-focused talk - Traders who talk trading situations out loud--shifts in prices, looming exits, etc.--perform much better than traders whose conversations are ventings of emotion (positive or negative). From the vantage point of cognitive neuroscience, this makes sense: when we're problem-focused, we're activating frontal regions of the brain associated with the executive functions of planning, judgment, and decision-making. When we're in the throes of emotion, those same regions, key to trading behavior, are deactivated. Gladwell, in Blink!, points out that our access to the brain's frontal regions decreases dramatically as our heart rate elevates. Emotion-focused talk sustains physiological arousal, which impairs cognitive functioning.
2) "I" talk vs. "Me" talk - I'm convinced that this subtle measure may be the best gauge of trader self-priming of all. Traders who are more likely to be successful talk about "I". Traders in trouble refer to "me". The reason for this is that "I" reflects an active tense: "I" do things in relationships, in markets, in life. But things happen to "me". When I'm in the "me" mode, I'm the passive recipient of events; circumstances influence me. When I'm in first-person mode, I am the author of life's events. Successful traders experience themselves as efficacious; they prime themselves to feel in control. Unsuccessful traders exhibit an external locus of control. They are primed to feel that situations control them.
3) On-task talk vs. off-task talk - Successful traders, I've found, display tenacity and a superior capacity for concentration. They can focus on markets from opening bell to the close. Unsuccessful traders lack this intense focus. Much of their talk is off-task: it has nothing to do with markets. Less successful traders IM during the trading day, surf the Web, chat with buddies on bulletin boards, e-mail, and engage in a host of activities that take them away from the flow of market activity. Successful traders talk the market: who is in the market, how the market is trading, how they're adapting their strategy, etc. They are primed for trading and competition; the less successful traders are primed for avoidance.
CV