Among traders and portfolio managers, those who make their livings from anticipating developments in financial markets, perhaps no psychological tool is more common than the journal. Keeping a journal is one of the first things mentors at trading firms will recommend to their apprentices. The journal is a great way of tracking what we do and why we do it. The journal can also serve as a powerful learning tool.
Interestingly, however, few money managers truly continue their journal writing beyond those formative years. Amidst the pressures and demands of daily markets, journals tend to take a back seat. Outside of trading, that is even more the case. It's unusual to find someone who consistently maintains a journal and uses it to further their development.
For a number of research-based reasons, it makes good sense to engage in regular journaling, whether it's via pen and paper in a notebook or electronic, through platforms such as Evernote. Below are three ways in which journals can assist your journeys.
Reason #1: Journals Can Reflect And Shape Our Realities
What we write speaks volumes about who we are and our states of mind. Our words can also impact how we perceive the world and how we will feel going forward.
James Pennebaker's research finds that we express our personalities through our language. Work at HopeLab, for example, finds that our resilience to stress and setbacks is revealed in the language we use. Resilient people are likely to use motion- and action-related terms, such as done, doing, do, working, and make. These are words that are often used in the context of describing goals and intentions. Conversely, when I've worked with traders who have maintained journals, I've found that the less successful participants fill their journals with emotional expressions: happiness over making money and frustration over losing it.
Pennebaker's research goes further, however, and finds that expressive writing can have a healing impact. Medical patients report a decrease in their symptoms when they write about their stresses--and especially when their writing enables them to take a fresh perspective on those challenges. Our language expresses our realities, but can also help to shape fresh realities. As Steve Cole's research at HopeLab suggests, our language may be an important link between mind and body.
Interesting research reported by GreaterGood finds that keeping a gratitude journal--writing down the things in life we are grateful for--brings a number of positive benefits, including increased well-being and reduced physical symptoms of illness. The work of Robert Emmons finds that writing that focuses on the depth of emotional experience and emphasizes relationships over things brings particular positive benefits.
These findings help to explain why I have found the journal writing of many money managers to be particularly unhelpful. Most often, they turn to their journals when they are losing money and fill their pages with descriptions of what went wrong. If journals not only express our realities, but also help to shape them, such problem-focused writing eventually helps solidify an internalized sense of being troubled. Alternatively, when I have directed managers to keep solution-focused journals, describing what they did well, how they did things well, and how they could learn from their successes, the managers were: a) more likely to sustain journaling and b) more likely to find writing to be empowering and helpful.
Journals make our self-talk concrete. They are ways of structuring our conversations with ourselves. Properly executed, journals become psychological mirrors, showing us who we are and what we are capable of becoming.
Reason #2: Journals Enhance Learning And Development
Several years ago, I conducted an informal survey of the journal practices of most and least successful participants in financial markets. What I found was that the journals of the least successful participants served reporting and venting functions. That is, the least successful professionals used their journals to report on events of the day or week and to express their thoughts and feelings about those events.
Conversely, the journals of the most successful money managers served learning functions. The journal entries specifically analyzed what had happened in the recent past, but then went further to frame goals for going forward. It struck me that these successful journals had actually become platforms for deliberate practice: evaluating experience, making corrective efforts, and re-evaluating performance after those efforts.
From this observation, I developed a journal format that has proven helpful across a variety of performance situations. The journal requires six focused entries:
What one thing did I do best this week and how did I do it?What one thing did I do worst this week and what led me to do it?What specifically will I do next week to continue doing what I did best?What specifically will I do next week to improve what I did worst? How well did I achieve my "continue my best" goal last week and what do I need to do this week to continue/improve upon that progress?How well did I achieve my "improve my worst" goal last week and what do I need to do this week to continue/improve upon that progress?
Note here the combination of learning from strengths and shortcomings, as well as the focus on turning self-evaluations into actionable goals. The effective journal not only captures what has happened, but connects it to the present and future by framing relevant goals.
In a worthwhile post describing positive psychology exercises, Seph Fontaine Pennock mentions a "best possible self" exercise in which the writer envisions an optimal, fulfilling future for themselves. The writing has been found to fuel optimism and well-being. Suppose, however, we take the exercise one step further and turn it into an ongoing journal process. Each day or week, the writer would focus on one action that would move her or him toward their best possible self. Successful efforts would be continued and extended; unsuccessful efforts would be reviewed and revised. Over time, the journal writer would not only internalize the sense of moving toward ideals, but also would build skills that further their development.
Many people fail to sustain journals because those become too time-consuming and cumbersome. Turning writing into a habit--engaging the journal at the same time and place each day--can be particularly useful in making it a regular part of performance improvement.
Journaling is thinking aloud; it makes us conscious of our internal dialogues. In no small measure, journals are tools for mindfulness. They make us more self-aware and they make us more aware of our highest ideals. That is the most powerful reason of all for keeping a journal.
Author: Brett Steenbarger
I am Clinical Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. I work as a performance coach for hedge fund portfolio managers and traders and have written several books on trading psychology. I have also written several dozen peer-reviewed book chapters and journal articles on the topic of brief approaches to cognitive, behavioral, and emotional change and will be publishing my next book in mid-2015. As the author of the TraderFeed blog, I cover the psychology of traders and markets, emphasizing recent research and application in psychology and behavioral finance.
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