Shrink Rap: The Art of Doing Nothing

Dr. Hendlin, I'm an active trader who is often fighting the urge to take action when I know I'm forcing it and should instead be sitting back and not trading. Why is it so hard for me to just watch the market and not react? Any suggestions on how I can change my thinking? And thanks for the perspective and fresh writing style you bring to the site. -- K.L.

Shrink Rap: All active traders know situations like these -- everything is going against you, charts appear ill-defined, preferred setups are few and far between, or the action is too whippy to get an edge. During these times, it may be a real challenge to learn how to comfortably sit back and yield, or do nothing. Why is it so important to learn how to do this?

The normal tendency is to want to actively intervene to change what you don't like, especially when you begin to feel out of control. For example, in the case of losing money on a trade, you want to stop the bleeding, and the only way you think you can do it is by following your anxiety of the moment and selling your position -- all too often, only to watch it reverse a few minutes later. Or, during the long hours of the day's trading session, you find it tough to just sit back and stay out of the action, unable to wait patiently for the best opportunities.

In both cases, the natural impulse is to want to jump in and do something to either make things better, or just to take a position to have something on the line. You are operating from the notion that only active assertion makes you feel in control. But this is only half of the control story -- and not even the most interesting half.

Psychological theory suggests that there are two basic modes of control. The first is the more familiar active, assertive, mastery mode; but the second is a less comfortable but equally important yielding, accepting mode. It is this yielding mode of control that can be so valuable in helping us to counteract our impulses to actively intervene to change things.

It is common to think of control as being only the first type. And yet yielding to all of those circumstances you can't change is often as important a tool as is the assertive form of control. Because we often fight against it, yielding ends up feeling like a total lack of control -- it feels like resignation. But that's only because it's not part of our Western culture to give up the active mode in trying to solve our problems.

Eastern philosophies and psychologies focus far more favorably on gaining a sense of control through the yielding mode. If you want to learn to feel at least some sense of control over all the aspects of the market that you are unable to directly influence, it's vital to learn how to access and utilize this yielding form.

Practice consciously choosing to drop into this mode of yielding and see if you can experience it not as passive helplessness but as a position of strength. Think of it like this: You are graciously giving in but not giving up. And this "do nothing" yielding is exactly the type of thinking that can help you avoid panic reactions when the market turns against you. It also works when you need to resist the impulse to make a trade simply out of boredom or anxiety.

To strengthen your ability to feel in control through the yielding mode, try this: Each trading day allow at least a half-hour to pass at a designated time in which you sit and watch but make no trades whatsoever, no matter what your indicators tell you. For those who are like racehorses champing at the bit to get out of the gate fast right at the opening bell, experiment with not trading for the first half-hour. This helps wean you of any sense that you must trade the open. Then try letting the first hour pass with no trading. You will see very quickly what kind of discipline you have to refrain from the active mode.

Awareness of the Demand to Act

Besides our favoring the assertive mode of control, there is another psychological dynamic that works against "doing nothing." Active traders need to be aware of what, in research, is called the demand characteristic.

This is just a fancy term used to point out that the pressure you feel to take action is evoked, or demanded, of you simply because of the situation itself. For example, sitting in front of the screen and simply watching quotes tends to bring out a demand to trade. This impulse gets stronger the longer you watch the quotes and often leads to forced trading. This demand characteristic has a stronger unconscious influence than you may think. When you are not aware of a motivator like this, it is easy to blindly step into the trap and act impulsively.

One of the reasons periodic breaks from the monitor over the course of a market session are crucial is to counter this demand characteristic. Not only do breaks give you a chance to stretch your body and refocus your eyes on something besides a monitor, they also give you the necessary mental break so you can come back more focused.