 If we respect fear, frustration, disappointment as information, I basically think we can solve any human performance problem, any human psychological problem. From CMC markets, this is the artful trident. And there are lots of opportunities. 100 points swing on the down. We're all going to hit those losing strings. We're all going to have four or five losing trades in our room. It's inevitable. We just have to acknowledge that it's just part of being human. Hello and welcome to the Artful Trader. I'm Michael McCarthy, Chief Market Strategist at CMC Markets Asia Pacific. In our third season, we talk to the experts in their own fields to uncover what gives them the confidence to succeed. We uncover confidence, unlocking the secrets behind resilience, preparation and growth and how it can make you a better trader. Denise Shull leverages her training in psychological science to solve the challenges of mental mistakes, confidence crisis and slups in Olympic athletes, Wall Street traders and corporate titans. Denise began her trading career in 1994 at the Chicago Board of Options Exchange. She traded there before moving to New York City to run trading desks on the floor of the New York Stock Exchange. In 2003, she founded the Risk Decision Consultancy, the Re-Think Group, and in 2012, she released her book, Market Mind Games, a radical psychology of investing, trading and risk. It's been described as the best of its genre and the Rosetta Stone of trading psychology. In 2015, Denise consulted on Showtime's drama Billions and her clients now include portfolio managers, traders, professional Olympic athletes and business innovators. Denise Shull, welcome to the Artful Trader. Thank you so much for having me. Can we start with why did you make the move from Wall Street and the finance world to psychology and performance trading? Well, the funny thing is I had just, or I was just finishing a master's degree in neuropsychoanalysis which was a lot of psychology when my friends who were floor traders went upstairs and convinced me to come with them while I was writing my silly master's thesis as they put it. So it was really a switch from psychoanalysis and neuroscience to trading that meant that fun but expensive master's degree seemed irrelevant and I didn't think I'd ever go back to that. But then someone wanted me, wanted to publish that master's thesis in 2003 and they were psychoanalysts and they didn't understand neuroscience and I said, it's got to be updated, you'll look really silly. And so when I went to update it for them, a group of neuroscientists had shown you had to have emotion to make a decision and I was like, well darn, all those trading psychology keeps saying take the emotion out of it, have no emotion. But if you could literally do that, you wouldn't be able to make a trade. And I was sort of like, this is a problem. And I started talking about it and people got interested in it and then that just took on a life of its own and so that degree came back into play. And then it seemed like it was all sort of meant to be actually. So you've developed your own approach based on your studies in neuroscience and also psychoanalysis. What is the shill method? It's basically looking at the human mind from the perspective that emotions, feelings and senses also. I put those on a spectrum. If you look at human perception judgment, decision-making behavior through that lens, basically everything's fairly easy to understand. So the shill method is about how do we help people do that for themselves because it's so different than what people have taught and taught. We're taught that our thinking and analytical and cognitive abilities are our greatest abilities and while they may be in terms of our ability to create in terms of day-to-day perception judgment, decision-making behavior it all happens through how we feel. People find that shocking. It makes it easy to explain why people do what they do in ways that say behavioral finance does not and then it's about how do we interact with any given human being who might be resistant or defended against how they feel like it might be scary for them to know how they feel. How do we go about helping them really become more centered in themselves? A key question you often ask your clients is what are you feeling and why? And you say this is a simple question but it's not easy to answer. What do you mean by that? You know, it seems like a simple question, right? What are you feeling and why are you feeling it? But it's definitely one of those things that people don't really know what they're feeling oftentimes. You know, lifetimes of trying not to feel or trying to use their intellect to overcome their feelings and usually, even if they can get a semblance of what, then the why tends to be a little bit superficial. People will use the first answer. The coaching is about drawing out the what and then helping the client connect the dots for the why and when they're able to do that, first of all, they are usually able to solve long-standing problems and at least understand what needs to happen to solve, like long-standing, mysterious performance problems. But when you're able to do it for yourself in real-time, you're also able to make the whole data set that your unconscious is working with to make it as in you make it all conscious and then you have better odds of choosing between the senses, feelings, and emotions that are germane to the decision you're making and separating that from the senses, feelings, and emotions that may be about something else. Even the previous trade or yesterday's P&L or your teenager who got in trouble at school or whatever. What you're saying certainly goes against everything I was taught as a young trader. I think I might be a decade or two older than you, Denise, but nonetheless, we were certainly told to stomp on our emotions, but rather you say that you're saying that people should feel their emotions in as much detail as they can. How do they do that? How could I do that? Generically speaking, your psyche wants for you to know these things. So on some level, your subconscious is relieved to be able to communicate with you directly to when you're interested in this key piece of feelings and emotions. I mean, everyone develops defense mechanisms against how we feel because that's how we were raised, right? Like to not feel those things, and so you have to engage in somewhat distortions in order to not feel things. So it's a matter of figuring out what those are for any one person, but I generally think this. If anyone decides that they want to know what they feel and why they feel it and they choose to have the courage to find that out, they will know more than they knew before. And then if they work at it where they're trying to listen to the information their body is giving them because that's where the feelings are, it's like the path of least resistance for your psyche and so it's moderately easy to make, for most people to make big leaps and bounds in doing it and they start to find out that they're just much more centered and less agitated and feel truer to themselves. Are all emotions useful to performance generally and trading in particular? Well, you've got to categorize them as the ones that are information and the ones that are irrelevant. Or Jennifer Lerner of Harvard would say the ones that are incidental, those are the irrelevant ones, or the ones that are integral. Or for traders I use intuitive, which is unconscious pattern recognition and reflective of expertise or impulsive. So that's the trick. It's not only know what you're feeling and why you're feeling it, but then to categorize it and to know which feelings are about your market decisions and which are about something else and be able to direct that energy, if you will, into the proper bucket. So let's say you have a losing streak and you feel lousy about it and you're frustrated. And if you're able to identify what that is and why, and obviously no one likes losing money, but you can put that into words for exactly what it is, that disconnects it from the next trade, which is, you know, whatever your P&L was yesterday or last week or last month is irrelevant, right? And we always say that to ourselves. But if you try to address that problem just with your intellect, just saying that it doesn't matter, it's not as effective as if you work through the emotional paths and make the link between the feelings and the last trade really clear that ends up clearing your mind so that you can focus on the relevant feelings for the next trade. What's the relationship between emotions and behavior? It sounds like you're saying they can be separated. The neuroscience is, you know, quite definitive that you have to have emotion to choose the behavior and in practicality what that means is you have to feel confident in something to make a choice and do it. But for, you know, centuries of history, we have misunderstood the energy of emotion that often urges us to do something. We've misunderstood that and said, okay, you have to act on that energy. Well, you don't. Like, you can feel that energy and research and analyze what's going on for you and what does it mean and why. And then assign that energy to its proper category and then choose which of those energies, emotions, are relevant to your trade and which ones you want to act on. The better you get at parsing all of this, the easier it is to recognize that unconscious pattern recognition that we call intuition that really is expertise and segment it or unravel it from impulse or bias that is not relevant to the trading decision. So I understand that this is your business and I'm not asking you to give away business secrets, but how do we separate intuition from impulse? Well, so intuition is calm. Like, you just have this sense that you see something or you know something and impulse is agitated. Impulse has got energy and like it makes you want to do. Intuition doesn't make you want to do anything. I mean, you may say, oh, I have this intuition and I should do X, but intuition isn't like, isn't urging you to act. If something's really urging you to act, particularly in trading, then it's really suspicious. So it's a difference between a quiet voice and a storm. Yeah, I mean like intuition will urge you to act, you know, if you're about to get hit by a car. And in those cases, like, it matters. You know, that kind of pattern recognition is like, okay, you know, jump out of the way of the car or the train. But for people to work with it generally speaking, if they think of in terms of calm versus agitated. Is confidence important to trading success in your experience? Totally. Confidence, I mean, confidence by the way, that's that reason we can't make a decision without emotion because you have to have some confidence to make the decision. Like the research that was done on people who have brain damage in such a way that basically they don't feel confident. They can't decide what day to go to the doctor. They can't decide what shirt to wear because they have no physical sense of what's right. So the question is, how does one work with their own confidence or lack thereof in an organized systematic way? That's the strategy you want to take, that confidence or its variations of confidence is like a thing. It's an actual thing that you can work with. It's just data that's inside of you, you know, not data you're seeing, you know, on a screen. Denise, you work with traders, but you also work with elite athletes. Sounds like this might be one area that both groups have in common. Yeah, I mean, the athletes will say that what they need the most is confidence. There's a lot of sports psychology that works just fine until the pressure is really on. And then it doesn't work so fine and the athletes struggle with their confidence at those moments. I hear that from every athlete. And can sports psychology be useful to traders? I mean, confidence in general and, you know, wanting to be an expert in your craft, certainly, and the idea of training and practicing, yes. But there's a couple of things that are really different. So in any sports contest, like, you know who's winning, you know why they're winning, and you know not only when it ends, but when it's going to end. You never know that in markets. It's like a completely different mental problem. The fact that the markets go on forever. I mean, think about like, if a football game went on forever, if there was no end, and like, and anyone could score again and again and again. Like that's a completely different problem. The other thing is, so in sports, like, I mean, you take football, whether it's American football or, you know, Australian football or European football, like generally if the ball goes backwards into the opponent's territory, it's a bad thing. In trading, depending on your system, you know, if it goes against you, does it mean you should get out or is it an opportunity? I mean, I have these hedge funds that hold positions for years, and so, you know, they're always saying, does this mean we're wrong or does this mean we should be adding more here? So you never know when the game's going to end. And you never have that clarity in the market that you do in sports. But worst of all, in sports, you can make something happen. And the idea that you can make something happen in trading is probably a sure way to lose money. With full respect for client confidentiality, would you be able to give us an example of how a trader can turn around using your techniques? So, okay, losing sticks are actually relatively easy. So what everyone wants to do is like say, okay, put it behind me, start fresh. You know, that was yesterday or that was last week or last month. A secret to losing streaks is to go back to the trade that got it started and understand what happened there and how, you know, maybe you made a mistake or you did, you know, what I call the bet, I know better trade. Skip everything in the middle. Go back to the beginning. Figure out, like, what caused that, what you were feeling and why. And let yourself feel bad about it or go through a mourning process of, you know, feeling guilty or feeling stupid or whatever. Like, just deal with the feelings from that first trade. Process them and get to the point where, like, you can forgive yourself for that. Because actually, the psyche is trying to use those unpleasant emotions to teach you something and you're trying to override them. And so you think you've overridden them and you've forgotten about it, but you basically, they keep creeping back in trade after trade after trade. And so the losing streak keeps going because you start to lose confidence in yourself and you start to doubt yourself. And basically all of those unpleasant feelings from the trade that got it started just keep influencing you. And so if you go back and you just, you know, look those demons in the eye, if you will, you can get over that and move on. I mean, my greatest example of that ever is I had a client whose wife had been kidnapped a great trader. And by the time he started working with me, it had been like eight years maybe. And he was like at a bank in the hedge fund, bank in the hedge fund. And he struggled a lot. And by the time he got to me, and then he told me the story, like no other coach had taken him back to his feelings about his wife getting kidnapped. She was rescued and safe, by the way. And when he went back to how he felt responsible, I mean, he wasn't really, but you know, how he felt bad that he couldn't protect her, et cetera. And like we worked through that, his like multi-year losing streak started to resolve itself. So can traders be broken by the market? Have you seen some that were beyond repair? I mean, the true answer is no, but I think that's like if someone, let's just say someone looks broken, you know, I'm gonna know that they have a set of feelings and emotions that probably got started by some mistake they made however long ago. And if we unravel all that or untangle the spaghetti bowl, they can get back to the part of themselves that knows what they're doing. Basically, if we respect fear, frustration, disappointment and levels of intensity and fear, frustration, disappointment as information, and we go back to that understanding what are we feeling and why. I mean, I basically think we consult any human performance problem, any human psychological problem. I truly do believe that. Denise, what haven't I asked you? Is there anything else you'd like to add? What people can do in working with their own confidence is make themselves like some sort of tracking mechanism. Like it can just be a scale, one to seven, of how confident they are or not and just put tick marks on it. So as a mechanism to start to track your own feelings and then in doing that start to know how it feels when you're seeing the market really clearly. I'll often give talks and I'll talk about the optimal level of confidence but you don't have to be at the optimal level of confidence to make a good market decision. You know, you can be a little bit below it and learn to tolerate the anxiety of that. So that'd be my second thing. Making yourself a scale for your own confidence but just learning to put your exact feelings into words just for yourself, no one has to know. But gaining that skill of it's called emotion differentiation or motion granularity of being able to say, you know, I'm anxious or I'm worried about this and make sure the word connects to the feeling in the stomach because when you get it right, oftentimes that feeling contracts so it becomes less disruptive but it only works if you get the description right. If it's panic, you have to admit that you're panic. Well, that sounds like a good note to leave it on Denise. Thank you very much for your time today. I'm very grateful to you for doing this and giving you your full schedule. Thank you for having me. That was Denise Schull of New York City joining us from Hong Kong. I'm Michael McCarthy and you've been listening to the Artful Trader Confidence Uncovered. Listen to the Artful Trader on your favourite podcast app or at theartfultraderpodcast.com Join us next time.