Cognitive flexibility is being aware that in any given situation there are options and alternatives available. As an example, you don’t have to stay in a losing position, yet so many traders do just that as their conviction in a trade turns to hope. Cognitive flexibility is a critically important executive function that occurs, almost automatically, with most individuals. However, a lack of cognitive flexibility is problematic for traders with attention difficulties. Dr. Steenbarger would refer to these individuals as having “Trader’s Syndrome A.”
Success as a flexible trader combines both a willingness to be flexible and adapt to a given situation along with self-efficacy in being flexible. In other words, being prepared to change your thinking while believing that you can change it and that the results of doing so will improve your situation. Cognitive resistance to change occurs when we imagine failure rather than the act of failing itself. If multiple instances of failure to change occur, especially for the same situation (as in a string of losing trades), one’s cognitive flexibility is dampened as self-efficacy takes a hit.
I’ll be discussing this topic in greater detail at the Trader’s Expo in Las Vegas next weekend. Those that attend my presentation will learn more about a working model of mine that I use to help others achieve success.