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Hi,
'While Emotions'
---------------------
Recently a trader stated:
"Emotions must be eliminated by the trader while
trading.
We our capable of certain control of our emotions. We must always
exercise that control when within our grasp, failure to do so and leaving
it up to luck, is an abrogation of our responsibilities to our
interests."
I agree - especially about the while trading. It
is a matter of being dispassionate while still having emotions in the
background.
Emotions are good - they are telling us our current path is not
consistent with our objective(s) and or constraints.
Emotions are invoked based on ancient wisdom, some of which is valid in
todays circumstances, some which is not. Much of this
wisdom is not available to us using only our cortex.
So emotions are very useful - never try to suppress
them.
Emotions can probably not be suppressed - but they can be accepted and
honoured.
Accept emotions for what they are - a powerful tool, and a poor
master.
It is perhaps a way of being, not being a way.
So what can we do practically do to start to trade without emotional
interference.
If we suffer from emotions while trading, we have an opportunity - our
trading actions are not aligned with our trading or overall objectives
and constraints - the problem is ours and the internal feedback message
of emotions can be exploited instead of being ignored.
We can accept the message and honour it, rather than accept the state of
being emotional as something to be suffered on an ongoing
basis.
The emotional message can be exploited to get our actions in line with
our objectives and constraints. Maybe both our actions
and our objectives/constraints need modifying.
When we have done this the emotions will subside - for there is no need
for their invocation.
To repeat, emotions while trading are a clear and useful warning - ignore
them at your own cost of failed objectives and emotional
suffering.
Now you know why most traders lose or suffer for their meagre profits -
we are ignoring our own wisdom.
'Before Emotions'
----------------------
But it is not just while trading that emotions can be
problematic. Paradoxically it is the honouring of now
inappropriate emotions that can cause problems.
Here is where, perhaps, the bad reputation of emotions is
derived.
Another trader wrote:
"Unless you hold for a really long time, in the US market you would
have
been killed recently if you accumulated as the NASDAQ went nearly
straight
down. If you traded during the internet bubble you would have been killed
as you sold into rally after rally.
Again if you hold your positions for years I can see how you would have
profited - but otherwise your strategy sounds a little
dangerous."
Notice the emotive word "killed" was used twice.
Fear stops us from experiencing - that is its job and it does it
well.
When meeting the proverbial sabre-tooth tiger, our ancestors were fearful
of being killed - and this gave survival value.
So just the thought of the sabre-tooth tiger still might make us fearful
of being killed, and so stops us from actively looking for the
sabre-tooth tiger!
So fear in the context of trading is designed to stop us from ever even
paper trading a new trading idea if it invokes fear.
Even the possibility of trading in a penny a point (rather than say $10 a
point on the DOW or say $50 a point on the S & P) can be ignored,
because fear can stop us thinking before trading.
We often invoke bluster as a self-defence from having to face our
fear.
We often reject the possibility of learning through trying, as fear stops
us experiencing. So we can never learn if the fear was
justified or not.
So our fear stops us from ever finding out there is little or nothing to
fear.
So what appears very frightening may be frightening or safe.
This is the key lesson for traders. The opposite of what
appears to be, can be true.
So fear in a strange way generates a kind of arrogance - the strength of
feeling can fool us that we are obviously right without the experience to
support the opinion.
We sometimes refuse to admit, or even conceive, that others may have got
past their fear and by so doing have experience we do not have -
experience which our fear stops us experiencing.
Experience that possibly gives them knowledge and understanding that we
have been self-limiting ourselves from.
So we perceive those who are not fearful and have such experience, not as
being without such fear, but as:
- being
arrogant about doing the 'impossible',
- talking
'through their hat',
- supporting
our fear based need to reject,
of if not perceived as telling non-truths,
- being
boastful,
- having
the temerity to point out, by comparison our fears and
limitations.
While all the time it is us, the fearful, who are arrogant - the mirror
as usual.
Now you know why most traders fail to make significant and regular
profits - we self-limit ourselves from ideas that invoke our
fear.
So a practical step is use our fear as a reason to try, in a low risk
way, that which our fear tells us not to do.
Summary
-------------
So in conclusion, as traders, we have a delicate balancing act:
- accept
and honour 'while emotions' and change our trading style, system,
trading
size, other parameters until the emotions subside,
- recognise
fear as a powerful reason to actively try (not suppress), in a safe
way
(such as paper trading or penny a point trading) that which fear tells us
to
avoid.
Now it becomes reasonable that so few traders are big regular winners -
for this is a balance most of us have not begun to recognise, let alone
achieve.
May your potential be realised, Ric.
www.traderscalm.com
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