Read any book or blog about trading and you’ll be told controlling one’s emotions is a key skill needed to trade well. On the surface, this sounds like good advice. After all, greed and fear are killers at a trading desk right?
But the evidence doesn’t back up such a notion.
These writers are saying you must be very calm and not get too excited. You must keep an even keel and not ride an emotional roller coaster – as if to imply emotional restraint is a desired state.
I’ve never completely agreed with this concept because I know from casual observation most successful people are very emotional.
- Michael Jordan, Tiger Woods – very intense, very emotional!
- Bobby Knight, Coach K – love them or hate them, they’re extremely emotional and extremely successful.
- Muhammad Ali – intensity, passion, showmanship and yes, emotion.
- Paul Tudor Jones – if you can get your hands on a copy of the PTJ 60-minute documentary the subject supposedly bought up, you’d learn he has off-the-charts competitiveness, intensity and is very emotional.
THE TRADING TEMPERAMENT
Yet it’s a rarity to meet a calm trader, who doesn’t seem to be overly intense or competitive, become successful. This doesn’t mean you have to hurl your keyboard out the window every time you lose money. It’s just means you aren’t likely to succeed if you don’t have a little fire in your gut.
Trading is tough. It takes years of study and practice. Without a strong emotional drive, it’s unlikely a newbie would be willing to put in the time necessary to get good.
So we’re told be calm. Don’t get overly excited when things go well. Don’t get overly mad when trades go against you. Be a machine. Your significant other shouldn’t know if you had a good day or a bad day because you are cool hand Luke.
But the evidence is over whelming. Studying the characteristics of successful people – in all walks of life – reveal many are emotional, so why are we told to be calm? Perhaps the books are written by the wrong people.
In Napolean Hill’s book Think and Grow Rich, he talked about the most successful men he studied being highly-sexed and having the ability to focus that energy in proper ways.
In John Wooden’s Pyramid of Success, one of the five building blocks is “enthusiasm,” which in my opinion is very closely related to emotions.
How does the old saying go…it’s like sex, nothing happens until someone gets excited.
You don’t need ice water in your veins to trade successfully. You don’t need to be this unemotional being that’s unmoved by wins and losses and can completely dampen all feelings. A little emotion, a little enthusiasm – something that grabs you and makes your heart beat a little faster – is good, not bad. There’s nothing wrong with being excited about trading, and being a little emotional about it will help more than hurt.
It’s true getting too emotional can interfere with performance, but there’s a difference between being an emotional being who’s excited about a pursuit and letting one’s emotions short circuit their quest.
The key is to focus and concentrate that emotion, not completely dampen it. It’s ok to be happy when you execute according to your plan and things work out. It’s also ok to celebrate once in a while. It’s also ok to be a little pissed if things don’t work out. This should energize you to work a little harder and focus a little more.
This doesn’t mean you allow the thrill of victory to absorb you and lead to recklessly sizing up. It also doesn’t mean you irresponsibly try to get back to even on days/weeks when things aren’t going your way.
Allow yourself to smile when you win. Allow yourself to be human. And on the flip side, get energized by losses such that they motivate you to put in a little extra time if needed.
If you aren’t at least a little emotional, you will wander. You’ll space out, check email and Facebook too often, take too many snack and bathroom breaks. A little emotion that keeps you focused on the task at hand will help during market hours when you’re looking for entries and will help during off hours during your planning sessions.
Do you really think you can pay attention for 6-1/2 hours/day if you’re an unemotional, nonchalant dope who feels no joy or sorrow with wins or losses or possibilities?
TRADE IN THE PRESENT
To trade well, you will need to be here, “in the moment,” paying attention. Good luck doing that if you’re an emotionless being who can’t even sit up in his chair.
I tell traders: don’t dampen your emotions – learn how to funnel them in a productive way.
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