It is a fact, intra day trading in particular brings them out: Emotions we did not know we had suddenly make their appearance, often out of the blue, so it appears at first glance. This is often a shock for traders, particularly beginning ones. Understanding your trading emotions and learning to decipher their language goes a long way to attaining lasting trading success. It also will make you feel much happier too. Sounds good in theory, I know, yet the reality for traders is often a very different one, who can struggle for years to get a handle on their trading psychology.
Suppressing your emotions is never the answer, because it builds up a residue of emotional garbage that eventually overflows the mental garbage bin, typically presenting itself in overwhelm, deep anxiety, or anger and much frustration.
As if that were not enough there is another issue which makes dealing with trading emotions an even greater challenge:
Emotional reactions are never about the issue you are reacting to.
It took me years to understand this and learn to handle the issue in my own trading. I have found, that most traders are hugely challenged in this area. The reason for our challenges in this area is to do with the subconscious mind. It is estimated that as much as 98% of our thoughts are subconscious and therefore eliciting subconscious automatic responses. This becomes particularly apparent when we are trading intra day, off a tick chart for instance, or are manually trading several stocks or commodities at the same time.
I often trade gold, crude and the DAX intra day. Sometimes they move in tandem. When this happens the logical mind can have difficulty executing the trading plan in a calm seamless manner. The logical trading mind, which is still regarded by many traders as the ultimate tool for good trading behavior, creates a barrier to processing the information in front of it. All of a sudden there is too much information upon which to make fast trading decisions. The mind can only deal with around 25 pieces of information per second. Whenever the logical mind is overwhelmed, unable to decipher market action in its linear way, it goes into fight or flight.
Yet there is nowhere to run and nothing physical to fight while you are sitting in front of your trading screens. The result, the mind gets even more agitated, the ancient programs of the subconscious part of the brain are now going full power ahead.
To the conditioned, logical mind these automatic subconscious impulses create immense tension, which it needs to resolve, or identify. In other words the logical mind is seeking to understand why it is experiencing the anxiety and frustration in order to deal with it. Here is what happens next:
Just like a computer, the mind begins to look for files to open in response to the emotion.
The only problem is this: There are no accurate reference points to search for. The modern body is seldom under threat of extinction, yet the old part of the brain is still running the programs from tens of thousands of years ago. The logical part of the mind proceeds to search its data base, just like a computer would, looking to find a similar behavior from a past event that creates an appropriate reaction to the present situations and there is no such event.
The brain does not differentiate between the stories behind events, it just recognises the energy signature.
For example, an event that happened 10 000 years ago might be on the same energy frequency as the bicycle accident you had when your were four years old.
Your mind now searches its files looking for the closest match energetically to the present situation which might be the bicycle accident, which has now been processed as a form of trading fear. Translated into trading behavior this emotion might appear as your worry of being stopped out of a winning trade too early. The logical mind will move the stops too wide or too late, resulting in poor risk/reward management or giving away profits instead of taking them at obvious inflection points. It is a known fact that many traders have problems with stops, even professional traders who have traded for many years. In other words, traders are not afraid about their stops, but a glitch in the filing system of the mental computer makes it appear so. You may have just discovered the real reason behind the issue. Alas, there is more:
Trading practice cannot solve such issues satisfactorily.
If anything, the misplaced emotions may be imbedded even deeper into the subconscious mind as you attempt to will yourself out of the mental strain putting in yet more trading practice. There are several things though you can do to get round the issue:
Understand what is going on. Hopefully, in this article I have given you one important insight into the workings of your mind. Self knowledge is the highest knowledge you can possess. Strive to attain self knowledge it will calm your mind, since it satisfies the logical part of your brain. However, that alone will not resolve deeply imbedded incorrect emotional association.
You can neutralise emotions in a number of ways:
Consider learning to meditate, because this will over time slow down your mind, thus giving you access to the hidden layers of thoughts buried in the subconscious part of the brain.
Learn to use other cognitive awareness techniques. The simplest one is learning breathing techniques. The challenge is to practice breathing techniques whenever you notice that you are getting into mental overwhelm.
Clear your emotions by gaining knowledge of how the universe works.
Practice the power of gratitude, acceptance and understanding.
And last but not least: Never ever regard your emotions as your enemy. They hold invaluable clues about your trading personality which you can use to master the psychology of trading, your greatest trading edge by far.
