When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion…Dale Carnegie
THE RAT BRAIN SITS DEEP WITHIN THE RATIONAL BRAIN
I promise to contain my comments here, since this is the area I have written about more than any other. What is the benefit of this for you?
Unless you are at the point where you understand that successful trading and investing are at least 90% neuropsychiatric, you are destined to be on an eternal search for someone or something outside of you that will tell you exactly what to do, how to do it and for which you are likely to pay large sums of money. When that system fails, you will go on to another service or newsletter or the latest guru who will tell you what works for him or for her and that it should certainly work for you. When it doesn’t, you will begin the search once more. Eventually, you will come to realize that, although there are tools, platforms, indicators and signals unlimited, every answer to trading and investing success lies within you. External forces can and may facilitate some progress, but, in the final analysis, you absolutely must do the inner work required to take you to trading and investing mastery.
OK. Enough of that because it is a theme you will hear from me repeatedly until you either write me off as some kind of lunatic or realize that every answer to successful trading which you are seeking is within you and your brain.
Sparing you an interminable discourse on emotions, emotional intelligence, self-assessment, self-confidence, the stages of trading competence, adaptability, achievement, heuristics and biases, allow me to introduce you to an endlessly fascinating topic: Who are you? What do you feel when you are trading and why do you feel it? Why do you make certain trading decisions? Are you a hot or cold reactor? Are you Mr.Spock or Dr. McCoy?
Once you begin to think about some of the above questions, you are on the path to inner knowledge of your emotions and why it is critical to understand and manage them. Notice, I did not say get rid of your emotions. Who would want to get rid of emotions? Emotions are what make us human, give flavor and color to life, provide the ups and downs that we need to appreciate that everything exists only because of the existence of its opposite.
I urge you to read my article entitled “Your Rat Brain Is Out To Get You” as it will help you identify your emotions and the ways that they undermine your trading success. “Rat Braining” manifests in many ways, including anger, frustration, sorrow, terror, greed or ” How could I possibly do something like that?” Technical analysis is nothing more than a plot of emotions on a grid to make a chart. Once you look long and hard enough, you will see that. It is not just your own emotions, but those of millions of people that are reflected in any chart at any time. Study your emotions and own them, and then study mass emotions in order to really get an understanding of how markets move and why.
What I wrote years ago in “Your Rat Brain Is Out To Get You” is every bit as applicable now as it was yesterday, a year ago, or at any time in the history of the stock market. Today, however, I would like you to take this one step farther than being stuck in your old, limbic, rat brain. I want you to learn to absolutely ‘be” with any emotions that come up for you during the trading day and to begin to take the journey out of your old brain into the higher cortical centers of your new brain. In this way, you will be able to let your emotions work for you in a positive manner. You will not take the low limbic road and panic out of positions or chase into positions. You will feel the emotions and then pause and wait until you can get them to the higher centers of the brain where more clarity will appear. You will still have the feelings but they have a different intensity because they are now laced with higher cortical restraint. Please read: This Is Your Brain On Trading.
At the highest level, the ability to turn this process of primitive, instinctual reactions into more logical and considered responses is what separates losing traders from winning traders. It is the basis of survival of the fittest through selective adaptation. Only the most flexible and fit will survive in the great game of trading, so it is time for each of you to start the journey inward and to come to understand who you are, what you are doing with your emotions and how to preserve yourself to trade another day. Do not give up on your emotions. Embrace them, manage them, master them and make them work for you. Make yourself a fabulous and fierce trader and investor by using what you have to make you stronger.
If I feel depressed I will sing. If I feel sad I will laugh. If I feel ill I will double my labor. If I feel fear I will plunge ahead. If I feel inferior I will wear new garments. If I feel uncertain I will raise my voice. If I feel poverty I will think of wealth to come. If I feel incompetent I will think of past success. If I feel insignificant I will remember my goals. Today I will be the master of my emotions…Og Mandino (The Greatest Secret In The World)
Janice Dorn, M.D., Ph.D.