Ramblings on emotions and trading ...

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djxput

I've been doing alot of 'thinking' on emotions and trading (and observing what other's feel (their posts etc ...).

There seems to be two different mind sets when it comes to your emotions and trading.

1.- One of them is to develope emotionless trading; from what I can see is that some of the worst enemies of trading is fear and greed. So the theory behind this is to limit your emotions; weather its just the fear and greed or all(most) of your emotions while you trade (ie develope a system where it takes them out of the game - where you strictly follow your trading plan).

2.- On the other side of the equation there is the theory of trying to channel your negative emotions into positive ones. If fear and greed are your enemies; it's trying to not have those 2 creep up on you. So to develope a system where you are focusing on the positive aspects of the trade or plan.


Money is the motivating factor for most people to trade.

What you value most is what will dictate how you respond.

So if you value money the most; money will dictate how your emotions come into play and how you respond.

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I was trying to understand about the emotionless trading (as I described above); and I think it would be very difficult and counterproductive to try to produce trading behavior based on this type of system (at least for me it would be).

It is natural that humans feel emotions; in order to shut them off one would have to go through alot of training and re-training of their mind and attitude. While I can see how this type of training can help in certain situations. I don't think this type of trading is for everyone.


Think of the most 'gifted' athletes. I'll name 2 Michael Jordan and Tiger Woods.

What makes them so successful at what they do?

From what I can tell; there are a few things.

1. They have practiced practiced and practiced and practiced some more.
2. They Love what they do; and from what I can tell they love the game ... meaning they love everything about the game.
3. When it comes time to perform(play) they are totally focused; and from what I can tell they are focused not on the 'need' to score points or to win the game. They are focused on nothing and everything. Meaning they focus on all the training they put in; their confidence in theirselves what they need to do, the way the club or basketball feels in their hands, their visalization of what they want to occur ... everything that makes the game beautiful to them.
4. When the shot or put is missed or made; there is emotion there. When all their training has come down to that moment in time; there is alot of emotion there. Michael and Tiger have missed a shot or a put before; but what happens when they do? It's not the end of the world. They probably train harder and become more determined. And when they make that shot or put; their joy fills their world.


So why am I talking about basketball and golf? Is it really any different then trading? Why do you trade?
Have you ever played basketball and tried to force a shot? or have you ever played and were just in the moment and let it fly?
What were the differences?

For me it was peace of mind.
When I tried to 'force' a shot I was giving the outcome more value then the act. Therefor my emotions were tied up with the outcome.


All of us have different views on what trading is. But most of us probably see trading in a similar way.

Trading is a way to have more freedom, more money, to pay your bills, to aquire more things, to have better things for your family, to live a better life, to boast to your friends, to live life more fully etc ...

While all of these things are resonable goals for one to have. When you feel there is a lack in yourself and that money (winning) can fill that lack; you give more power to winning (money). And thus the outcome will influence your self worth and your decisions.
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What brings you joy when you trade ... I'm not talking about the outcome I'm talking about the act of trading.

Is it to see how your long hours have paid off and how the market just seems to respond to your analysis? Is it the comradery that you share with other traders; where you can share the trades? Is it just the thought of doing something that you have almost total control over and that your destiny feels like it is in your hands? Is it the joy that you dont have to go to work today from 9-5? That you have made it where few people succeed?

I feel that all of us need to think about what brings us joy in trading. When we can give that more value then the outcome we will be free from fear and greed.
 
IMHO you havent taken your "gifted athletes" to the right point.

Golf could be swing day trading (a trade every so often) and Tennis could be faster day trading. The faster the trading the more important it is to avoid letting emotions bleed into your performance.

So if you listen to athletes and their psychologists you'll hear them talk about focus on performance (of the hit/stroke) not on outcome. You'll hear them talk about each ball being a seperate one and leaving the performance of the last one (emotional bleed through) behind.

Almost all traders must learn to understand themselves and reduce their emotional response, good and bad, to the results of their action.

You also mistake reducing emotional response for denying emotions. Or supressing them. Take the buddhist approach - focus gently on the emotion not the thought cluster producing them and they will weaken.
 
emotions play a humongous role in successful tradin'; usually before initiatin' a good trade off a repetitive setup i feel a strange stomach churnin' kinda feelin' that can be not pleasurable at times, but that is a counterintuitive instinct characteristic of a vision of a successful trade. on the other hand before engagin' in all my worse trades i feel nothin'; they are infact trades based on what i think and not what i feel. that's the paramount difference between tradin' by gut feel and thought, the latter always produce disastrous results. in the end emotions are the discrete trader's best friend and gettin' rid of it, if that's even possible, would mean only losses imo.
 
Quote from Bitstream:

emotions play a humongous role in successful tradin'; usually before initiatin' a good trade off a repetitive setup i feel a strange stomach churnin' kinda feelin' that can be not pleasurable at times, but that is a counterintuitive instinct characteristic of a vision of a successful trade. on the other hand before engagin' in all my worse trades i feel nothin'; they are infact trades based on what i think and not what i feel. that's the paramount difference between tradin' by gut feel and thought, the latter always produce disastrous results. in the end emotions are the discrete trader's best friend and gettin' rid of it, if that's even possible, would mean only losses imo.
More...

LMAO. That may be one stream's experience but as a general rule its BS Bs :)

Don't confuse anxiety before a tough looking trade with "thinking leading to disastrous results." You might be better off spending time to think about the patterns, market behaviors, thoughts and feelings that lead to an anxious trade vs a feeling free trade.
 
Quote from kiwi_trader:

LMAO. That may be one stream's experience but as a general rule its BS Bs :)

Don't confuse anxiety before a tough looking trade with "thinking leading to disastrous results." You might be better off spending time to think about the patterns, market behaviors, thoughts and feelings that lead to an anxious trade vs a feeling free trade.
More...

t it is a reoccurance that i feel, like a sort of 'illumination' before i enter a potentially big winner. when i feel nuttin' means that if am gonna take the trade it it's more likely to be a gamble. it's obvious it works like this; after seein' a setup u saw countless times before u get excited and your brain makes connections, endorphines and andrenline are realesed creatin' that stomach crunch. it's not anxiety, more like a realization accompained by a special feel.
 
If Tiger was thinking about money when he hit a tee shot on 18 it would probably go in to the woods. I think the reason guys like him are successful is they DON'T think they just do. They trust their training and can get rid of all negative thoughts and let their muscles do what they're trained to do.
 
Vhehn,

thanks for the link to the article; that guy had alot of good insite.
btw have you read any of his books? wondering which one would be the best to get in regards to this subject

ie hedge fund master, trading to win, trading in the zone or the psychology of risk
 
You must use your Logical Mind to tame your Emotional Mind.

Or else your Emotional Mind will make your decisions for you.

IF you can tame your Emotional Mind with your Logical Mind....

Then, and only then will you use your Wise Mind to make your decisions.

Better to use your Wise Mind than your Emotional Mind.

Unless you like being controlled by your Emotional Mind which
will make you an Emotional Wreck in the long run...:p

Emotional Wrecks do not make for good traders...
 
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