There is a discussion going on about why we trade emotionally. About why we sometimes know what to do, but donât seem to be able to do it. Our choices, our actions or inaction becomes other than logical.
Difficulty accepting there will be losses is one issue that stirs emotion. But we can reframe losses being the price we pay for information while we trade, or it is just the cost of doing business. Perhaps it is even an investment, like you can put up $300 to make $500, etc.
But even more basic than the issue of losing is uncertainty. The human mind is built to pick a side and not want to sit on the fence. We need to know, or to convince ourselves we know so we can make a choice, take an action. The market has patterns, but you never know in the moment what will happen. In the normal course of events, no matter how much of a master you may become, you will never know.
You can slide over to statistical probability and get real time data that says you took 100 trades, and you have a certain record of outcomes. But in the moment of trading, you donât know what will happen. And the market is not like poker in the sense that with poker the game is set in structure and is what it is. However, the marketâs character can shift, and your statistics no longer apply. You will never know.
That stirs emotions.
The discussion turns to considering emotional behaviors as a response to a stimulus, so consider using behavior modification. You think about reinforcing or extinguishing a behavior. You certainly can change some of your responses based on this. But the market is not a controlled environment. It will give you intermittent positive and negative reinforcement for the exact same event, over and over.
So you have an absolutely out-of-your-control and uncertain environment that alternatively rewards and punishes you for the exact same event⦠That is very powerful and undermines behavior modification.
Another choice being discussed is to alter the stimulus or change your range of behavioral choices to the stimulus.
Iâm still thinking about that one. You might alter the stimulus by doing more or better prep work each day before trading. Of course your trading plan alters the stimulus. You canât control the market, but you can choose your perception of it.
While we have the human tendency to want to pick one side or the other, so as to not live with uncertainty, there is yet another analogy about how we go about this. This analogy is where we make a map of reality, and then ignore reality and live by the map instead. The map becomes certain in our minds. Reality may be to complex, to uncertain, and perhaps have factors we donât understand or might ignore, or factors we donât even recognize.
So you can ââ¦change your range of behavioral choices to the stimulusâ? How?
Can I change my map â or how I think of my map so as to have behavioral options?
This might affect how I respond to certainty, uncertainty and reality.
Perhaps my prep work each morning creates a map.
A topographic map might show a river here, a mountain there, a road, a canyon, a spring. My trading map has channels, swing lows and highs, ranges, medians and means, etc.
With experience I can become comfortably certain of what has happened in the past on my trading map.
Yet I will never know how, when or where the market will go. It may zip right past something I put on the map, and it will go to anyplace in any order it pleases.
Part of the fun of trading is setting up the map, and then seeing where it goes and how it reacts to the things on your map. You can observe if it moves with energy or not, watch what it's behavior is along the way. Maybe get a clue as to why, out of all the options, it did what it did and improve your map making skills.
Making a map, and having a POV about it, may change my behavioral options.
