Emotions are part and parcel with our humanity. We can’t just squash them. However, it is important to understand that no amount of emotion from an individual perspective is going to change the outcome of the market. So it becomes necessary to have trading strategies and tactics that are based upon logic. That said, emotions can be utilized to keep a trader consistently profitable. We can leverage our emotions to help us execute a trading system based on logic. The key is when to buy or sell. That is, the moment of execution. That is this precise moment emotions, at their highest level, tend to kick in. Granted they will build up to that moment. Fear, greed, hope will always be here even if only momentarily, in the background. How we deal with these emotions is key to being a successful discretionary trader. The application and use of emotions in successful trading is counter-intuitive. In other words, it is hard to do because it goes against common sense or logic in a specific environment. It is not natural. In successful scalping there is a time to be greedy and a time to fear. And a time to hope. Basically, what we have to do is leverage our emotions in a counter-intuitive way that correlates with a logical trading system we have developed. We cannot deny emotions. They WILL come and they will be there. How we use them in trading is a key factor for being successful.
Many have tried to eliminate the emotional element of trading by using strictly computer trading via algos..etc. However, that in itself has it’s cons and it’s pros, I might say. Often a much studied..backtested..coded up..algo works for a while then ceases to work very well or does not any longer work, at all. It also requires extensive and continuing study of the markets and market structure and changes to code algos that will work or to adapt them to work over long periods of time. Someone like Simon’s Renaissance has the $$$ and expert personnel to pull this off. However, the average small trader does not. Therefore, he has to depend upon other mechanisms for his trading. Especially in price action trading the human brain is many times over more powerful than an algo in detecting patterns and adapting on the fly. It can process enormous amounts of data very fast and categorize them. It in essence, can reprogram or code on the “fly”. Not always, but it has that capacity. In short the brain is much more powerful (IMO) than the computer that traders use to trade with.
Some of problems associated with discretionary trading are of course:
1) the emotions
2) the subjectivity
3) The Worldview or structure that the mind has developed in the trader, because of his/her interactions with life and reality experiences. These are used to form belief systems (true or erroneous) that tend to govern behavior. Most traders will need a paradigm shift (a fundamental change in underlying assumptions encrusted in their W.V.) to become successful.
4) the assessment of probability that the trade will likely hit a profit level before it would hit the SL level. That requires experience and practice.
The good news is much of the above can be developed via using a SIM. And leveraging of emotions to some degree can be developed via SIM. W.V. change is slower and takes time to become integrated to form new beliefs that lead to new actions and reactions. Subjectivity will always be with us. You will see what you will see, and I will see what I will see. However, we can train ourselves to see things more clearly and to act upon them more quickly. Such things are required in successful scalping.
Many have tried to eliminate the emotional element of trading by using strictly computer trading via algos..etc. However, that in itself has it’s cons and it’s pros, I might say. Often a much studied..backtested..coded up..algo works for a while then ceases to work very well or does not any longer work, at all. It also requires extensive and continuing study of the markets and market structure and changes to code algos that will work or to adapt them to work over long periods of time. Someone like Simon’s Renaissance has the $$$ and expert personnel to pull this off. However, the average small trader does not. Therefore, he has to depend upon other mechanisms for his trading. Especially in price action trading the human brain is many times over more powerful than an algo in detecting patterns and adapting on the fly. It can process enormous amounts of data very fast and categorize them. It in essence, can reprogram or code on the “fly”. Not always, but it has that capacity. In short the brain is much more powerful (IMO) than the computer that traders use to trade with.
Some of problems associated with discretionary trading are of course:
1) the emotions
2) the subjectivity
3) The Worldview or structure that the mind has developed in the trader, because of his/her interactions with life and reality experiences. These are used to form belief systems (true or erroneous) that tend to govern behavior. Most traders will need a paradigm shift (a fundamental change in underlying assumptions encrusted in their W.V.) to become successful.
4) the assessment of probability that the trade will likely hit a profit level before it would hit the SL level. That requires experience and practice.
The good news is much of the above can be developed via using a SIM. And leveraging of emotions to some degree can be developed via SIM. W.V. change is slower and takes time to become integrated to form new beliefs that lead to new actions and reactions. Subjectivity will always be with us. You will see what you will see, and I will see what I will see. However, we can train ourselves to see things more clearly and to act upon them more quickly. Such things are required in successful scalping.
