Series: A Trader’s Diary on Fear 3
In the previous posting, I talked about the role of emotions in our decision making process. The feeling that we are making the ‘right’ decision is part of who we are as humans and really can’t be separated from the cognitive process. The use of those feelings, that feeling of making the ‘right’ decision, is what I’d like to expand on in this posting.
One way of making a decision that feels ‘right’ is to have a clear concept of a greater value that you’re using as a standard. When we begin to feel anxious, fearful, hesitant, our body is saying that something is amiss. We’re making a decision that is in conflict with something that we hold of a greater value.
Now where a lot of new traders get into trouble is that they take readings of these feelings and think that something is ‘wrong.’ Let’s begin a new conversation about what feelings are telling us. One that can help us rather than drive us crazy.
Feelings are neither right nor wrong. They are just a way of receiving information. Placing a judgement on your feelings is a rationalization and that’s in your head. Feelings are in your body. They come up as the butterflies in the stomach, tightness in the neck or a pressure in the chest. The beginning of understanding feelings is to first be aware of them.
Next, feelings are often experiential. Being anxious about pulling the trigger could be based on something that happened in the past. I had one client that had great difficulty in placing a trade because it never looked ‘perfect.’ Turns out, through our coaching sessions, he discovered he had a mild form of ADD and would obsess about many decisions, not just trading, before making the ‘right’ decision.
This is where the adage “trader know thyself” comes in handy. Our cognitive process doesn’t happen in a vacuum and isn’t dictated by a trading methodology. Just because someone says that a trading method is the next best thing since sliced bread doesn’t necessarily make it so.
Understanding what is driving our decisions can help us decide what we want to place as a value. In the case of my ADD client, we came to the conclusion that short term trading was not the answer. Since there is very seldom a ‘perfect’ setup on an intraday chart, taking the longer view of his trading decisions was the best way for him to execute trades. By examining his emotions, we were able to find the values that could formulate a trading strategy for him.
What are your feelings that come up when you trade? What might those feeling be telling you about yourself and your cognitive process? Where do they reside in your body? How might that understanding help you make better trading decisions? In our next posting, a discussion about creating a higher value.