Archive for the ‘Emotions’ Category
As we stated in a previous posting, we’re going to get started in learning about these different filters by examining the first one that I call the Defeated Trader Syndrome*. As I stated before, these filters are neither good nor bad but they do have positive and negative qualities, similar to the positive and negative quality of electricity. They can be ranked from 1 as most catabolic, negative, to 7 as most anabolic, positive. We use all 7 filters on a daily basis, usually unconsciously, and they help us make decisions on a variety of subjects and situations.
The Defeated Trader Syndrome
The Defeated Trader Syndrome is the most catabolic of the energy levels. Being the 1st of the seven levels, it often is where many people default to when stress occurs. Some of the core characteristics are stated below.
Let’s start by identifying some feelings, and thoughts of this level.
- Feeling of guilt, regret or remorse.
- Incapable of succeeding as a trader.
- A sense of avoidance to trade or lack of motivation to trade.
To help you identify this level to yourself, becoming aware of the self-talk we use when we are in this level is helpful. Here are some things you might say when in this level:
- “Why is the market doing this to me?”
- “Every trade is a loser.”
- “Why did I take that trader? I know better.”
- “I should never have taken that trade.”
The action or result of this level might be:
- Feeling bad or a sense of inaction.
These are generalizations of what you might be experiencing, but in general, a lack of motivation and energy is not uncommon in this filter.
If you’ve been trading for any length of time, these feeling or actions are not unfamiliar to you. It is normal to experience these feelings. The trouble occurs when these dictate how you act on a regular basis or how long you stay in this particular level. If you are experiencing these feelings on a regular basis or several times during a trading session, you are probably not working are your best, optimal self. Creating the awareness is the first step to moving forward in your trading and getting more of the results you desire.
In the next posting, we’ll talk about some strategies for moving out of the Defeated Trader’s Syndrome to empowering yourself to making better decisions.
*The educational material contained is gratefully adapted from the training received at the Institute for Professional Excellence in Coaching (iPEC), its founder Bruce D Schneider, and his bestselling book Energy Leadership.
People that know me and my coaching know that I’m a big believer in intuition. I’ve written about being in the moment as an important aspect of trading. Some of the best traders rely on that unexplained something that puts their trading above everyone else. One of my favorite stories is that of George Soros and his famous trade shorting the Bank of England. Yes he had a lot of technical and fundamental evidence to back him, but to hear him tell the story, the final call was a gut feeling he had that helped him place nearly 100% of his fund on the bet the British Pound was going to take a dive. He made over $1 billion for his trouble.
That’s the power of intuition. The ability to see beyond the perceived. So how intuitive are you? Would you like to get an idea? This article by Vishen Lakhiani from finerminds.com asks the question How Intuitive Are You?
I took the quiz and scored a 45. There’s room for improvement but I’m pretty proud of my score. What’s your score? Post your score in the comment section of the blog. I’d be interested in knowing.
In the previous posting in this series, we talking about how feelings can help reveal a hidden value that might be in conflict with your trading decisions. Let’s now add to that discussion and talk about determining the higher value.
So what is the greater value in our trading? What is the standard by which we are going to make our decisions? These standards can be for almost anything that we do in our trading decisions. What type of method we are employing, the amount of money we’re putting at risk, determining whether the trade is worthy of our investment, and the way I feel about the trade and the decision. All of these can be guided by a higher value that is more important to us than just pulling the trigger and entering the market.
So here is an example of determining guiding values for a methodology. For the sake of this discussion, I’m going to use my self and my trading methods as the example. I’m not advocating my methodology or the methods of anyone else.
As a technical trader, I have literately thousands of indicators to choose from. And, if you believe the statistics that 90% of all traders fail, there apparently isn’t any one indicator that stands head and shoulders above the rest. So the decision of what I’m going to use as an indicator is very personal and needs to be guided by what ‘feels’ right for my style of trading and my perception of the trading world.
To decide what feels right starts with understanding what type of trader you want to be. I like trading trends. I determined this after many loosing trades trying to fight the trend or picking the tops and the bottoms. I also like trading smaller, intraday, charts. I like the sense of getting in, making what ever the market will allow, and being done for the day. There was a time when I would spend the entire day and part of the evening sitting in front of a computer screen. This obsessive behavior lead to an understanding that there is more to life than trading. Also, I value my coaching practice and working with clients. Trading the entire day would not allow me to work with others and their trading plans.
So now that I know I like trends and short time frames, I began building a method accordingly. (For more on building a trading method, click here.) I experimented with Bollinger Bands, Keltner Channels, various different moving averages, MACD, RSI, ADX with DI, a brief stint with Heken Ashi charts, candle stick patterns and formations, and market profiles.
After many incarnations , I’ve settled on what I currently use. It looks something like this:
That’s the other thing that I would like to emphasize. Our view of the world will change as we develop new skills and perceptions about the market. I often talk about trading as an art form. As the market changes, so must we change to adapt. What I’m looking at today, may not be what I’m looking at next year. The only constant in this venture is that the market is changing. That, too, can be a value we use to make better trading decisions.
In a previous posting, I wrote about the use of emotions in predicting the future. That the unconscious mind has the ability of giving us a sense of what might be coming up in the future without any real concrete evidence. Well to continue that conversation, here is an article from Wired magazine that asks the questions Are Emotions Prophetic?
Our minds are amazing. We are capable of doing so much more than any computer can do. Computers are great and they can do certain things really well. But they are never going to out think a human. I hope you enjoy the article.
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.
“Don’t trade with emotions!” “Park your emotions at the door!” How many time have we heard these words when it comes to trading? When I first started trading, this was the advice that I received and it always made me scratch my head. No one ever explained exactly how to go about doing this.
As it turns out, my skepticism was well founded. Though my continuing education as a trade and a coach, I’ve learned that to divorce ourselves from our emotions is impossible. As humans, we need to have that emotional component in our decision process. All decisions. I wrote about this as part of a series, A Trader’s Diary on Fear.
Well, there seems to be a growing trend in this type of thinking. I first read about this concept in Malcom Gladwell’s book Blink. It’s about that moment of instant cognition that happens in the first two seconds of encountering a new idea. Those can be incredibly valuable insights and sometimes really good.
And an article appearing in the Washington Post on March 3rd is further evidence of this growing trend. This isn’t a crystal ball thing and I’m not going to rely on a tarot card reading for my trading decision. But our brain is able to do so much more than a series of indicators or trading rules.
I would say that I’m generally a happy, upbeat person. My family, for better or worse, has experienced my darker side, but for the most part, I present the world as glass-is-half-full kind of guy. When I’m trading, I certainly try to maintain that same type of optimism. But we are talking about trading. The market has a unique ability of challenging the happiest of traders in new and twisted ways.
This is the reason why I dedicate a number of postings to mindfulness, being in the moment, and the art of the trade. Our mental state of mind has more to do with our success in the market then any method or trading strategy. Simply put, if you look at the world, or the trade, as if ‘they’ are out to get you, you’ll probably get your wish.
The good news is that we can change our perception of the world and by so doing, change our trading results. Positive psychologist Shawn Achor from Harvard University gave a talk at TEDxBloomington in May of 2011. In it he describes the value of a positive psychology and becoming better than average.