Thursday Trader's Tip: Emotional 'Control'
Welcome to the first post of the New Edition of The High-Performing Trader: “Thursday Trader’s Tip”.
Reading time: 3 min.
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Voiceover
The image above represents the two dimensions of Emotion.
X-axis: Valence - This is the value of the emotion itself. It can be painful or pleasant. With our human nature, we function in a way to seek pleasant emotions and to run away from the unpleasant or painful ones.
Y-axis: Intensity of Arousal - This measures the intensity of the emotion. We might feel good and relaxed - low intensity; or good and overexcited - high intensity. We can also feel bad a low in energy - depressed; or we can feel bad but heightened - like your reaction when you first blew up a trading account.
For most traders, controlling emotion is about changing their valence - when they feel bad, they do everything to change that - the trader who after a painful loss, engages in revenge trading seeking a way out from that pain in the hope of recovering it all back; Or the trader who, under anger, rationalizes it by saying “Be calm please, you can’t screw this up! Get calm now!”.
Why is this useless?
Managing emotion isn’t about changing their valence, the X axis - turning painful emotion into a pleasant one -, it’s about playing with the Y axis instead - their intensity.
As a trader, the key isn’t in running away from painful emotions. Yeah, they feel bad but can you really change that with forced positive self-talk? Difficult if the intensity is high.
If your goal is forcing good emotion when you feel pain you’ll end up pursuing short-term gratification. And this leads to all those mistakes you’ve been repeating or that you fall for sometimes.
Think about it: these mistakes mostly tend to happen in high-intensity arousal states, not in calm ones. Even if you feel bad but low in intensity - you’re able to have clear thinking. But when you feel good and high on intensity - like overexcitement to enter a trade - you’ll lose clear thinking and possibly enter an impulsive early trade.
The first trading mistake of your session might be made under a calm state of mind but the continuation of the cycle of mistakes happens as your emotions intensify without a stop.
Forcing a positive narrative and emotions under extreme states of arousal just adds wood to the fire!
So the tip of today is: Stop running away from the pain. Emotions are all needed and healthy, we are the ones who attribute them a value based on our survival instinct. Instead, the next time you feel the need to manage your emotions because you’ve lost control, aim to do one single thing: reduce their intensity by regulating your visceral response.
If you can slow down your breathing (under your control), you take away the fuel the emotion needs to survive and all that’s left is clear thinking.
Happy trading,
Sara
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Good stuff. Thanks. For whatever reason I’m reminded me of this quote : "If I puke in the trash barrel, double our position" - Andy Gochberg
The intense emotions need two things to survive: the associated thoughts and the associated physical response. Pausing to focus on the physical sensation and stabilize the breathing does help. A monk in my courses mentioned something similar. It’s like a quick meditation that gets two birds with one stone