Trading Elements: EMOTIONS (Part 2)

[Joe Ross]

EMOTIONS

We've been looking at the fact that as a human being there is a component working in you that is comprised of the following elements: Your intellect, your emotions, your memory, your imagination, and your will. These elements work together to determine who you are and how you will behave in the market -- actually, in anything and everything you undertake to do. These elements work together and definitely overlap at times. This week we are going to look at "Emotions" to see how this element can defeat you as a trader.

I cannot count how many times I have encountered traders who in my opinion were smarter, better, and more knowledgeable about trading than I am, who seemingly were unable to win in the markets. I was puzzled by this for a long time. From the point of view of intellect, they were able to make excellent and logica trading plans. They could read a chart and tell you everything that was going on. They understood the dynamics of markets. They understood what they were seeing, how human behavior acts and reacts in the marketplace. They understood indicators and how and when to use them, yet they couldn't win at trading.

They could develop logical trading methods and systems. They could recite all sorts of statistics about the markets in which they traded. They could win with backtesting and simulated trading, piling up huge amounts of make-believe money. Yet, something happened to them when they traded with real money on the line. Suddenly they couldn't see anything on a chart. They were unsure of any of the tools they normally used for winning in their simulated trading. It was as if they came apart at the seams as soon as real money was involved.

I thought about this for a long time. What happens to these people when the trading is real? What is it that goes wrong with all their plans, hopes and dreams?

Perhaps a good way to explain it is to compare it with falling in love.

A man and a woman meet and because each is good looking, popular and in every way outwardly attractive they become infatuated with one another and "fall in love??" Maybe they just fall in heat, but that is not my point here. Because of pure infatuation, neither is willing to see beyond the physical.

Underneath her outward appearance the woman is really a nag. She is super critical and controlling. Others can see it but the man in love cannot. Love has made him blind to reality.

Underneath his outward appearance the man is a cowardly bully, a womanizer and is know to drink to excess. Others can see it but the woman in love cannot. Love has made her blind to reality.

In both cases, emotions cause the persons to become blind. They are no longer thinking rationally. Their intellect and logic has gone out the window and all that remains is an emotional lump of human blindness.

I have come to believe that the same sort of thing happens to traders when real money is on the line. All their market prowess goes out the window and they no longer see what is really happening in the market. They have lost the big picture. They have strayed from their plan. They have abandoned their method or system and they are now simply reacting. They are no longer proactive, they have become entirely reactive.

Some traders attempt to overcome this human fault by trading mechanical systems. The problem here is that they never actually learn how to trade. They become entirely dependent on the whims of the system they are trading. When the system no longer works, they don't have a clue as to what to do next. But they do have an out: They can blame their losses on the system and thereby save their pride. Lying to oneself by blaming the system only creates a new level of under-confidence, if I may call it that. Whatever courage of their convictions may have existed has now fallen to a lower level. The trader who blames his system rather than himself, knows he is lying but he does it to save face -- even if only to himself.

It takes work and practice to separate the emotions of trading from the logic of trading. But it can be done.

I love to watch the Rambo movies from the point of view of what can be done with trading. The character Rambo is a well-oiled fighting machine. He is entirely focused and unemotional. He has a job to do and knows how to handle adversity. He can deal with any eventuality. Emotions are not a part of his character. He is simply fiercely determined to get the job done. Rambo should be the role-model for everyone who aspires to trade.

How did Rambo get to be an unemotional fighting machine? He did it through intensive combat training. This is not unlike what a trader must do: Train himself to execute without emotion. Once you learn to take the emotion out of your trading, you will find that trading is amazingly simple. You will be able to think and act logically while you make money trading.

Joe Ross

 

[fxmarkets]

EMOTIONS

It takes work and practice to separate the emotions of trading from the logic of trading. But it can be done.



Joe Ross

hmm, no doubt that western cultures are obsessed with "external physical material aspects" in their whole life until perhaps they reach an age where they might be fortunate enough to step back and question it all... and they way things are going the future generations are being pumped/conditioned to "buy" into this way of living even more so. Its good for business.

So as you have highlighted the external physical aspect that clouds people from themselves Joe, what techniques would you put forward that would enable individuals to transcend their westernised material conditioning.

Shouldn't they just pretend that if they dont follow the rules that they will get beaten with a big stick? A very big one.. and would that technique work? People need to recondition themselves, discipline... whats the best way to drive that into a human ? You mention Rambo and no doubt those types are broken to breaking point and beyond. some really die trying. Do aspiring traders need to go through a similar wall of being broken , by themselves? whose clubbing them with the stick ?

Or would a more reflective way of gaining discipline through understanding of own behaviour , be a favoured way to go.... no doubt though the military have spent millions upon millions learning techniques that will programme a human to do things which quite frankly when they do them ends up with their very existence ending that moment. So they are very,very good.

Interesting post. I cant see a quick fix though Joe without getting the military involved can you ? How do we take the first step...



Fx.

 

[fxmarkets]

A question Joe....... did you go through emotional trading phase ? how long did it last and what changed in you , did you use various techniques, or receive /gain insight into specific steps that you followed to enable change. execute without emotion how did you personally achieve this state of operation?

fx.

 

[Joe Ross]

Dear friends at Trade2Win,

I rarely have time to respond to questions or comments made to posts I make on Trade2Win. I beg your forgiveness for that—I am usually up to my ears in “busy.”

I read Fx’s post and question and feel that I should explain how it is that I came to be able to achieve a state of emotionless discipline while trading.

Fx asked who would wield the stick that would break a trader and turn him/her into a Rambo type person—totally intent and focused on the task at hand.

In my own case it was the market that wielded the stick. When you are beaten up enough times you do one of two things: you quit, or you submit. In my case, it was submission. It was the realization that I could not fight the market, to win I had to get in step with the market.

How I achieved that is in keeping with what Fx termed a “more reflective way of gaining discipline through understanding of own behaviour.”

To get in step with the market—to acquire the necessary discipline involved a very deep exploration and introspection into who I am. I had to discover what made me behave the way I did, for I was a complete rebel against rules, and authority. What I had to discover was why! It meant examining and reliving every hurt and painful situation that repetitive deep meditative thought could reveal.

I had to employ meaningful and sincere forgiveness for everyone and anyone who in my mind had ever done me wrong—anyone who had ever hurt me in any way. I had to drag old skeletons out of the closet and boot them out of my life. I had root out the problems and face them squarely.

When I had done that and continue to do that, I began to have faith in myself and faith in what I was doing. You might say I developed the courage of my convictions. I knew how to trade I simply had to believe it. But there were all these old hurts standing in the way. Having been a rebel, I had incurred a plethora of bad experiences. There were far too many of those to recount here. But I was full of pain and didn’t realize it until I opened myself up to self-examination.

I can tell you this for certain: being in the military did not give me what I needed although I am sure my unconscious search for identity caused me to join the navy.

My advice to all who aspire to becoming first-class traders is to take the time to find out who you are and what motivates you. Dig out the hurts and the pains—they are there whether or not you will admit to them. Confront them and deal with them. And if it means forgiving those who hurt you, do so. Doing so will set you free—free to fulfill who you are and your purpose in life, which may turn out to be not trading at all.

All the best to all of you,

JR

 

[fxmarkets]

thanks for your time Joe I'm sure many will find your repsonse helpful. nice one..

fx.

 

[charliechan]

A man and a woman meet and because each is good looking, popular and in every way outwardly attractive they become infatuated with one another and "fall in love??"Maybe they just fall in heat, but that is not my point here.

joe - this is a classic!! youve got a great sense of humour as well as a neat way of getting your ideas across clearly!!

 

[charliechan]

i do think that the level of emotional interference in a trader is related to the complexity or granularity of market information used to base decisions on.

a simple ma cross over system will be relatively easy to execute compared to a 100% discretional method where no pre defined 'set-ups' as such are used.

 

[CJIA]

re

Trade what you see, not what you think! -- (Joe Ross)

Trade what you see not what other parts of your mind think and want to see!--(CJIA)

 

[contrakt]

EMOTIONS
I love to watch the Rambo movies from the point of view of what can be done with trading. The character Rambo is a well-oiled fighting machine. He is entirely focused and unemotional. He has a job to do and knows how to handle adversity. He can deal with any eventuality. Emotions are not a part of his character. He is simply fiercely determined to get the job done. Rambo should be the role-model for everyone who aspires to trade.

How did Rambo get to be an unemotional fighting machine? He did it through intensive combat training. This is not unlike what a trader must do: Train himself to execute without emotion. Once you learn to take the emotion out of your trading, you will find that trading is amazingly simple. You will be able to think and act logically while you make money trading.

Joe Ross

100%. You better get good at whatever you do in the market with your money.
What I like about the rambo analogy is Rambo's portrayed effectiveness.He wasn't born that way. So somewhere along the line he trained very purposely to become as skilled as he is at his game. You see, I train to be effective too.
While at the same time I can easily imagine a life without ever seeing this oily man running around all oppressed excited.

 

[15 min tlb]

EMOTIONS

We've been looking at the fact that as a human being there is a component working in you that is comprised of the following elements: Your intellect, your emotions, your memory, your imagination, and your will. These elements work together to determine who you are and how you will behave in the market -- actually, in anything and everything you undertake to do. These elements work together and definitely overlap at times. This week we are going to look at "Emotions" to see how this element can defeat you as a trader.

I cannot count how many times I have encountered traders who in my opinion were smarter, better, and more knowledgeable about trading than I am, who seemingly were unable to win in the markets. I was puzzled by this for a long time. From the point of view of intellect, they were able to make excellent and logica trading plans. They could read a chart and tell you everything that was going on. They understood the dynamics of markets. They understood what they were seeing, how human behavior acts and reacts in the marketplace. They understood indicators and how and when to use them, yet they couldn't win at trading.

They could develop logical trading methods and systems. They could recite all sorts of statistics about the markets in which they traded. They could win with backtesting and simulated trading, piling up huge amounts of make-believe money. Yet, something happened to them when they traded with real money on the line. Suddenly they couldn't see anything on a chart. They were unsure of any of the tools they normally used for winning in their simulated trading. It was as if they came apart at the seams as soon as real money was involved.

I thought about this for a long time. What happens to these people when the trading is real? What is it that goes wrong with all their plans, hopes and dreams?

Perhaps a good way to explain it is to compare it with falling in love.

A man and a woman meet and because each is good looking, popular and in every way outwardly attractive they become infatuated with one another and "fall in love??" Maybe they just fall in heat, but that is not my point here. Because of pure infatuation, neither is willing to see beyond the physical.

Underneath her outward appearance the woman is really a nag. She is super critical and controlling. Others can see it but the man in love cannot. Love has made him blind to reality.

Underneath his outward appearance the man is a cowardly bully, a womanizer and is know to drink to excess. Others can see it but the woman in love cannot. Love has made her blind to reality.

In both cases, emotions cause the persons to become blind. They are no longer thinking rationally. Their intellect and logic has gone out the window and all that remains is an emotional lump of human blindness.

I have come to believe that the same sort of thing happens to traders when real money is on the line. All their market prowess goes out the window and they no longer see what is really happening in the market. They have lost the big picture. They have strayed from their plan. They have abandoned their method or system and they are now simply reacting. They are no longer proactive, they have become entirely reactive.

Some traders attempt to overcome this human fault by trading mechanical systems. The problem here is that they never actually learn how to trade. They become entirely dependent on the whims of the system they are trading. When the system no longer works, they don't have a clue as to what to do next. But they do have an out: They can blame their losses on the system and thereby save their pride. Lying to oneself by blaming the system only creates a new level of under-confidence, if I may call it that. Whatever courage of their convictions may have existed has now fallen to a lower level. The trader who blames his system rather than himself, knows he is lying but he does it to save face -- even if only to himself.

It takes work and practice to separate the emotions of trading from the logic of trading. But it can be done.

I love to watch the Rambo movies from the point of view of what can be done with trading. The character Rambo is a well-oiled fighting machine. He is entirely focused and unemotional. He has a job to do and knows how to handle adversity. He can deal with any eventuality. Emotions are not a part of his character. He is simply fiercely determined to get the job done. Rambo should be the role-model for everyone who aspires to trade.

How did Rambo get to be an unemotional fighting machine? He did it through intensive combat training. This is not unlike what a trader must do: Train himself to execute without emotion. Once you learn to take the emotion out of your trading, you will find that trading is amazingly simple. You will be able to think and act logically while you make money trading.

Joe Ross

A good post explaining how traders become overwhelmed by emotions.A normal human instinctive trait is to protect one's account and win at any price ,even if t means throwing the game plan out of the window.