Emotions While Trading

[traderpsyches]

DB's answer covers almost innumerable helpful hints - imo.

Things people tend to overlook include
1) what time do I really have to trade
2) when am I most mentally and physically available
3) how patient am I? how hyper am I?
4) how patient can I be?
5) how much risk can I take on any one trade without getting overloaded with anxiety?
---
and then
1) How systematic am I. How comfortable am I with a formula?
2) What do I already know that I can capitalize on?

THIS is the big one. The standard pattern is to run into a series of losers and change the market or timeframe that is traded. After a couple of rounds of this, it isn't likely to be the strategy/tactics. This is when it is time to look back at your experience and ask "what feels right to me?" NOT what I am told by someone else but what timeframe pace, rhythm etc. It takes some guts to listen to and essentially honor your own experience but that is really the clue.

If you have less than 2-3 years of experience, then you have to go with a trading educator who teaches a methodology that seems right and is run by a person who you feel good about it.

All of this is a judgment call and as such, we all have the tendency to doubt ourselves. The best answer I can give is review some of DB's (jason's?) questions above along with my comments and then realize that if you have more than 3 years of experience, chances are you know lots more than you think you do.

One more thought - it is usually best to throw out some number of indicators and charts. Invariably everyone clutters up their strategy and tactics with more stuff than they need.

I hope that helps - at least a little.

[forsearch]

Denise,

I hope you don't mind if I post a link to a recording of one of your CME webinars...

Peak Performance Electronic Trading - How thoughts, actions and emotions govern your trading

I think traders might benefit from watching you, Brett Steenbarger and Doug Hirschhorn discuss this topic in depth.

-fs

[traderpsyches]

-fs

No I don't mind.

There is a new one at the CME from 2007 versus 2006.

It is more comprehensive regarding our approach to advanced trading psychology.

http://www.cme.com/edu/events/od/general.html

I don't see how to make that a link but I guess anyone who is interested can copy it.

TP aka DKS

[forsearch]

Here's a direct link to your newer CME webinar for all to view:

Handling Exaggerated Trading Emotions: Issues & Answers

Hope this helps.

-fs

[Wilson]

Here's a good article from mypivots forum.




You can easily judge the character of a man by how he treats those who can do nothing for him.
- - Malcolm Forbes -


A Time and Place For Emotions


Winning traders are extremely disciplined. They astutely study the markets, devise a trading plan, and follow it. They control their impulse to abandon their plans prematurely, and they don't allow emotions, such as fear and greed, to influence their trading decisions. In the trading profession, emotions often get a bad rap, however. There are critical moments of investing when it's vital to control your emotions, but there are also times when you can let your emotions run wild.

Trading can be broken down into two basic phases: Planning and Execution. In the planning phase, a trader creatively searches for trading ideas and develops a viable trading plan. During the planning phase, you can feel free to experience a variety of emotions. When you execute your trading plan, though, it's essential to control your emotions and impulses. Once you plan the trade, you must trade the plan in order to take home profits.

During the planning stage, your goal is to find new trading strategies. It's a creative process, and to find them, you cannot be closed off and rigid. Not only is it all right to allow your emotions to guide you, it may be necessary. It's all right to psych yourself up. Get excited and enthusiastic. You need the energy to do the homework to discover an innovative idea. Depending on your trading style, you need energy to backtest, scan charts, or read financial reports. Go ahead and tell yourself encouraging thoughts, such as "I'm a creative person. If I let my imagination run freely, I'll think of a brilliant idea." When you're in the creative planning stage, you can think emotionally.

As you search for ideas, feel free to impulsively switch from one idea to the next. Combine and recombine ideas. What's the harm? You're trying to find a new idea. At some point in the creative process, you might even want to show some self-reproach or even paranoia. You might want to play Devil's Advocate as you try to figure out what might go wrong. In the planning stage, it's useful to defensively think of every potential adverse event that may ruin your trading plan. A little skepticism can only help matters during the planning phase.

At some point during the planning phase, though, you must stop searching and deliberating and decide on a plan. You must specify when to enter and when to exit, and determine the indicators that will allow you to monitor the success of your trading plan. Once you have a plan devised, your emotions and impulses must be controlled. At some point, you must stop thinking emotionally, and move into a rational state of mind. You must carefully enter as planned, monitor the market action, and effortlessly exit should the markets go against you, or wait for your plan to come to fruition.

Emotions aren't always a distraction while trading. There is a time and place for everything, and emotions can motivate us to develop creative ideas. But once you move from the planning to the execution stage, it's essential to trade with discipline. The disciplined trader is the winning trader.