Oct 24, 2011
Volume 28 Issue 8
You have to be able to control yourself. You can't let emotions
get in the way of your thoughts and actions... Warren Buffett
One of the most
difficult aspects of trading is emotional management. For many months, we have
struggled through market and economies that are news-driven, volatile, and
filled with uncertainty. For many, it’s been a real emotional roller coaster.
. To say "don't get emotional" is pointless because everyone
has emotions around money.
What can you do about
your emotions as they apply to trading and investing? Of all the books and
papers I have read or written on trading psychology, there is one aspect that
stands out most clearly to me. This is the condition of living in the past.
I believe that this is one of the most significant obstacles to trading
success.
Why? Because
the brain remembers. The brain imprints loss or gain in a “memory” area called
the temporal lobe, and generates fear or greed as a result of it. The larger
the loss or the gain, the greater the neuronal imprint becomes. Losses are
imprinted as fear and gains are imprinted as greed. Both are equally destructive
to further success with trading.
The real culprit is
memory. It is the memory of losses or gains that stay with the unsuccessful
trader, causing continual mental sabotage and inability to move forward.
The best traders
forget about a loss the minute they take it and move on. They are confident in
their system and their ability to execute it. It is not about the money for
these people. It is about finding a system that will bring them more profits
than losses. The best traders know how to take losses and not become depressed,
angry, jealous, disgusted or defeated. They know how to take gains without
gloating, boasting, or becoming euphoric. They see only the trade they are
about to enter---not the trade that just ended or the one that might be coming in
the future. All past trades are out of sight and out of mind. All future
trades are an illusion.
This is a really
difficult thing to do, but it must be done in order to move forward. If
you are unable to detach from the past and the future, you will continue to be
a victim of fear and greed.
Fear doesn't form in
a vacuum. It is a learned response to a particular event or probability. In the
case of trading, when you have a trade that goes bad, the regret and
frustration can carry over into the next trade. Often, the fear is so
consuming, that you don't enter your next trade. Of course, Murphy's Law
dictates that the trade you don't enter is the one you should have entered,
which only compounds the existing emotional anguish.
Greed creates the
opposite problem. With a couple of consecutive winning trades, the ego enlarges
and invincible feelings overcome logic. This will ultimately lead you to trades
that you normally would not have entered. Finding good trades is hard enough,
while finding poor trades seems to get much easier after a couple of winners.
Emotions cause 'perceptual distortion' where we only see the part of the
picture that our beliefs allow us to see.
The instruction is to
know who you are in this present moment. You are the problem and you are
the solution. Living in the past or the future does nothing but stir up
emotions that impact adversely your trading and other aspects of your life. It
is said that fear blinds one to opportunity and greed blinds one to
danger. Make every effort to be fully present and you may be surprised at
the outcome. It’s the best way to defeat the enemy within you.
The ability to be in
the present moment is a major component of mental wellness…Abraham Maslow
Thanks and Good
Trading!
Janice Dorn,
M.D.,Ph.D.
About the
Author
Janice Dorn, M.D. Ph.D. is a
trader and trading psychiatrist. She has written extensively on all
aspects of trader psychology, longevity and wellness. Additionally,
she coaches her fellow traders. Dr. Dorn also posts at her website: www.thetradingdoctor.com
Semoga bermanfaat.
Eco Syariah
Share