Tuesday, April 12, 2005
Traders are From Mars
In the last post, I said
For a trader to recognize the waves of emotion and reject them in favor of riding the market waves means transforming negative behaviors into positive attitudes and effective actions.
How do you recognize emotion? What is an emotion anyway?
Our body is a complex sensor, with our eyes, ears, mouth, skin, nose relaying simple data to the brain about what is going on around it. Synapses move the signal along to the brain, where it is logged in, significance attached, and a response created and relayed. A form of actio et reactio.
image: Limbic System
The James-Lange Model better fits recent findingsSo emotion can be thought of as a reactive wave. Examine a recent negative emotional experience during trading. Perhaps overtaken by a wave of anger, you berate yourself. Not yet spent, this emotional wave harkens a memory from your youth when you miserably lost a sporting event.
Wait. What does an memory from 20 years ago have to do with a trade you made today?
Nothing. Absolutely nothing. But the emotional "echo", created in the limbic brain long long ago, has spent years compounding itself with other similar events, and no doubt had *its* origin in a prior, unremembered event. In this example, the pain of a losing trade is made equivalent to a past pattern of loss. This form of repetitive behavior serves no creative purpose. It is a simple emotional impulse that once had a use, but rationally no longer does.
Ari Kiev in
this NYMEX presentation (Second link from top, "Psychology of Risk") says, "When you feel trading anxiety, start the stopwatch". What he means is that emotional impulses are waves with a very short time cycle. Simply timing your emotional response (be it anger, panic, euphoria, elation, or any other "emotion") will prove it is short lived.
Knowing this, it becomes useful to recognize your particular "emotional forms" earlier and earlier in their cycle. By witnessing your impulse to display anger, dejection, euphoria, etc, you see its arrival, its peak, and its passing. You become free to choose instead to
not react, clearing the way for a rational response. You begin to experience for yourself that level-headed trading has a higher probability of success.
Our intellectually focused work has literally put us "out of touch" with our feelings. Traders are from Mars! By observing how your body responds during an emotional impulsive wave event isn't touchy-feely. With focus and persistent practice, it can speed you towards your goal of being a Trader in the Zone. More in the next post.
Labels: attitude
