As hundreds and thousands of articles have been written on the subject of trading the markets, and with the emergence of new financial instruments every day, I feel compelled to put together a dissertation on the most important element of trading, the emotional effect.
Before detailing the key elements, I will offer to you the thoughts of two prominent individuals. They do not need any introduction, as their work is known and appreciated all over the world. I am sure you will love their insight into the human psyche.
“When dealing with people, remember you are not dealing with creatures of logic but creatures of emotion”. Dale Carnegie (1888-1955)
?Let’s not forget that the little emotions are the great captains of our lives and we obey them without realizing it”. Vincent Van Gogh (1853-1890)
In a world apparently dominated by logic, it is very interesting to find such ?heretic? ideas. There is nothing more debilitating than the thought of us acting not on our heavily trained conscious, but rather on the unknown subconscious impulses.
I would like to add just one more fact to my presentation, in order for you to fully grasp the importance of this new approach to trading and in general to any business activity.
The Institute for Health and Human Potential, with offices in U.S.A., Canada and Australia is a research and learning organization that uses Emotional Intelligence to leverage performance and leadership. Fortune 500 companies, the world’s top business schools, professional athletes and Olympic medallists seek their expertise.
According to their studies, “Research tracking over 160 high performing individuals in a variety of industries and job levels revealed that emotional quotient was two times more important in contributing to excellence than intellect and expertise alone” Shocking? Not at all. It is our way to act on impulse, without questioning the triggers.
It is well known already that the two emotions dominating trading are GREED and FEAR. What is less grasped is the extent to which these emotions influence our decisions.
While amateur traders are greedy when they lose and fearful when they win, professional operators have an exactly opposite attitude, being fearful when losing and greedy when winning.
While simple psychological training could help you discipline your impulse reactions, it is the experience you get ?in the ring? that makes you understand how to play with these primal emotions.
We all hate to lose, not necessarily money. The sentiment is very powerful. ALL professional operators are well versed in dealing with it day in and day out. Although they have been through tense moments due to financial losses, they have learned the most important rule in trading the markets: losses are the COST OF DOING BUSINESS.
They have a high emotional management procedure and are trained to implement it no matter how hard their ?ego? may suffer.
This is easier said than done, as emotions kick in and all theory crash and burn together with any trading plan.
Here you have some easy steps to help you start taming your emotional horses.
- What you see is NOT what you get, as opposed to what you have been taught all your life. The way you act is just a consequence of years and years of education and interaction with others and not your genuine attitude. You are the product of an outside education, not necessarily positive.
- In the long run, your FOREX business is just PART of your whole life, together with your family, friends, hobbies, long-term projects and various other activities. I personally use a very powerful ?mantra? when in pain following a loss. LIVE TO FIGHT ANOTHER DAY! – Never lose sight of the general picture. Read more…