We often talk about how it’s the “emotional” game in trading that is so hard, or that one must “trade without emotion”, etc. Those are easy things to say, and they seem sensible to a point. But if you stop to consider what emotions actually are, none of it really makes any sense.

For starters, emotions aren’t even real things. What we perceive as emotions, is really just chemicals released by the brain flooding through our body. Much like how what we perceive as sound, is actually just vibrations in the air around us. But with emotions it can be easy to get all consumed by them, to feel as though your world is crashing down around you when something goes wrong, or that you are unstoppable when something goes right. And besides, which comes first? Is it the emotion that happens and then the chemicals flood our brain, or is it the chemicals that *cause* the emotion? Why does any of this happen, and what can we do about it?

I stumbled upon an interesting video on this subject the other day. It actually even references traders, which I found quite surprising!

Definitely worth a watch when you have a few free minutes. But the primary component I want to point out here and leave you with, is that emotions aren’t actually real. They are nothing more than the manifestation of chemicals in our bloodstream. Which means that as soon as those chemicals have subsided, the emotion will, too. This is an excellent thing to remember the next time you find yourself going “on tilt” for example (trading angry, revenge trading, etc.).

It is however something that requires a fair amount of practice to get good at controlling in the moment. As anyone can tell you who’s ever gotten into a fight with a significant other only to later wonder “WTF was I doing saying stuff like that??”, it’s easy to see later but very hard to interrupt in the moment.

My suggestion is to work on it. Don’t expect to master it straight away, any more than you would expect to master trading straight away. Think back to a time when you got highly emotionally charged in trading, and consider the signs. The physical signs within your body. Can you identify any? Maybe a clenched fist? Or a tightness in your chest? Sweaty palms, a desire to not look at the screen, etc. It could be anything but just identify something you see as consistent, and then watch for that.

The next time you observe it, say so. Out loud. Speaking things out loud in your actual voice is an extremely powerful and effective tool at manipulating yourself (for better OR worse!) and in this case, it can be the first step in doing something about the emotional firestorm about to hit.

Sometimes I find that just actively, verbally describing whatever I’m feeling (“Wow my palms feel hot”, “I feel like I can’t look at my P&L right now”, etc.) is enough to do a “pattern interrupt” for just a moment, and allow me to recognize that this is something I need to act on. Maybe I need to get flat, or take a break, or even shut down for the day. But if I manage to catch it quickly, it can give me just a momentary window of clarity, to take that action and prevent further damage.

But again, this takes practice. It’s a process, like everything else we do, and you’re going to make mistakes. That’s OK! The important thing is that you consciously put effort into “controlling” your emotions, not by dictating when they happen or not, or by being a robot who has none, but by understanding what they are, where they come from, and how it is in fact possible to disrupt the chemical process in your body just enough, to minimize the effects they’ll have on you.

Until next time, good trading!

Jonathan van Clute
Community Manager, Trading Research Group