How do you remove emotion from trading?

tech/a said:

I think this is simpler to avercome than most realise.

Just trade in parcel sizes which are small enough not to cause grief if your stock moves against you.
Over trading and trading more than is comfortable is in my view strongly correlated to that roller coaster ride.

Make your million over a few years rather than weeks!

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markrmau said:

As much as I try to suppress/ignore it I have to admit that I have some feelings of elation (depression) when a stock I have selected goes up (down).

Obviously this is not good for trading. You want to be completely objective and impartial.

How do others deal with this? Is it even possible to eliminate it? Could hypnotherapy help - similar to an alcohol/gambling addiction?

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Nick Radge said:

Morning Milko and Happy Easter to all ASF'ers.

Yes I saw a therapist for quite some time. 1-session once a week for about 8-months if I remember. In my opinion psychology is the make or break of a trader and the easiest way around the conscious side of your mind is:

(1) trade a method/style/instruement that suits YOU. You need to feel comfortable and you need to understand why it can make money over the longer term. If you intuitively understand why it will make money and you're comfy executing the plan, then you will have a higher chance of making it.

(2) As tech/a rightly says, trade small enough that it just doesn't matter if its a win or a loss. Think of trading as controling the losses and simply forget about the profits. If they come, they come. You can also up the ante when you get better prepared. When times get tough there are two actions to take (a) trade small and then even smaller, so it doesn't even hurt. (b) use wider stops so daily market noise will not take you on a roller coaster.

The above is the simple CONSCIOUS side. These types of things are what you will get when you attend a seminar on psychology, although I don't beleive these are value at all and would avoid them. I have strong opinion sabout these types of seminars, mainly because of what I'm about to say below.

The second side of th mind - and the part that smacked me between the eye's when I saw the therapist - is that most of the major issues are sub-conscious. These, I beleive, cannot be seen or solved in some kind of seminar. These are the things that are deep down and driving you. You cannot see these traits yourself because you hide them away. They exist because of your upbringing and your sub-consious values and beliefs. Its these one's that do the major damage, not only to your trading but to your life in general.

The one thing that I realised is that I'm not aware of my sub-conscious personality traits. Everything you do in your life, trading or otherwise, will come from these sub-conscious issues and if you cannot recognise them (or should I say want to recognise them, then you will, over time, defeat yourself in any endeavor you pursue - trading included. I wrote an article a few years ago on the conflict of a smoker who plays the pokies. Perhaps on another thread we can discuss that then I'll provide the answer. Whilst its not trading related in its basis, its is directly related to trading, as is all these sub-conscious issues.

My personality traits had implications on my trading without a doubt. To not deal with these would've, eventually, destroyed my trading but more importantly my family relationships.

The only way to get the real sub-conscious answers is to have one-to-one sessions. There is absolutely no way that a seminar or course can delve into your sub-conscious.

One source of highly recommended information can be found here:

www.brettsteenbarger.com

The other source is Mark Douglas' Trading In The Zone. But don't just read this book. I've read it some 20 or 30 times (I actually have the pre-book manuscript) and I can recite it verbatim. I think the large difference comes from really understanding, not just reading.

Nick

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David123 said:

hi, i just stick to plan, no emotion in it... buy here... sell here... so dont change rules... just stick to plan...simple!


cheers

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ducati916 said:

You will never eliminate *emotion* from trading/investing.
Emotion is, and always will be a basic human experience. What you can do is learn, and understand how emotion and all other psychological components can be utilized effectively, to augment, rather than detract from the goal.

Emotion, and emotional responses are located in the oldest genetic areas of our central nervous system, the *limbic system*. Detailed anatomical knowledge is not a prerequisite, however understanding the *function* is useful, and with understanding, you can learn to manipulate the *state* of your *sub-conscious*

In no particular order, the areas that must be addressed;
Motivation
Goal-setting
Vizualization
Training and warm-up
Arousal
Concentration & Relaxation
Competition (Trading & Timeframes)
Attribution (testing, systems, records)
Teamwork (team sport, or individual endeavour?)

As can be surmised, trading, and particularly trading in short time frames has a very close link with professional sports, and prepping for competition.
However many of the issues cross all timeframes, with some having stronger links into the longer time frames.

I actually wrote about this subject some three years ago on Reef, but have some new thoughts to the subject, and so will post the revised edition if you will.

Just returning however to the conscious contrasted with the sub-conscious.
As an easy example;

When you first learn a skill, in this case a motor skill, you learn via the cognitive centres in the brain, viz. the cerebral cortex.
Once you have learned the skill, it becomes second nature, or reflexive, and is shifted from the cortex to the sub-conscious areas........Thalamus, Pons, Cerebelleum, etc.

Example;
Learning to drive a car, initially, we concentrate very hard on the mechanical aspects, changing gear, indicators, clutch control etc.

Once we have been driving for a period of time, we concentrate on talking on our mobile phone, doing our make-up on the way to work, finding juniors lunch that he's left at home etc.

When Douglas et al talk about *Trading in the zone* they are referring to trading on automatic pilot, trading sub-consciously.
Professional athletes, talk about the *zone* in exactly the same way. Golfers, Tennis, Racing drivers, Sprinters, all have their optimal performance zone. It is this zone that *professional* traders can also occupy.

The same way that professional athletes increasingly rely on psychological training and coaches to teach them how to achieve that zone consistently, so can traders.

jog on
d998

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I would like to add something;
as we intellectually know, a decision made in the spur of the moment is invariably wrong.

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