Top Ten Trading Mistakes/Solutions - Mistakes # 7, They Trade With Their Emotions and NOT Their Intellect

Last week we covered the sixth topic related to traders who brought their past into their trading present. The mistakes discussed come from the top ten that come up repetitively in my conversations with traders.

Mistakes that apply to new traders will be marked will “N” where as all the rest apply to all traders at any trading level but all are important to be aware of.

Mistakes

#1(N) No Financial Preparedness

#2 (N) A Solid Trading Strategy - There is none or too many

#3 - Trading is Easy – early wins

#4 - They neglect to develop a detailed game plan to win

#5 - They neglect to set rules that will keep them safe

#6 - Traders possess patterns on how they dealt with success and failure in the past that now effect there trading today 

Note: Mistakes will be list in priority order with the most important being the last. 

As a reminder here is the Re-Cap of 1 through 6:

·        Have a plan for how your money is spent in your trading day and life

·        Set up rules to stick to the plan

·        Minimize your losses and manage them

·        Focus on one strategy till it’s mastered

·        Become a “digger” and fine tune each trade

·        Trading is what you make it, have fun and learn

·        Be a learning sponge

·        Be flexible and change with the markets

·        Create a detailed game plan to win – Profits, risk rewards, targets, why you are trading, markets, size, rewards, penalties

·        Create Rules that will protect your cash. Find distinctions that fine-tune a trade. Work to be as precise as you can.

·        Your past beliefs, experiences, successes and failures will show up in today’s trading.  Just being aware of them helps to keep them in control.

Mistake #7 – They trade with their emotions and not their intellect.

When emotions get in the way of a trade intellect goes out the window.  It’s important to remember that emotions override intellect or what you are thinking. You can know what to do, have a plan to do it and the market can even be in the right position to take the perfect trade but if emotions come up at any point sticking to the plan is almost impossible.

Have you ever thought why so may now gravitating to any form of automatic trading systems? It’s because they remove they eliminated all emotions and assist the trader to sticking to their plan.

The topic of emotions, is not one, new trade’s are aware of at the beginning of their trading career. Experienced traders know how critical emotions are and work hard to stay clear of them. Soon into a trading career both the new and experienced traders realize how important mastering emotions becomes. It IS the most important part of trading and needs special attention. Emotions can affect each and every part of the trade and successes and failures then follow this.

An additional unwanted side effect of trading emotions can manifest into physical unforeseen problems resulting in poor sleep, anxiety, headaches, stomach problems and even ulcers.  When the mind is filled with emotions and is followed by stress, stress then creates pressures in the body that can release stomach acid, which creates the perfect environment for ulcers.

So becoming the master of your emotions is important not only to your mind but your body as well.

Emotions can become the number one killer of a good trader at ANY stage of their career. Time doesn’t always insure that a trader is void of the emotional entanglements trading brings on.  I have seen new traders that can’t get past the emotions as they trade and those with lots of experience and years of successful trading fall prey to emotions.  It can happen quickly and all of a sudden, with no warning even with years of successful trading. All of a sudden successes turn into mental anguish and out of control losses, one bad trade after another and repetitive mistakes that through a trader into a tailspin.

Emotions take over and leave the minds consciousness paralyzed to react. Over time with emotional trading in the forefront, confidence deteriorates and losses accumulate.

So how does this happen?

The mind is very susceptible to anything that it can attach to a “pain” of any kind. 

Lets call them “pain centers” of the mind. They come from past experiences that cause a pain, like playing baseball in little league, coming to bat, swinging and missing the ball three times for the out that results in a losing the game for the team. That’s a big emotional scar for anyone, causing a pain center related to losing.

So now losing anything in general gets stored in the brain in this center for “losses”, any kind of losses. Depending on the emotional intensity the ball game caused at the time and the experiences of the losses over time will determine how impactful trading losses will have on the mind and they too get stored and accumulated with all the other losses stored in this pain center.  This is the stacking process the mind does so well. The mind doesn’t have the ability to ONLY hold onto good things it holds on to all experiences good and bad.  

Expand the pain-center of losing with our overall social conditioning of being right verses wrong, success verses failure and we have a lethal concoction perfect to store away and compound the “Trading BLOCK.”

Anything we experience during trading that falls into an area of pain will compound and attach to the others being stored and increase an intensity in that area. This in turn generates a reaction and the greater the reaction the greater the intensity of the emotional block. 

The emotional reaction the mind creates to these blocks come in the form of fear apprehension, uncertainty, and hesitation. The mind is working to protect itself based on the accumulation of the past similar pains.  I call this reaction stage “protection mode” an amazing innate quality we all have.  Our bodies have all sorts of amazing built-in mechanics for all our body parts.  Lungs to help us breath, a liver for detoxing, a heart to pump blood and a mind where thoughts conscious and subconscious guide the whole works. Each part has it’s own build-in a form of protection so why shouldn’t the mind have a way to protect us if it knows it’s going into harms way?

At some level emotional blocks protect us from harm.  It’s just in some careers like in trading where protection mode works against us and not for us. 

How does a trader know emotions are in control?

If a trader has one intentional thought in mind and yet executes it differently, usually it’s based on an emotion that is taking over what the conscious mind wants to do. The mind is reacting from “protection” mode and working to avoid the pain it thinks it will feel if it does what the conscious mind wants to.

So how do you control this?

That will depend on how strong the block is. Mostly the emotion of uncertainty tends to be the one most common at the beginning of the trade so by creating more certainty can help.  The more certainty the better and the more the conscious mind has to hold onto when reacting.

If this doesn’t seem to help than it’s an indication that the emotion block is very strong and intensity more than the conscious mind can fight.  In this case removing the block can happen with time and one success after another as the strength of certainty builds.  Should that not work than other measures should be sought after, in the form of coaching to learn proven techniques that remove the block altogether.

Great traders trade from their conscious intellect not their emotions.

  Re-Cap

• Be aware if your conscious mind is really in control
• Work to create as much certainty as you can in each and every trade
• Don’t be stubborn and get help if you need it
• Be diligent in your trading approach
• Get resourceful in mastering your emotions
• Do whatever it takes to overcome the problem
• Try the “BlockBuster” Package for the most value to learn to the technique that will remove the block

Have fun!  AND  In the meantime Great Trading!