Recently I had a conversation about fear and greed. I was asked how I get over it. This is an interesting question everybody is looking to get an answer for. Yet this question is very general. First of all, we have to really know what we want to ask. We need to know what it is we are seeking the answer for. If we do not know what we want, we end up asking general questions. And as a consequence, we get general quick and dirty answers. "Do not trade based on emotions." It is easy to say "Don't be greedy!" or " Don't let the market scare you out!"
Emotions are a big topic. And all we find are short and quick answers, which every trader has heard at least a dozen times. The first time I got involved with trading, I kept reading this very same thing over and over in every book. It was like a mantra. 'Don't trade based on emotions!' We as traders think that emotions are a bad thing and we need to be completely emotion free. Many books teach to get rid of emotions. Find a mechanical trading system. Well, ideally a trader has the ability to be emotionless (when it comes to taking a position). But we forget we are humans. Emotions are a part of us. And they will always be a part of us. So logical conclusion would be to quit trading, right?
Well, no! I do not want to quit trading, because I am a human.
I was asked about my approach. I personally think we need to understand what emotions are. Where do they come from. Why do we have them. The emotion "Fear" is a safety mechanism. The emotion "Fear" keeps us safe. Fear is the very emotion that made and still makes surviving possible (this was in the past, it still is in present, and most probably will be the case in future). If our ancestors did not have this very emotion, we most probably would not be here as humans. The fear of getting burned makes us treat fire with respect. The fear of getting bitten makes us scared of petting with a Tiger, a Lion or maybe with an Aligator (that is if we are not Crocodile Dundee). I have a friend who is afraid of small dogs and cats. If we know why we have feelings and where they stem from, we may be better equipped in dealing with our emotions.
I personally think the understanding of emotions is a better way to deal with emotions when trading as opposed to ignoring our emotions. It is important to know that the fear of a loss is stronger than the sadness of losing. The degree of emotional pain of losing is stronger compared to the degree of emotional joy when you are winning. Now what does this tell us? Fear and losing have a stronger impact on us than happiness and winning. This is a bad combination (for trading) if you ask me. but taking evolution into perspective, this is the very recipe to survive the threats and dangers in the jungle. This is the result of millions of years of evolution.
Do not get me wrong. I do not say trade based on emotions. Emotions are a bad guide when it comes to trading. I don't say let emotions take control. 'En contraire mon frere'. Know about the feelings. Know how feelings can influence you. Learn to identify the emotions and only after you identified your emotion, deal acordingly with the emotion. I can't tell you how to do that. This is a very personal development. But I can share with you how I approach this.
I let go.
A trade is a trade. I do not give a single trade much value. I am happy if I hit the homerun. but I do not let the happiness become euphoria. Once I identify this is happening, I step back. I am able to do this, because I know there will will be many trades ahead. I know by heart I cannot win all trades. And I also know by heart that I cannot lose all trades.
Do I get sad if I lose? I wish I could say no. I do get sad.
Do I get carried away on a loss? Not at all. Because there are more trades to come.
I am not rushing after the fast pips. I do not need to trade every move. I do not chase a trade. I used to chase my trades. I kept repeating the same mistakes. And eventually I did realize that I was repeating the same thing over and over but expecting different results. And I beleive this is key to understanding the own self and make a change.
This is a big topic and there is much more to write. This topic could easily fill a book. I hope this article is helpful and you enjoyed reading it. There is more to come in a later part.
You'll find part II here.
Hope you enjoyed reading this article. If you have any questions please leave them in the comments section below.
Happy trading,
TT
Keine Kommentare:
Kommentar veröffentlichen