Getting a grip on Emotion
How easy is it to learn to control your emotions while trading?
Reason I ask is because I know myself enough to say that while just about every facet of being a trader sounds like a perfect fit to what I want from a career/ and my abilities, one aspect that seems to be a huge mismatch is my nervous/stressed mindset.
A few examples come to mind:
- Poker: I usually don't bluff, but when I do I completely stop breathing, my hands shake, and my heart beats uncontrollably.
2.) Soccer games: when watching my team play (which I place much of my emotion in), I am continually in a nail biting state.
3.) Tests: usually I study so hard or know the material so well that my slight nerves are easily overcome when I begin speeding through the problems. However, there have been a few finals where the night before I was so nervous I couldn't sleep more than a few hours despite laying in bed for many hours more.
Now I realize these examples aren't that uncommon in the general population, but I'm wondering if they would be uncommon for the typical trader? I just figure that when your trading on your career or even your own capital that things like those mentioned above shouldn't even come close to being nerve racking for the typical professional trader.
Am I correct in my assumption?
Also, is it relatively easy to learn to master your emotions or does it tend to be a very hard skill to learn? In other words is it more up to nature or is a trader in this sense not necessarily always born?
Swing trade or algo trade, otherwise your mindset will only hurt you! Or, pick up Mark Douglas' "Trading in the Zone" or "The Disciplined Trader" and read them RELIGIOUSLY, aka The Gospel According to Mark...
I got over it after a while. I lost half my account within the first two months of starting trading so after that I have been pretty good at controlling myself. I still feel pretty good after hitting a nice trade, but the lows aren't as low and devastating as they once were. I have a low leverage, passive management style strategy, which I have found more comfortable than day trading. Finding a comfort zone is key.
You get used to it--the highs and lows, that is. You get addicted to it in a way, I guess. Like most addicts, though, you're going to build up a tolerance to your drug of choice: adrenaline.
Over time, it's going to take more and more to phase you. So long as you know when to unplug, you'll be fine.
Play poker religiously. It's the best thing to develop control. Develop the discipline have good tightness and aggression stats, and never go on tilt.
I think it's easier to overcome emotion in trading these days (notice I said "easier" and not "easy") because of the tools available to traders today that didn't exist even 20 years ago. With computers, it is much simpler to set up a "red-light, green-light" type system and just let the machine do everything for you.
It sounds as though you might be the personality type prone toward "paralysis by analysis". This might be a plus in the quant trading field, but it's a big minus in every other type of trading. Just realize that trading isn't for everyone, and that you might be better suited to a more traditional IB role.
[quote] you might be better suited to a more traditional IB role.[quote]
Just you saying that makes me 10 times more motivated to try everything in my power to become a trader. : )
Seriously, if banking is all I'm cut out for then I'd rather go back to school for four years as an engineer or something. Starting out as an analyst with mundane, 120 hour work weeks only to shoot for similar work at PE or the salesy role as a VP/MD is not something I would ever want to follow as a career path. If anything, the emotional aspect of trading draws me in.
While I may have trouble controlling it, the idea of waking up either nervous/ or excited for the next days market opportunities would greatly exceed the risk-averse but mundane IBD routine of 18 hours of formatting PP slides and going through the same model over and over.
Yes I do think a quant role would have been more down my ally but I unfortunately spent the majority of my five year finance program figuring I'd go down the business/corporate side of Finance. That would mean cramming in a significant amount of math classes to get into a top Masters in Financial Engineering/Mathematics program. I would actually probably have to prolong my undergrad and pay for a few classes over the credits I need in order to satisfy the math requirements to those programs.
Learning to control your emotions is definitely one of the most difficult things to do, but it is possible...
I found it hard to get used to trading in the beginning, but I think what FXTrading said is key: your comfort zone is the most important thing.
The human brain is impact much more by negative experiences. A positive experience has a lesser payback than the pain of a negative event.
The key is to avoid "death by 1000 cuts." Recognize that you can lose small amounts 100 times, as long as you win big once.
http://www.amazon.com/Beyond-Greed-Fear-Psychology-Investing/dp/0875848… I find behavioral finance a really interesting topic, because there are connections to the way we behave in everyday situations. This book is a quick overview of a lot of behavioral finance concepts. It points out several false assumptions people can make when emotions drive their actions. By being aware of your emotions, you can also be aware of how irrational many of them can be.
At the very least not controlling your emotions leads to some ridiculously good laughs.
Check if you are risking a too large stake, like in your Poker games.
It seems that you are sensetive(soccer and test cases). Not a bad thing actually, since every coin has two faces. From my experince, the bad thing about being sensative is that...well you probably already know that; the good thing is you might see important details that others won't be able to notice and you might be more "artistic" than others. Sometime it's easier to listen to your characteristic than going against it.
In case that you are too nervous, grab a coke, could help.
learning to control your emotions is one of the most important parts of trading. in the future, when u r starting to feel freaked out, step back mentally, observe your emotions, and think about why you are freaking out. Dont try to suppress your emotions, instead learn to accept them and move on. For eg, ur internal dialogue should be "ok, i am feeling nervous, but that is a natural reaction to having big trade on. But the trade is not abnormal or bigger then is justified by my capital. It is part of my plan. so i accept that nervousness." As long as u r not over-betting your capital then you should just learn to live with your emotions instead of trying to suppress them. Read "trading to Win" by Ari Kiev which deals with this subject extensively.
Learn to have a very short memory. When you lose money on a trade (and you will), or if you cover a position and leave more money on the table (and you will), you need to be able to leave it in the past and move on to the next trade. If not, you will drive yourself crazy, Nerves are normal. You will learn to control them. If you don't get some form of an adrenaline rush right before/after the opening bell, it is my personal opinion that you should think about finding a new profession.
Very hard to do when starting out.
Improves with time though
Another big stress reliever can be to rub one off. (Like in that one Entourage episode)
How much does playing sports transfer to trading? I represented my country in soccer at the junior level.. I always sell "mental discipline" and "competitiveness" in my interviews.. but I'd love to hear from ex-sportsmen who are now traders and whether or not it helped them..
dunno why it dbl posted.
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