Articles

Trading With Emotional Control

October 10, 2011 in Articles

Part 1

Discipline and the ability to control your emotions are important attributes of a successful trader.

If trading becomes an emotional game, the profession becomes no more than a gambler’s pursuit.

The goal of trading successfully becomes replaced with the goal of receiving an emotional fix.

How do I control my emotions?

Using mental strategies you can take control of your emotions.

During this mini-course I will outline 3 exact strategies that you can anywhere and at anytime to control your emotions.

The first strategy :

This strategy will allow you to maintain an impartial and objective approach when you trade the financial markets.

Before you place a trade, complete the following exercise:

Write down 3 reasons why if your trade is UNPROFITABLE it can be classed as a positive event. I have filled in the table below to show you an example response.

It is important that you create your own responses even if they are similar to the ones below:

Classing an unprofitable trade as a positive event

1. Prevents you from becoming complacent and thinking that trading is easy.
2. Makes you aware that there is more to learn and apply
3. Spurs you on to work and train harder

Now write down 3 reasons why if your trade is PROFITABLE it can be classed as a positive event. Again it is important that you create your own responses even if they are similar to ones in the example below:

Classing a profitable trade as a positive event

1. Increased growth of your account size
2. Reinforces your confidence that in your ability to trade
3. Helps you to build a positive track record

• By applying this strategy you balance out your emotions, creating an approach that is impartial to succeeding and failing in the markets.

• Consequently you approach the markets more objectively and rationally, uncompromised by your emotions.

• The strategy will also encourage you to not OVER or UNDER want success in the markets, helping you to cultivate a healthy middle ground between the two.

The second part of the mini-course will show you how to combine a centring exercise with the art of visualisation, to further reinforce your ability to control and maintain a tight grip over your emotions when you trade.

Part 2

The mind and body are intrinsically linked.

By applying this strategy your mind and body will keep your emotions well-regulated.

The exercise that follows will add another tool in your trading armoury to maximise your profits in the markets.

As I previously mentioned, this strategy combines a centred breathing exercise with visualisation to create a calm and collected state when you trade.

This centring exercise directly calms down the body, while the visualization exercise works on the mind to generate a resourceful state.

The second strategy:

• Stand up straight, and imagine that your feet are connected to ground.
• Take in a deep inhalation through your mouth centred from your diaphragm, to point where you cannot take on anymore air.
• Hold in the air for 2 to 3 seconds and exhale completely through your mouth.
• Repeat the breathing exercise, however this time close your eyes and visualise yourself trading in a calm and collected state.
• Create all visions that you see, all of the sounds that hear, and all the feelings that you feel when you are working at your best.
• Make the scenario fill your whole mind, as if it is a panoramic experience.
• Make images in your mind’s eye vivid and full of colour.
• Make the sounds loud and full of impact.
• View the scenario of you trading at your best, from your own eyes so that you are associated with it.
• Continue to use the combination of the visualisation and the centring exercise for as long as you feel is necessary to anchor your mind and body to a calm and collected state.

Combing visualisation with the centred breathing exercise is highly effective because the brain does not differentiate between real and imagined events.

Here are some of the best times to use this exercise:

• Before you go to sleep
• Just before you begin to trade
• Immediately after successful and unsuccessful trades
• When you feel under pressure

Like all skills and strategies, you need to practice them.

By honing and mastering the strategies contained in the mini-courses you will begin to use them instinctively.

Part 3 will conclude the mini-course by teaching you how to control your internal dialogue to further strengthen your emotional mastery over the volatile markets.

Part 3

We all have an internal voice that provides commentary on everything that we do.
Your internal voice also works to direct your behaviour.

In the context of trading, a negative internal voice directs your actions towards unconstructive trading opportunities, while a positive internal voice directs your actions towards constructive trading opportunities.

In relation to your emotions, positive internal feelings generate resourceful states, while negative emotions generate destructive states.

Therefore when you trade it is important to maintain conscious control over your internal dialogue.

Here are some examples of positive internal voices:

1. “I have the ability to trade well and profit from the markets”
2. “I feel calm and collected when I trade”
3. “I also remain disciplined when I trade”

Here are some examples of negative internal voices:

1. “I am scared of losing money”
2. “I am worried that my trading abilities aren’t up to scratch”
3. “I must make money on this trade, otherwise I am in trouble”

By applying the strategy below you will amplify the positive voices and quieten the negative voices in your head.

The third strategy:

Enhance the impact of your positive internal voices

a) You can use the strategy both with your eyes open or closed.
b) Take your positive internal voice for example; “I feel calm and collected.”
c) Start playing the voice in your mind, making sure that the way in which you deliver the message reflects its content. For example this positive voice should be internally expressed in a slow and relaxed manner.
d) Imagine that there is large internal volume control switch in your mind, and turn it up until it is on full blast.
e) Make sure that the sounds are crisp and clear
f) Add an echo effect to compound the impact of the positive voice.

Minimising the impact of your negative internal voices

a) Again you can use the strategy with your eyes open or closed.
b) Take your negative internal voice for example; “I am worried about losing money in the markets.”
c) When you catch yourself playing the negative voice in your mind, make the way you express the message incongruent with the content. For example if the voice is panicked in style, now express the message in a slow and calm manner.
d) Imagine there is a large volume switch in your mind, and turn it right down so you can no longer here it.
e) If the voice is still audible, distort the sounds and jumble up the words of the message.

By taking ownership of your internal voice, you can consciously control your internal dialogue. Using the above strategies will accentuate your positive internal voices and minimise your negative ones.

Consequently you foster resourceful emotions and dispel negative ones.