BarroMetrics Views: What is Emotion (Success Series)
Before beginning, a little housekeeping: I have included the words ‘Success Series’ for each of the articles in the series. In this way, by searching for ‘Success Series’, you will easily find the relevant blogs.
Well, here we are. I have provided a context, and I have outlined the problem: because of the brain’s hard wiring, when we encounter uncertainty and ambiguity, the limbic and reptilian system s are likely to kick in, producing the 3 Fs effect (fight, flight or freeze). In turn, the 3 Fs produce sub-optimal decisions.
If the 3Fs are the problem, how does the brain handle it? The brain’s solution is to avoid, deny, and/or control. Unfortunately, this solution does not work. Avoiding, denying, and suppressing our emotions does not work because they inevitably come to life to create even more problems. Moreover, even if we could use the brain’s solutions, we would not want to – given the recent findings that show that excluding emotions from our decision-making process results in poor decisions.
I concluded the last blog by asking, given the context, what is the solution? We’ll now turn to these ‘solutions’. In essence, solutions fall into two camps – those falling within the purview of our unconscious mind, and those falling within the conscious domain. I’ll be looking at the latter today.
But first a word of warning. The solutions assume:
- the trader has a method with a positive expectancy return; and
- a money management approach that is optimal for the method.
Alone, the best Psychology in the world will not enable us to climb to the ranks of the successful because the truth is this: if we are to experience success, we need not only effective Psychology (Mind) we also need Method and Money to be in our corner. With that caveat, let’s look at conscious solutions.
The first solution calls us to be aware when emotions arise. We have the capacity to do this because emotions are initially a biological response (see Rande Howell). Howell suggests that by the time we ‘feel’ our emotions, it may be too late to manage the 3f because by the time we feel the emotion, the probability is we are DEFCON 1. The only solution is to walk away to allow our emotions to subside. This will be anywhere from 30 mins to 60 Mins.
It doesn’t have to be this way.
To prevent the 3Fs from taking control, the first step is to learn to be aware of and to recognize early, the biological responses that signal the onset of the three Fs. In this way, we have a better chance of preventing a sub-optimal decision. The works of Randy Hall suggest to me that there are stages in our emotional (biological) response:
- early-stage – easy to manage
- adolescent stage – still easy to manage
- beginning of intense stage – manage it with difficulty
- intense stage cannot be managed, time to walk away.
The question of course immediately arises how do we acquire the necessary self-awareness to identify the early stages of the biological response? We’ll go into this in the next blog.