It’s That Time of Year

BarroMetrics Views: It’s That Time of Year

It’s that time of year – you know the time when we make promises that this year it will be different – this year we’ll …..(lose weight, have a positive ROI in our trading etc, etc). Most times the new year resolutions last a week, if that.

So, my question to you is: what will you do throughout the year to produce a different result in your trading for 2015?

It’s clear that unless you do something different, you will keep getting the old samo, samo. It’s also clear that the difference has to be something essentially different i.e. different in essence rather than just difference in form. For example, are you looking to produce better results by finding a ‘new system’ or are you going to try a new fangled way to suppress those pesky emotions – you know the ones that keep hijacking great trades and turn them into mediocre ones?

Both of these ‘solutions’ may have a common base – that our trading is governed an attempt to by-pass the feelings of discomfort brought about by the feelings of uncertainty whenever we are in a trade. Let’s face it, the nature of markets is to be uncertain, that is what makes our profits possible. But as humans we are hard-wired to move away from uncertainty. Indeed, it’s said that feelings caused by uncertainty register in the same region of the brain as intense pain. Unless we take appropriate action, these feelings will rise, and too often these feeling cause us to sabotage our trading.

Unfortunately, finding a new system isn’t going to solve the problem. A system addresses the probabilities of success  – the domain of the neocortex (left brain) – it won’t resolve issues brought about the limbic system. Whatever system we use, at some point, the feelings of discomfort will arise and we’ll again have to deal with this issue.

So, if emotions are the problem, why not seek to suppress them? Unfortunately, that won’t work. The work of Antonio R Damasio and others have shown that not only is suppression not desirable for decision-making, it is not even possible i.e. we need our emotions to make effective decisions (see e.g. Feeling Our Emotions).

So, as traders, what can we do? I’ll look to answer this tomorrow.