BarroMetrics Views: Psychological Pressures and Trading
‘When you find a way to make reasonable decisions not based on your own opinion about future market trends but in accordance with certain market signals, the problem of diminishing and almost completely eliminating psychological pressure and stress will be solved. The key issue in this case is a philosophical attitude about market trends-they are natural phenomena beyond human control and forecast.
The easiest way of solving psychological problems is to abandon attempts to trade on the basis of personal notion and forecast. Only the system trade, while making decisions automatically according to the preset plan, provides this opportunity. Turning to the system trade helps to solve the problem by decreasing psychological pressure on the trader and avoiding a lot of mistakes associated with psychological stress. The system trade itself not only helps traders to make operational decisions to increase profit; it also provides great psychological comfort necessary for the trader’
IGOR TOSHCHAKOV
Igor wrote the book, “Beat the Odds in Forex Trading”, and while I found it an interesting read, the above is a comment with which I disagree. It harkens back to the days of old when it was thought that emotionless trading was needed for success.
The statement may be true if the trade signals are executed by a computer. Once human intervention comes into play, it’s a whole different story.
Neurological research tells us that when it comes to trading, the human mind slips in ‘ambiguous mode reasoning’. We may want it to the black and white signals produced by a system but the mind is subconsciously saying: “Hey, it just ain’t so!”. This conflict itself - what our conscious mind says and what the subconscious mutters - causes its own stress. And if the stress is left unresolved, then we are likely to self-sabotage in a big way.
This is not to say that we should not have rules - for most personalities, rules are a must. But as a discretionary trader, I have a rule that says ‘it’s OK for me to break my rules’. This gives my discretion room to take part in the decision-making process.
We cannot suppress our emotions - indeed D’Amasio’s books show that not only is it not possible, it is not even desirable. We need emotions to make decisions.
Our emotions are not the enemy of traders - they fulfill useful functions, e.g. they pick up market nuances ignored by the conscious mind, they warn us we are trading too large a size etc. The key to our emotions is to be aware of them, acknowledge them and then decide if it is the fight or flight speaking or the voice that is warning us of danger. As traders we make emotions our ally and a voice in our trading operations.
By the way TraderPsyches’ course setting out the theory and practice in this area is a very good one.
Refer this blog post to a friend or colleague…
