Our mind works in a few primary modes. A plan prepared at ease is rational, well considered and reasonable. However, just before the trade, strong emotions appear and rapidly the same plan seems weak and not suitable for the market.
Why emotions take over trader’s mind?
If we think rationally, the brain is dominated by the activity of frontal lobes.
When emotions (fear) occur, the amygdala dominates. Amygdala is the center that is responsible for the response to a threat. It prepares our body to fight or run away. It is a very powerful survival mechanism and works today just as it did thousands of years ago. And it is still as necessary. It’s what helped our species survive on the planet.
But when the amygdala starts to act (because strong emotions have appeared, what our protective systems identify as a threat) our perception of the situation changes: This is why we view and judge the same situation in a different way.
The prescription is as below:
The main thing is to be aware of this mechanism. It is strong but it can be prevented or even blocked, these methods are learnt by special units troops.
Awareness alone can make you not give up and try to come back to rational “sober” thinking.
If you have a good concept and a plan (always note it down, just a simple note, a few lines) — then after some time come back to the situation that earlier “froze” you. Did the market move as you expected? Was your plan right? If many times the market confirms your assumptions (concept and plan), it means that you are doing a pretty good job. So you have an extra motivation to work on overcoming the amygdala and doing things in spite of it.
Most people, over time, become used to the “danger” and stress in such situations is reduced.
“My emotions are somewhere in the background”
— Joe Ross