[B]Overcoming Emotions: Between The Profit & The Pain[/B]
When we as Traders engage the marketplace… we no doubt, will experience a measure of emotional response to the inherent risk associated with such an endeavor. These emotions range from Fear & Greed and to most… bewilderment.
[B]The Profit[/B]
Let’s face it folks, this is why you are reading this article isn’t it? The Trader identifies the opportunity to make a profit from the market. There is nothing wrong with that and it is why I trade personally. However, this motivator can be the downfall of many would be Traders.
The pursuit of profits can lead a Trader to see things that might not be actually there. Perhaps the hunt for profits has had this effect on your trading? Greed is a real struggle for most in the Trading world. If you are not able to resist the temptation to seek profit, you will become a victim of emotional and reckless trading.
A Professional Trader identifies the goal of profit but has a clear plan of pursuit. He or she is not reacting to the market, no, they are anticipating the market to present them a setup they have clearly defined in a written Trading Plan. Only by working within a clearly defined Trading Plan can a Trader have measurable results and a means of direction in their business as a Trader.
When a Trader considers the Profits… this is the motivator. This is the agent of action… the element of Trading that makes fearful Traders take a trade and assume risk. The actions one takes in the process of making a profit are many times those things remembered by the Trader most. This is directly related to the money and the times when their particular approach was “profitable”. However, let’s look at those things that Traders encounter during the experience of Trading.
[B]Are You Lost?[/B]
Every Trader deals with this one. The million dollar question… is the market going to go up or down from here? I have read many books on trading and various authors over my nearly two decades as a Trader. It’s interesting to me how Traders interpret Price and how they approach trading individually. We can have many similar concepts and or tools, but we each “interpret” Price in our own ways.
One author of the book titled Street Smarts, Linda Raschke, likened Price Action to reading musical notes. Not being a musician this makes no sense to me personally, but I can understand her analogy nonetheless. I always envisioned Price as a young woman that dances and twirls to a song in her head that no one hears but we can watch her move to its tempo.
In the example Test #1 – Directions
I presented a popular optical illusion of the Spinning Woman. I have a special affinity towards this illusion as it depicts, in my opinion, Price Action. I can ask any number of folks to look at the image as the silhouette of a woman spins in circles. There will be many varied directions given if asked by each viewer. Some may say they see her spinning to the left to others it may appear she is spinning to the right. The image is not changing directions but some may see her spin one direction only to reverse and spin the opposite direction.
I liken Price Action to this example… as it communicates the lack of “Direction” needed to watch Price gyrate or dance. We as Traders make money when there is “movement”… does it matter to a Trader which direction the movement takes place? No… just that the Trader is dancing with the market at the right tempo and tries not to lead… she knows the song we just follow her lead.
Some dances are longer than others and some are short and sweet. Some dances see Price move one direction and then see her change direction. Like actual Price Action… this example continues to do its thing. The image is ambiguous and leaves the viewer to determine the perspective of her. Price is no different in that regard.
Fill a room with Traders and place a real time chart of the Euro in front of them and you will get a disparity amongst directional views. This doesn’t equate to 50% bullish and 50% bearish, if we could in this example equally divide the two groups, as seeing one group as “right” and the other “wrong”. The opposing group may have a shorter dance in mind with her… while the other group may see a longer dance in the works.
[B]Which Way Do I Go?[/B]
When looking at the spinning woman illusion note the direction she spins. If you look at her foot and watch as it spins, you will notice her shadow… under her foot. If you study the shadow and not concentrate on the woman and her lovely grace and curves… you can see your perspective change and her spin will change directions.
What lesson is hidden in this example? IF you look at the shadow of Price Action… that being the left side of the chart… you can see Price Action’s direction. Knowing the current conditions and allowing your trading to get in sync with that perspective… you and the market can share a dance. Short term dances are short in duration and long term trades allow you to hold hands with her longer. Understanding the dance you perform best and move gracefully in… will assist you in overcoming frustration and avoid an emotional trigger in your trading.
[B]Narrowing Your Focus[/B]
One of the emotional responses in developing and unsuccessful Traders is that of chasing Price. Professional Traders have unique skill sets and concepts they employ as a Trader. It doesn’t matter what new trick of the trade makes its way into Trader Magazine this month… they stick to their own skill sets.
In the example Test #2 – OPPORTUNITYISNOWHERE
The image illustrates the tendencies for Traders to not focus on your specific setups and as a result… chase Price. If you look at the image and study the black squares… you will out of the corner of your eyes see “grey spots” in the intersecting white areas. Notice when you turn your attention to the grey spots, you aren’t focusing on the black squares any longer are you? Note also that you are not able to see the grey spots… but more appear and still you cannot focus on them no matter how hard you try.
The black squares are your specific setups. The grey spots are the common Price Action moves that exist outside your clearly defined Trading Plan. Your job is to focus on the select setups, or black squares in this example, and filter out the grey spots that novice or reactionary Traders chase.
For some the black square represents London Open OTE’s long, for others it might be a Trend Trading Holy Grail Pattern. What select setup you use and focus on matters not… just that you focus there and avoid chasing Price and phantom Price Moves that result in nothing at all. Narrow your focus on the setups you have grown to find easily and make sense to you and your personal Trader’s Profile. By doing this you avoid emotionally charged regret and sorrow by not following your Trading Plan.
[B]The Finish Line[/B]
When you began your journey do you recall your objective? Was it a million dollars? What was the “finish line” to you as a successful Trader? For me it was retirement and a means of living without the need to maintain a job for finances.
Now ask yourself this question… when you began Trading did you have the starting line sharing the same role as the finish line? What I mean by this is, did you permit yourself time to make it off the starting line? Were you giving or are you giving yourself a fair chance to make a run of it?
Runners have a unique experience that each eventually encounter. While each runner enjoys running as a sport and each have stamina in respect to the average non-runner… eventually they encounter a change. The change isn’t physical… it is conceptual and internal.
They no longer run with the “Finish Line” in their sights… but rather adopt the mindset that… there is no “Finish Line”. As a result they grow a deeper appreciation and love for the sport of running and their performance excels as a byproduct. This paradigm shift takes place in successful Traders.
The successful Traders no longer see the “Finish Line” or end result as the task and goal… but rather the process of Trading becomes their passion. It overrides the perspective of win or loss and it replaces with a reflection of whether the process is being followed and experienced with comfort and passion.
The end result in runners with no perspective of a Finish Line waiting in the distance is that they run longer and stronger than they did before. The end result of Traders with no perspective of a Finish Line ahead of them is that they trade emotionless and free from internal struggles.
Think about how limiting your end result becomes if you measure every Trade or step forward in development as a stumbling point or hurdle to your Finish Line. You might have a time objective or a monetary limit or your Trading and when you hold these paramount they no longer act as goals but rather a ball and chain. Think about the process of Trading successfully as your goal and remove the limits of your preconceived Finish Line. The result will be that you avoid uncertainty and doubt while building a passion for Trading successful Traders acquire over time.