We know that you need emotion to make decisions. We cannot trash emotion and make decisions. The opponents come out and score the first six points. Do we take a timeout by emotion (to stop the run), by rule, or do nothing?
But emotion gets layered upon other "business" analysis, such as perceived quality, value, and growth prospects. How good is my "team" (family, work, sports team), where is the value, and how can we improve?
A few lessons extracted from Market Mind Games:
FUNDAMENTALS
Key Concepts
The task in trading is to predict the future perception of other market players. (What can the other team do to give us trouble? Experienced teams understand context. Younger players can't color within the lines because they don't see the lines or connect the dots. We have to provide a lot of structure while teaching context.)
Beliefs are pre-existing conditions that create implicit context. (We know that good teams need to create and defeat pressure.)
The Spectrum of Fear
On the left: Fear of Losing (Teams need to play to win, not to avoid loss.)
Middle: Anxiety due to Ambiguity / Uncertainty (paralysis by analysis)
On the right: Fear of Missing Out ("If only")
HANDLING YOUR EMOTIONS
Hold On to Winners by Improving Self Awareness.
Do more of what works and less of what isn't. We can improve - WRITE down what is working and what isn't.
“Emotions as Data” — Monitor Your Emotions for Analysis
"Reams of research indicate that putting feelings into words does indeed provide a great benefit, it not only reduces anxiety but verbalization can actually allow us to work more effectively on a thinking level."
Unconscious Motivations Are Dangerous
"What am I doing and why?" Are my actions consistent with my stated (written) intent?
Accept Your Emotions as Natural and Stop Blaming Yourself
But-I-Know-Better (BIKB) trades set up feeling and emotional contexts of self-recriminations. Just catching yourself in those — and the feelings surrounding them — will impact your bottom line in a positive way.
Get used to admitting to yourself (and if possible to someone you can trust) what you are feeling.
Walk Away When Your Emotions Get Intense
Stay grounded. Be the adult in the room. When the feelings and emotions you are experiencing become the most intense, you can be assured that it is not really about the markets or the money.
LEVERAGING ON YOUR AWARENESS
Use Your Emotional Awareness for Risk Management and for Reading the Market
The more conscious you are of your emotions, the more you can use this knowledge first as risk management and eventually as a tool for reading others.
Maintain your Physical-Psychological Edge
Trading (Coaching) is actually a physical game. Playing the “sport” of trading should be handled as if you are the quarterback of an American football team.
Rest: Being well-rested is an edge.
Diet: When one really concentrates, the body and brain use an inordinate amount of energy. Eating properly keeps your energy up and adds to that physical-psychological edge.
Exercise: Exercise gives us a physical boost that makes us feel more optimistic, and that counts as psychological capital.
The body counts essentially as much as your intellect. If the body is feeling the static of tired or drained, the feelings and emotions of risk-management and people reading can’t properly communicate their data.
Why Pros Trade the Close, and Amateurs Trade the Open
Use available data to make better choices. "Literally, your mind has more contextual details to make a judgment call about what the next play will be." (Simple is better. It's always tempting to teach to a higher level.)
Why People Fight Trends
Trends are facts. Why do we choose to deny facts? Sometimes it takes time to identify the facts. "I have yet to find someone who habitually fights trends that doesn’t ultimately reveal a very clear and specific reason that arises out of their personal and family history." (Our emotions can betray us.)
Lagniappe: a HORNS SLOB
