Trading Psychology: Don’t Ignore Your Emotions in Trading
Have you ever felt out of control? Have you ever been so mad that you did, or said, something that you regretted later? Have you ever felt like your emotions were in control of you, instead of the other way around?
Let’s talk about emotions.
Background
I am sure we have all felt this way before and today I am going to be talking about how I learned to control my emotions over the last seven years. This is a story of my own personal journey, so I’m going to be talking a lot about my profession as a day trader, but this message is really meant for everyone.
If you have ever read a book, or watched a video on day trading, they probably talked about controlling your emotions so that you make smart decisions with your money.
They might have said things like… Control your emotions. Don’t act on anger. Eliminate fear. Learn to ignore your emotions and even stuff your feelings way down deep inside. It's sometimes difficult to know if you are reading a self-help book or a book on how to make more money. Maybe, it's because they are not all that different.
But, what do all of these tips have in common? They are simply impractical, and even impossible to implement. From my own personal experience… there is a much better way to “control your emotions.” I'm going to explain how I did in this article.
Day Trading is a Rollercoaster
Day trading is exhilarating. It is like a rollercoaster ride. When you enter a trade, there is anticipation that the stock might take off to the moon from $10 to $500, and you might make more money than you ever dreamed of, but when a trade is going against you, you might think that your life is about to be over as the stock plummets more than 90%.
And sadly this is true, because people have ended their own lives over their losses in the stock market.
A lot of people get into trading stocks for the money, but really, they stay for the thrill of it. They get an emotional high when a trade is going well and they become addicted to it, the same way people get addicted to food, alcohol, gambling, or drugs. They are seeking that hit of dopamine.
And despite difficulties and losses from blowing up trading accounts from following chat room alerts, the addiction keeps them coming back.
So, if day trading is exciting and you can get addicted to that adrenaline high, what are you supposed to do with those feelings? How do you control your emotions?
Emotional disconnect and why it’s bad
When it comes to conventional tips on emotional control, most traders preach… ignore your feelings, listen to only your trading plans and bury your stress, sadness, and anger deep inside.
Most people will tell you to disconnect yourself from all human emotions so that you can make more rational decisions. Basically, they want you to be a Vulcan from StarTrek as if you can somehow cauterize your emotions.
Well guess what, yes, you can disconnect yourself from your emotions, just like psychology tells us that we can. And guess what the field of psychology calls that? They call it a disorder. If people disconnect from their emotions, they also lose their connection to time, place, identity, and ultimately reality when they do so.
This disconnect of emotions is often developed in response to a serious life trauma. It is merely a coping mechanism that we could develop, especially as young kids, in order to deal with the problems in life that are too big for us to handle… because we were just children.
But, what is much different now that we are adults and not kids anymore? Now, we have the power and the experience to choose. We have the strength to feel our human emotions and still be okay.
I know this may sound a bit extreme here, but it is to prove a point. Lots of advice in the trading industry, or your friends, or family members believe people can “think” their way through their emotions. They preach that you should separate your emotions from your actions, and … I think this is wrong.
I mean, you know what we call people without feelings? Psychopaths. Is that really what we want more of running around the streets? So, why are so many people telling us to stop feelings?
Basically, they are afraid of emotions. Truth be told, if we made every decision in life based on our emotions, things would get pretty ugly, pretty fast.
Why emotions are good
What I have learned is that you have to learn to feel your way through your emotions. Emotions are an integral part of the human experience, you cannot truly remove them, nor should you.
Imagine the joy of getting into a top university after months of studying for exams, falling in love for the first time, or even the loss that you feel when someone close to you passes away. By removing all those feelings, wouldn’t that be robbing us of our true and genuine experience as humans?
It is important that as humans we allow ourselves to feel those emotions, even the bad ones. You and I are strong enough to feel our feelings and come out of the other end in one piece. You cannot just feel the good emotions, and shut out the bad feelings. Yes, this is something I learned from Pixar’s animated film, Inside Out.
At this point, you must be thinking, I came here for the bad jokes, and all I got was this lousy blog on emotions. Well… how do you FEEEEEL about that? See, I have plenty of bad jokes for you.
Okay okay, one more to make you FEEEEL better:
Why did 50 Cent replace Nickelback at the Superbowl performance?
Because of Inflation.
Okay I know a bad joke, but you came here to learn how to make money with trading and I’m boring you with your feelings. But, believe it or not, being in tuned, and not removed from your emotions is an integral part to achieving success in day trading, as well as in life. I do know a lot of this subject because…
Personal issues with emotions
Well, I have a secret to tell you: I used to have an anger problem.
I know, I know. I am this little tiny Asian gal that laughs at bad jokes and likes to help others make money in the stock market. I can’t possibly be serious about having an anger problem. Seeing me angry must be like seeing a little tiny angry mouse.
But, it still doesn’t mean I didn’t have an anger problem. In fact, I had to go through anger management therapy and 2 years of counseling to deal with it.
The point is, I really did have an anger problem that I believe was rooted in my early experience as an immigrant from Taiwan to Canada when I was little. I talked about it in detail in a previous article. In short, I had trouble fitting in my neighborhood and especially in high school.
It was a problem that started small, but over time it grew bigger and bigger, and the more I bottled it up and avoided talking about it, the more it built.
How emotions manifest
I’m saying this because what I’ve learned is you cannot control your emotions, nor should you bury your emotions away. If you do that, your feelings eventually could overflow in some weird way, because you have bottled them all up for so long that they eventually explode. There are many ways this can express itself.
It can be yelling at someone for something seemingly insignificant: excessive shopping, emotional eating, drinking, drugs or worst of all, revenge trading.
Whether you know it or not, your subconscious knows something. It knows that your bad feelings have to come out before positive emotions can come in. These expressions are one of the many ways that this can happen.
What to do with feelings
So, we’ve established that you can’t control your emotions and you can’t just ignore your emotions, so what are you supposed to do about these feelings? Especially, when they can seem so overwhelming.
This is going to sound silly, but we have to feel our feelings. We have to recognize our emotions as they come.
When I first started down this journey about managing my feelings, it was to become a better trader. In reality, though, it made me a better human, which, in turn, made me a better trader. I’d like to share one of the exercises I used to do in therapy with you here today.
Therapy exercises
It started by making simple statements of “I feel ____” (fill in the blank). At first, I thought this would be really easy and frankly, kinda stupid.
Instead, I found that I only had baby words to describe my complex adult emotions. I was saying basic things like I feel happy. I feel sad. I feel mad. I know… not exactly Jane Austen material is it?
However, through conscious effort and pushing to state even more complex emotions, eventually, I was able to describe my feelings as: I feel relaxed, thrilled, disturbed, impatient, resentful, overwhelmed, calm.
Journaling
Just like anything else, learning about your emotions takes practice. I’d write them down daily in an emotions journal the same way I’d keep a trading journal. In fact, there was a period of time when these two would go hand in hand.
I’d even make note of how I was feeling when I entered a trade to see if there were any patterns in making my trading decisions.
At first, I thought this journey down the emotional lane would make me feel weak and vulnerable because this was not something that was talked about at home or at school. So, I definitely had some hesitations.
However, I was pleasantly surprised. Instead of it making me feel vulnerable, It made me more powerful, more aware, and in tune with myself and others. Emotions should not be treated as a liability in life or in trading.
It’s through this journaling routine that it did make me more aware of who I am and why. With that awareness, I could make a more informed decision about my life choices, as well as the stock market.
Conclusion
By no means am I an expert in this field. However, I’ve made leaps in transformations with my emotional “control” over the years by recognizing and embracing them. I still have a long way to go and will continue to improve myself. That will be reflected in my daily life, as well as my day trading.
I really hope that you will share your story in the comments below. I’d love to hear them, and I hope that my story somehow made a positive impact on your journey. Thank you.
Don’t feel like reading? Watch the video.
