“You will never win the battle if you are having a heart experience in a head fight. What you feel has nothing to do with what you know”
“I never let emotion come into a business deal”
Those quotes are from Bishop T.D. Jakes and have been instrumental in helping shape my perspective on how trading works. Its profound. Business deals are not emotional. It’s is simply a spreadsheet. Does the business make money? Can it continue to make money with some relative conviction? That is by far the only two things that matter in business. And yet so many times I myself and other traders I believe approach this profession from exactly the opposite perspective.
So why do we bring emotion into it?
Is it a new cultural fad? We are bombarded with it all the time from every direction. “Focus on your passion and it will pay you”. “Do what your passionate about”. “Follow your dreams”. While those things have a very real place in our lives, I would like to throw out a different idea today. Maybe we should be passionate about doing well what we are already doing? Maybe that will lead to being able to do what we want? Maybe its all about doing what works and leaving passion for your marriage? We will see I guess…
The emotions of a trader
There are so many ways that a trader experiences emotion. Elation, desperation, depression, and invincibility just to name a few. Think about it.
When you and I first started out, this was all new. It was exciting. George Leonard in Mastery calls it “Dabbling” or the “Dabbler”. Someone who tries many different things and is always drawn to the newness of them. He says “The Dabbler approaches each new sport, career, opportunity, or relationship with enormous enthusiasm. He or she loves the rituals involved in getting started. the spiffy equipment, the lingo, the shine of newness“. But that doesn’t last long. That is emotional to the core. Its filling some need in us to not just do work and run a business or do a job. It’s an emotional high. We love the charts. There are so many new buttons and ideas and we can learn the lingo and be apart of a worldwide club of people who also want to quit there jobs and trade FX from the beach somewhere. We think that our lack of performance at our current job, again usually an emotional problem, not a problem with that job will all disappear and we will immediately walk into our most successful selves just because “well now I am actually free to pursue my passion”. Pleas excuse me while I throw up a little.
See I was that guy. BIG TIME.
What happens when we get passed that point? We realize that a market is a shark tank. An infested rat hole that is there for one reason. To take my money and take your money. Let’s be honest. That is their business model. Take your stuff and make it theirs. There is nothing new under the sun. All great wealth is created by taking it from someone else. Whether its done legally or not it almost doesn’t matter. Interest, debt its all the same. I want something so im willing to transfer my wealth and productive energy to someone else so I can have that car or that house or that feeling of passion and purpose that for what God forsaken reason we feel that I don’t know, trading seems to bring. And while that sounds horrible, sorry not sorry, its the truth. And every trader realizes that at some point and the emotion changes from elation to desperation. What do I do? I didn’t realize the game was like this! I just lost more money than I want to confess to my priest on the EURCHF news and wait, I thought that it was a good idea to buy the dip but my price didn’t get filled where I thought the chart was and I am immediately down 150 pips on 5 contracts and my coffee isn’t even cold yet. (No honey, this didn’t happen to me. It’s an example. Love you…)
We start to ask ourselves “will this ever work?” What the hell am I doing here? I could do XYZ tomorrow and never deal with this mess again. And depression wants to sink in. Again another emotion. At this stage we start to get overly focused on our P&L and very little attention is given to our actual trading. Am I following my system? Do I have a strategy that is repeatable every time it happens? Or am I just throwing darts at the wall hoping to hit a bulls eye before I run out of darts? Its the lowest point of any traders journey. This stage claims more trading victims than any dollar amount lost ever will. A guy can lose 100k in one swoop but if he knows deep down he has a way to make it back, he will be fine. But a guy that loses 10 bucks and has no clear way of regaining that money, will fall into a depression greater than anyone knows. Some of you know this feeling. Some have made it through and some are there now. This is the stage where we lose the discipline to take the trades we should because it feels like we are stepping into the ring with Rocky and we are severely under prepared for that fight. I don’t care how bad you or I “want to beat Rocky” if the preparation hasn’t been done, WE HAVE NO BUSINESS BEING IN THE RING. I promise you. I promise it will hurt more than you ever thought it would.
Our hearts will never get us out of this. Only our heads will.
I will say it again. Business has no place for emotion. It either works or it doesn’t. Its like being a doctor. The patient either lives or dies. That’s always the question. “Is he going to be ok?” There can be many problems with the person but eventually the question always come back to will they be ok? Will your trading career survive? Its up to your head, not your feelings.
1. Whats your system?
2. Whats your strategy?
3. Whats your expected return?
If you can’t answer those three questions, you have no business. Your trading is on life support and to use the medical example, your family who is out in the waiting room trying to stay strong and wait it out and see if you can make it, will only be killing time until the doc comes out and pronounces your account has passed.
The amount of information we try to take in as traders is unbearable most days. Figure out a way to find your set in stone decision points and answer these question. If your wife asks you what your doing and you say “I think this will work, then it changes next week and neither of them are producing results, you don’t have a business. You have an emotion. You have the desire to be a trader but nothing to stand on. Some may laugh at this and some may relate. Frankly, I don’t really care any more. It’s the truth. We can try to tell each other that “trading is just a random walk of events and some times it will work and sometimes it won’t” but we all know when we look ourselves in the mirror whether we can answer those three questions.
Let me close with those same three questions just phrased a little differently:
1. What beneficial action can you repeatedly take every day? Once a week? Once a month?
2. How good are you at following through on that action?
3. Does it make money? or not?
Please enjoy the weekend. Lets all take a real look at what we are doing and if it’s working, awesome. Have a beer for me this weekend. If not, lets get our heads on straight and stop having a single feeling about trading, being a trader, any one trade, or any other thing to do with trading and start running a spreadsheet type business come Monday morning. As Rob Booker said once, its your deliverable. You have 48 hours. If you don’t come through on your deliverable, you have to fire yourself. There is no other option. Drop everything. Don’t eat. Don’t sleep. Get the deliverable done. And then run your business. No more emotions. Just do what works.
I could keep ranting but I’ll stop.