The moment you put on a trade you lose half your brain cells. In truth it all comes down to emotion. Usually within my workshops or when working with a client I’ll ask the question; In the mind, Emotion or Logic which wins? Most people especially highly skilled professionals or folks who consider themselves intelligent will say logic. That’s about the time when the smile crosses my face and I think to myself “oh goodie, let’s have some fun with this one”.
If you have kids, a spouse, or have ever interacted with another human being you know that people are not always logical. I have some friends that if they do act logically I start questioning their identity. We are emotional beings who use logic to excuse, and justify our behavior.
Think about the last time you made a significant purchase at the store. The moment you saw the item you experienced some type of emotion. It could have been “need” whether real or perceived, it might have been seeing yourself using the item or having others see you with it. Even if you didn’t want to buy it, but you knew you had to it’s still emotion, and there was emotion behind why you picked the one you did. Of course you did a comparison, or tried to logically look at the data when making a choice, but during the process your unconscious emotional mind was leading the charge. Go ahead argue with me about it, you think that urge to “be right” right now is logical? Moving on.
Indulge me for a moment. The instant that we put on a trade our emotions, past, expectations, desires, pain, and all the rest are now in play. Logic, strong as it may be, will never be as strong as emotion. The only way to counter this is to have your trading rules, systems, and training ready before you click buy or sell.
Think of it as a bit like military training. Part of the reason why soldiers train so often, and in just about every conceivable environment, and circumstance is because if faced with the actual situation they can rely on their training. The last thing you want in the middle of a firefight is try and think about what to do next, or start questioning what to do. In life or death situations hesitation can be fatal.
In the trading environment when our emotions and survival instincts are engaged we are not going to be logical. It’s in these moment we have to rely on our ability to follow our rules, follow our system, and to trust our procedures. If we have done our homework and put in place our personal management process then we just might have a chance. I say might because even the most seasoned traders will have moments when emotion can take the wheel.
Trading is one of the most extraordinary ways to make a living in this world. There is nothing like it, and nothing will test your grit and self discipline like the market. It is only with the proper training, and skill sets that we will be able to consistently pull profit from the market. The first step is in realizing our potential blind spots, and building in the training to succeed not matter what situation we may face in the market, even with half a brain.