Do you analyze your psychological and physical state when you are the trading? After all, a trader’s brain faces a variety of stress while he is working in the market. The overflow of information that the trader receives as soon as he turns on the computer forces him to react instantly to any changes.
People who imagine trading as easy keystrokes somewhere on the shores of the azure sea under the tropical sun are a bit mistaken.
The emotional jolt that a trader experiences while working quite often can not be compensated by the sea or the sun. And, unfortunately, we must admit that getting rid of emotions, which is much talked about as a panacea in the psychology of trading, is practically impossible.
What to do with emotions?
If one has a clear plan of actions (a strategy), the emotional component of trading tends to zero, but it is impossible to get rid of the emotions totally, and it is not necessary. Your own ones need to be used. How? We will tell you about this in a nutshell.
From the American movies we all know how people visit psychotherapists. Usually they are offered to lie down on a comfortable couch, so that the person should feel as comfortable as possible. After that, the patient starts talking about the problem.
The inner observer
The psychotherapist’s task is to pull out what is deep inside the person. Brett N. Steenbarger in his book “Psychology of Trading” suggests using the same approach in trading.
The concept of “trading from the couch” implies that, when carrying out financial market operations, a trader should try to analyze his state of mind just in the way a psychologist analyzes his patient. Steenbarger calls this process “activation of the inner observer”.
The method of “trading mentor”
This activation is performed with the help of several interesting techniques. For example, the exercise “A trading mentor” is one of them. It implies that you should open transactions as if you are teaching a beginner and trying to teach him to be a successful trader.
Suppose that any position you would like to open or close is your student’s position. What will you tell him if the things go well? And what if the transaction will be unprofitable? What if the student is thinking about the exit or wants to hold the position?
An outside view
Your task is to prove yourself to be an effective mentor. Then compare what you said with the inner dialogue that you could have had before, during and after the opening of the position.
Believe us, doing the “trading mentor” exercise, you can really look at the situation somewhat from the outside. And this will enable you to avoid the mistakes, which you would have made without taking a mentor’s look at yourself.