Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
Do You Need a Strategy for Your Emotions?
11/17/2014 6:00 am EST
Andrew Menaker, PhD, of AndrewMenaker.com, shares how—when it comes to dealing with emotions in trading—empirical research has shown that putting feelings of fear and anxiety into words actually makes the situation more tolerable.
Add an ‘e’ to the beginning of the word 'motion' and you get emotion.
Emotion is energy. With enough energy, it becomes an action. For traders, energy can manifest in an impulsive entry...an early exit...or holding a loser too long. This is why you need a strategy to manage your emotions.
Emotion is like water. As the amount of water builds up, it will seek an outlet. It spills over the top, it bursts through, it flows through a crack that gets bigger and bigger. Water always finds an outlet. And so does emotion.
Just like water, when emotion is not expressed, it builds up and will seek an outlet; it may somaticize in the body into some type of disease process such as gastrointestinal issues, headaches, and many other possibilities.
A pre-verbal young child who experiences a buildup of emotional energy will often find an outlet through an action like crying, a temper tantrum, etc. When we get older, we are taught to use our words to express ourselves.
The same dynamic applies to trading. When the emotional energy builds up, putting your feelings into words provides an alternative. In fact, empirical research has shown that putting feelings of fear and anxiety into words actually makes the situation more tolerable. And when you can tolerate anxiety and fear, you are in a much better position to control your actions.
By Andrew Menaker, PhD, AndrewMenaker.com
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