Written by Pat Bailouni
How Emotions Destroy Your Trading.
Please note: this blog post has been simplified and analogised for ease of reading and times-sake.
Every human has two distinct parts to their psychology.
- A lower-minded animal that wants to seek pleasure and avoid pain:
This part of the brain is necessary for survival. This is the most primitive part of the brain and activates the emotion centre - your amygdala.
- A higher-minded angel that is responsible for self-governance, strategic thought and execution.
This part of the brain is necessary for thrival. This is the most advanced part of the brain and activates the prefrontal cortex.
Whenever we perceive more challenge than support (or more support than challenge) in our environment we activate our animal.
If we perceive more challenge than support we have an impulse away from the ‘painful challenge’.
If we perceive more support than challenge we have an instinct towards the ‘pleasurable support’.
Whenever we perceive an equal amount of challenge and support (a perfect 1:1 balance) we activate our higher-minded angel.
Because we aren’t trying to seek or avoid anything, we are now present, certain, grounded and grateful.
Now, how does this affect trading?
Well, if we're emotional (imbalanced perception) we are re-acting to the markets.
We have a fear of losing and are trying to avoid losing (which is silly when we’re playing probabilities).
We have a fantasy of winning and trying to seek after winning (which is silly when we’re playing probabilities).
We have a fear of missing out (FOMO) on the all pleasurable fantasy of winning.
And when we learn to balance our perception and integrate the opposites in our environment, we can instantly transcend the fear and greed dynamic.
And when we are balanced, we are present, certain, grounded and grateful and in the best and most objective position to now just act according to our trading plan.
Emotions affect our trading because they pull us like puppet strings - making us react irrationally out of fear and greed.
Being balanced and grounded allows us to transcend the judgements and simply act, according to our plan.
MORE ABOUT PAT BAILOUNI
Pat Bailouni is a mindset consultant (trained Demartini Method Ⓡ Facilitator) and a financial market trader. He uses his understanding of human behaviour and psychology to help traders & investors gain an unfair advantage in the markets.