Emotions are very important in trading/investing and an underrated topic

I want to shed some light into it because a change of attitude how I experience my own emotions was a step that immediately was followed by an exponential improvement in trading performance.

When we’re dealing with money, we should make objective decisions yet we fall in many traps that make us do the opposite and often we don’t even understand our own behavior.

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If we fail to make money in the markets, be it in Cryptocurrencies or anywhere else for a long time we know we should change something. But saying: “Change yourself!” doesn’t help. To really change our behavior, we must understand our emotions at a deep level because reason is not more than 50% of a human decision according to neuro scientists. We simply can’t ignore them.

Frustration is normal

In trading and investing there are situations that can freak us out. When dealing with the markets for a long time you certainly came across frustrating situations. You have a good trade running, it goes into profit, but suddenly it starts to turn against you and hitting your exit-stop-loss. You think “Ok, I know that was my risk. It’s ok I’m stopped out.” But then you see that on the exact price the market again turns in your favor and it’s making green candle after candle, just without you. At this point you might start to feel a little bit angry and jump into another “I knew it”- kind of trade. Buy again “Now it’s time for the big move.” A few moments later. Stopped out again. Ouch.

Another example, just because you should get a feeling how frustrating a life of a trader can be: You sit patiently on your but in front of your computer screen(s). Monday, Tuesday, Wednesday… nothing happens. You lose faith, this market is dead, you think. I’ll make a break today, all this waiting, all this staring at the screen, for what? You decide to chillax on Thursday. Only to see that on Thursday you could make a huge profit with your trading system. Ouch again.

Emotions are in the price movements itself

When going through this picture you can maybe see yourself. Being caught on FOMO (Fear of missing out) on number 1, therefore buying at a bad price. When the price moves against you, you'll get scared a little bit but hope is strong and on number 3 you're feeling reliefed. It starts to go in your direction, what a beautiful life, everything works! On number 5 you're back to zero and think: "Enough of this rollercoaster, I'm out!" The Buying pressure at this point prevails and at number 6 you're angry at yourself because you missed out the real move.

Getting out of the emotional loop

These are just a few examples of events that can happen, get-out-of-the-trade-at-the-worst-point or losing the waiting game because of impatience. There are and there will be always uncomfortable situations and sometimes we have a feeling that they occur very often. Why is that? Yes, you probably know the answer: because every market participant has similar emotions like yourself. The market is moving irrationally but on the same time calculatable because of said emotions. Trying to get out of our emotional steam can result in waking up and catch big irrational moves in the markets from time to time.

Confronting technique

Emotional problems can be things like your ex-girlfriend behaving like a terrorist in your head, planting bombs when you’re not cautious that damage your good behavior. Or it’s any form of doubt about the future or any unresolved event in the past. You should have a consistent behavior to make it as a trader. I’m not saying you must solve your emotional problems like they are a math equation. It’s just the confrontation with it, that helps. For me the exercise is repeating the confrontation even if it’s always the same and it makes you a bit insane. The connection to your emotional part of your brain is so important, I can’t stress this out enough. If you lose connection it’s like you try to push a balloon under water and by the laws of physic it comes back to the surface. Meaning that your unconscious disturbs your present moment reality and decision making.

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Every morning I can say to myself: “Come emotions, come to me! Confront me with every uncomfortable feeling that is there in the moment.” Just as Friedrich Nietzsche said: “Come my animals!”. By animals I’m sure he referred to his different emotions and instead of controlling them or throwing them away he made them his friends, talked to them. And this exercise is never ending. It helps me personally that my emotions don’t stab me in the back when making real money decisions. After all I'm also grateful that I'm a human being with emotions and all of them together make life worth living. I hope this exercise will help you too in becoming the trader or investor you want to be.