Trade Focus Commentary

We believe that without a doubt an incredibly important aspect of trading is the psychological and emotional conditioning of the individual trader. We haven’t talked about this directly for a while and thought it deserves some attention. It is something that should be obvious but unfortunately often falls prey to denial. Trading markets of whatever kind involves real money and this has its effects on most people. There are some, that small percentage, that can separate the dollars and cents from the thought process in their trading. Most people, we believe, simply can not. Human nature is human nature and is a powerful influence. We have often brought attention to this and said that the more that human nature can be separated from the making of trading decisions the better. Since real money is involved and the accumulation of it the goal, objective and reward, most participants can’t help but feel the effects of either positive or negative price movement. We have had the experience of that “Tazmanian Devil-like” feeling inside of us and know others have too.

It is easy to understand how holding a losing position can weigh on the psyche, but most traders will also suffer emotional stress of some sort while holding a winning position. Sometimes it can be over exuberance or giddiness if things are going quite well but there can easily be a strong sense of nervousness too, worrying that a winner will turn the other way and the fear that the position won’t be cashed in at the top. This just might be an ego issue as much as anything else, but nevertheless it usually results in exiting a winning position too early and it certainly causes deviation from the original trading plan.

Consider how having to make decisions in general can cause consternation let alone decisions that involve when to pull the trading trigger.

Since emotions can influence trading decisions, usually adversely, and because the effects can also be psychologically overbearing, we feel it is wise for traders to have some way to address this as part of their overall plan. Clear thinking is required for this business of trading markets, therefore doing whatever it takes to maintain sound emotional conditioning makes perfect sense to accept as part of the plan. It will be different things for different people but there usually needs to be a training regimen for this or at least a release of some sort. It can be reading literature on this subject, exercise, yoga, meditation, taking a break from time to time or some combination of all these. The point is to be prepared to do what is necessary to stay in top mental trading condition. Pay attention to this detail is our strong suggestion. We believe it is something that too many trading participants fail to realize and fail to do.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.