Although I don’t golf, there is a good analogy for trading I heard from a friend who is an accomplished golfer. He said most golfers agree that a large part of the game is mental but they spend most if not all of their time working on the mechanics of their swing, or researching new clubs.

 

Even though most golfers (and traders) know that the mental aspect of the game is a big part, they don’t do much about it.

 

Once you have your system down, when you know how to articulate your edge in the market, the trading game becomes largely psychological.

 

Although logic drives our thinking, humans are fundamentally emotional creatures, with emotion providing the fuel for our actions regardless of how logical you may think you are. I’ll paraphrase a quote from a leading brain scientist  (M.D. neurologist)  Antonio Damasio that captures this nicely:

 

“I once thought that humans were primarily thinking creatures that sometimes have feelings, however the empirical evidence over the last several years shows that humans are primarily feeling creatures that sometimes think”

 

And here’s a direct quote from Jennifer Lerner, PhD, a leading behavioral finance researcher and Director of The Decision Making Laboratory at Harvard: 

 

“The empirical literature suggests that emotions influence numerous cognitive processes – selective attention, evaluative judgments, perceptions of risk and estimates of value, causality.”

 

From working with traders and portfolio managers since 1995, I’ve seen this over and over. I also see it in my own trading.

 

In my own words I put it this way:

 

Although logic may drive our thinking, emotions provide the fuel for our actions. And trading is a performance that requires action. In order to change our actions we must learn to work with our emotions.

Change nothing, and nothing will change.

 

If you can articulate your edge in the market but have difficulty controlling your actions and wish to change, consider 1:1 coaching or my self-paced Advanced Course. Three out of four traders report improved performance.  At minimum consider signing up for my free email newsletter that sends you free trading psychology tips.