There's a few people who specialize in the emotional side of trading. Rande Howell is one of the more prominent. Plenty of stuff on youtube. Mark Douglas is another, though his message is more about reliance on statistical probability as a way of reducing emotion. In other words, have a system that is so solid that you just run it like a casino. Casinos don't worry if they have a red day because the statistics tell them that by the end of every month they'll be in the black. That's ok if you're a casiono or hedge fund, but I'm not so sure it applies to retail traders.
Of the two, I think Howell's approach is better, but he's in it to sell courses & books. To that end, you'll find a lot of padding in his work. You have to trawl through shitloads of material to find the essence.
So I'll tell you what I think is the essence. If it rings true, you can apply it. But first:
- Get your system as tightly defined as possible. Backtesting is very valuable but not essential. If your system is not tight, it's going to be very hard to control emotions.
- Once you know your system inside out and back to front, do a heap of paper trading on unseen data. I did a post on that last week with more detail.
Emotions.
This work can only be done when trading real money. The size of your bet must be big enough to trigger some emotion but not too much. Feel what emotion is happening before you click, and in-trade. If you're not familiar with feeling emotions, it could take a bit of time to tune in. We're men, right?! We don't have emotions!
Scan your body using your attention - specifically, head, throat, cheat and gut. Feel the physical response in your body. eg. tightness in throat, warmth in chest, knots in stomach. If you can't feel anything, then either you're someone who represses emotions, or the size of your bet isn't big enough. If you tend to repress, a lot of work lies ahead but I don't think that's true for you. Just feel what's there and do your absolute best not to judge what you feel. Full acceptance of the physical sensations. Over time, they will become less intense, then dissolve.
