Emotional management is crucial to the ability to focus on what matters most in the trade. For instance, planning, stringent rule following and keeping commitments are some emotional management skills you’ll want to hone.
There are those who would say that you should trade like a robot, meaning without emotions. They contend that, if you can do this you would be able to sidestep fear and greed. Well, if that were possible, you could avoid feeling any of the negative emotions that drive unwanted bad behaviors. However, what is also true is that you would be void of positive powerful emotions like inspiration, determination, joy, love and curiosity that substantially support decision making and good behaviors. Positive emotions lead to good decisions and behaviors that take you in the right direction, just as negative emotions lead to bad decisions and behaviors that take you in the wrong direction.
The research is clear that emotions govern decision making, not rational thought, despite what many think. Countless individuals contend that logic is what determines how and what they decide; but when you make a choice of which way to go on just about anything, especially important items like businesses, cars and houses, the final determinant is how you feel. So, while taking emotions out of the trading equation, you would allow you to avoid those pesky emotions like fear and greed, you would also not have the advantage of those wonderful emotions that assist you in making the right decision.
Emotions drive behavior, and the power of emotions and how they impact directly and massively upon what you do is very valuable. Consider just about every rule violation you’ve ever come upon; whether moving a stop, chasing a trade or whatever puts you and your account at greater risk of loss, aren’t fear, anxiety, greed, and anger at play just before you engage in that rule violation? You felt the fear before you moved the stop; you felt the greed before you chased the trade, or you felt the anger before you exited the trade prematurely. Actually, emotions, just like thoughts, are energy. If you were hooked up to a fMRI, a functional neuroimaging procedure using MRI technology that measures brain activity by detecting changes associated with blood flow, the technicians would be looking at colored pictures of emotions, thoughts and other brain functions in real time. So, a big part of the trading process is emotional management or energy management.