Sometimes our own personal lives can seem like we are in a spin, with events and decisions rushing by, and no time to ourselves. It’s easy to get into a flap with it all. In this era of road rage and anger management courses, I thought it might be interesting to have a look at the nature of our own tempers.
Is Anger Productive?
We have all heard that it takes a cool emotional detachment in order to trade effectively. It’s just that this goal is just so damn difficult to achieve.
There is an ancient Japanese proverb that states: “A man is like steel – once he loses his temper, he is useless”. Although this applied to the ancient Samurai, it is just as relevant today as it was back then.
When we get angry, a chemical cocktail floods our bodies as we resort to a primitive fight or flight impulse. The limbic area of the brain is activated, which is one of the most primitive emotional centres, and this increases our heart rate, preparing us for action. This is whether the threat is real or not.
If you’ve been trading for a while, you’ll be familiar with this type of response. One minute you can be calm and cool, yet after a newsflash that the All-Ords has dropped 100 points, or checking a dire looking intra-day chart, you may feel yourself pump up as your body primes for action. The reaction to either fear or anger tends to release the same chemicals as we prepare for decisive action – either to stay and fight, or to run for cover. It doesn’t matter that our foe is intangible, and that we are not under the physical threat of a sabre toothed cat rushing towards us. The effect on our physiology is identical.
This reaction tends to dispense with logic. When caught in the claws of either fear or anger, you are no longer a thinking, rational being. All of a sudden you’re a primitive, vicious animal, with a need for instant gratification. When faced with this type of emotional surge, your desire to use the more intellectual parts of your brain is totally out of the question. The blood flow to the Broca’s area of the brain is curtailed which makes it less likely you’ll be able to speak coherently, let alone think clearly. Breathing becomes shallow and fast. Rather than being a sophisticated trader, you more resemble a Neanderthal – at the mercy of your limbic system. So, other than forcing yourself to evolve at the speed of light, what can you do about this situation?
Solutions
Self-awareness is the key. Realise how counter-productive anger or fear can be while trading. Recognise when these symptoms are beginning to take hold. Develop a circuit breaker, such as taking a deep, long, slow breath. If the threat isn’t dire, this can be all it takes to head off a full-blown aggression or fear attack.
Don’t seek revenge if you have made a loss. Fight your battles with an opponent with whom you can make eye contact. Physical activity may assist. Lots of people use the gym as being an outlet for release. Others use the squash court, or martial arts. Also, following a written trading plan will help you avoid taking unnecessary risks.
Recognise that after you have had a shock on the markets, your reactions are likely to flow in one of two directions. Some people feel the fear and stop trading all together. Others respond with anger that leads them to make inappropriate decisions and over-trade, in an effort to grab back the funds that the market has snatched. Consider lowering your position sizes until you are emotionally ready for the challenges of the market. Also have a think about returning to a broker, rather than trading online. Evidence suggests that online traders often over-trade, are over-confident and earn less money than traders using a human broker. Find coping mechanisms to self-soothe your battered ego, and regain your confidence and consider them in advance.
While we’re on this topic, do you think the market doesn’t send people a bit crazy? This may change your mind. During 2009, a bunch of usually sane, angry retirees captured and tortured their funds manager. Did you read about that? Click here for full details.
For a free copy of Louise’s trading plan template so you can trading with an edge, visit Louise Bedford at (www.tradingsecrets.com.au). Louise is Australia’s best-selling author of books on the share market and her titles include – Charting Secrets, Trading Secrets, The Secret of Writing Options, and The Secret of Candlestick Charting.
