Managing emotions while trading is critical to making good risk/reward decisions and achieving consistent results. Trade psychologist Rande Howell shares some proven tips.
Rande Howell joins me today to help with emotional regulation, and Rande, I need to regulate these emotions. How do we do it?
The first thing is you make a commitment to doing it. You declare that you are going to learn to emotionally regulate, and you realize that literally you are responsible for whatever happens to you.
Emotional regulation starts with an understanding of what an emotion is. It’s not what most people think.
On a neurological level, an emotion is anything that happens when there is a difference in a standard sensorial pattern. An emotion automatically pops up.
An emotion is composed of arousal—that’s where everything gets cranked up, your breathing intenseness and the adrenaline gets in the body and stuff like that. That has to be interrupted if you are trading.
The second part is motivation. All emotions either attack, avoid, or approach, and in trading, if you do not manage emotion, you are going to be avoiding and attacking a lot.
Approaching allows you to approach trading with curiosity and understanding…very different.
Ah, so the fight or flight; I have more choices than just fight or flight.
Yes. When you interrupt, that’s the motivation of an emotion, and the whole key is an emotion, when it explodes, it is going to go down one of three corridors: fight, flight, or approach. You calm yourself down and you start acting from what I would call “higher parts of the self” and it’s going to approach.
It creates a completely different mindset. It is moving from a fear-based mindset that you would interpret uncertainty through to a mindset that can be designed from discipline and partiality, from courage and patience.
That is what intersects with the uncertainty instead of fear base. That is what mindfulness; that is what emotional regulation can give you.
And that will make me a better trader?
Oh, phenomenally.
How did you get started with this?
Many years ago, I was training violent prisoners how to regulate anger, and it was very successful, and they became better able to manage their anger than their prison guards.
And from there I evolved, and I moved beyond all that, and it got just more complicated, and I realized that the key here was emotional regulation so that you got to the moment where you could change the meaning that had become fused into the emotion itself.
And you moved away from external validation of the self where you are looking for external ways to prove your worth, to prove that you are mattering, your adequacy, or your power, to where you are finding something inherent within you that is of tremendous value.
And as long as, and particularly in trading, as long as you are trying to find value in performance in trading, you will always be inconsistent.
When you are looking at trading as a performance, and your job is to train the mind for that performance, everything changes, and that’s where emotional regulation is so helpful.
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