Controlling Emotions vs. Resolving Emotions

The biggest difference between my system and traditional performance psychology is the issue of what to do about emotions. While conventional wisdom acknowledges the role of emotion in performance, the advice is typically centered around controlling them. Conventional wisdom basically tells you that emotions are the problem. I disagree.

Emotions are not the problem. They are signals, pointing you in the direction of where the real problem lies. When you spend time pretending the emotion isn’t there, rationalizing it away, or writing it off as a one-time event, you are not actually solving the problem. You are just managing it.

Or perhaps you are aware of the emotions and have created your own “solutions,” which, spoiler alert, are just alternate ways of managing them. You exit early to lock up profit and avoid a potential blow-up if the trade turns against you. You stop trading on days your emotions are too high, until you can get your head on straight. You walk away from an active trade so you don’t interfere with it.

The problem with these work-arounds is that you’ve minimized your profitability as well as your ability to adapt and improve as a trader. Trading smaller, exiting earlier, and booking a profitable day all in an effort to keep your emotions in check is not how you ultimately want to play this game. Yes, they can be good short-term strategies, but they’re best used like training wheels. And until you lose the training wheels, your upside potential as a trader is significantly limited.

While controlling emotions often leads to temporary relief, and at times that is critical, they continue to come back again and again. You’re forced to constantly keep an eye out for their return, and when they eventually come back, you have to once again fight for control. There has to be a better way [read in classic infomercial voice].

Resolution is Better

Advice focused on controlling your emotions relies on the premise that you must keep holding ideas in your mind to control and fight against greed, anger or fear. I consider this to be a “band-aid” on the problem. Instead, I want you to eliminate the underlying problem. If you get to the core of the problem and take it out at its roots, the emotions stop impacting your trading. They go away, permanently. This is resolution.

Resolution means you have corrected the performance flaws causing your trading errors. Automatically, the things that would have triggered anger, greed, fear, or a loss of confidence simply don’t. The benefit of that is that you can stop managing, controlling, or working around your emotional reactions, because they are gone.

You can think of the difference between control and resolution as the difference between treating an illness (control) and curing it (resolution). Let’s say you are having chronic hip pain that you are treating with ibuprofen and ice. You are able to exercise and move around freely, but you have to keep up with your stretching, icing, and medicating routine, or you can’t exercise at full capacity. You are controlling the problem with treatment.

Now let’s say one day you mention this chronic pain to a physical therapist or sports trainer and he recognizes that you have muscle weakness and tension around the area. He teaches you simple stretches and exercises to build strength while stretching the muscles. Plus he suggests you get a few deep tissue massages to break-up some scar tissue. A couple weeks later, boom, the pain is gone. That’s resolution.

My System Is Designed to Get You There

What does your trading look like once you reach resolution? Your emotions aren’t gone in the sense that you’re void of them, like a robot. Quite the opposite. You’ll be:

  • Full of emotion, but the good kind—energized, confident, focused, and motivated
  • More patient and able to let the market come to you, rather than chasing it
  • Focused more on execution than PnL
  • Able to handle losses
  • Decisive and rapid in your execution

Not only will your emotions be stable and positive, but the common trading mistakes you make when you’re blinded by greed, tilt, or fear will be gone as well. Why? Those emotions were the primary cause of your mistakes. This doesn’t mean you won’t make mistakes—no trader is perfect—but now your mistakes will be smaller comparatively.

To solve the problems in your trading, however, you need to dig deeper than you already are. In fact, you need to dig all the way to the roots. Because only when you address the root of the problem can you really resolve it. My system has been used by competitors at the top of their field to do this work and reach resolution.

In my system are three distinct stages and each stage has its own set of steps and strategies. The big picture is:

  1. Map Your Pattern: This is exactly what it sounds like. You need to create a fact-based account of when and how your emotional volatility shows up. Over time you will be able to recognize a pattern and then you can work to disrupt how that pattern plays out.
  2. Identify the Roots of Your Problem: Here you dig deeper to find the hidden flaws, biases, illusions, and errors in learning that are the real cause of your problems.
  3. Correct Your Problem: This is about consistently and relentlessly working to correct the problems as they appear day-to-day. Like an athlete improving their technique, only you’re working on technique for the mind.

To learn more about how to reach resolution for the costly problems affecting your trading, check out my new book, The Mental Game of Trading.

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