First of all, neuroscience is teaching us that trying to separate risk decision making from feeling or emotion is at best a waste of time and at worse, a sure way to eventually trade-out (like act out) the feeling/emotion that is present. Second, there is a logical fallacy in the idea of “control your emotions” because it assumes a conflating of emotion and action when they are two separate matters. If anything the dictum should be re-written as “control your actions”.

Yet the challenge of not acting out an intense or strong emotion remains. This is because emotions do have energy associated with them and that energy needs to go somewhere. Since no one in school teaches us to truly examine the meaning and source of the feeling (which will deflate that action energy), the path of least resistance is to act out (trade-out) fear, frustration and giddy confidence.

Here’s a primer on the way to break down your feelings – or a step one in a systematic program of emotion analytics.

  1. Physical feelings – fatigue, hunger, sore throat
  2. Ancillary or tangential feelings – fight with domestic partner, getting a speeding ticket, getting a tax bill etc.
  3. “Every-man’s” trading emotions – fear of being wrong, fear of missing out, fear of giving back (the latter two both part of fear of future regret) and feeling cocky.
  4. Fractal emotions – the feeling that history will repeat itself. The feeling that history is always repeating itself and there is some mysterious force that could, but won’t, explain why you make that same mistake over and over.

Wise traders are checking all four categories all the time. They are treating their psyches’ like athletes treat their bodies – being very attuned to small changes and adjusting to return to the best state to ski the run or throw the pass or dunk the ball.

Categories 1 and 2 are just easy. One doesn’t have to do much to refrain from trading if they are overly tired or aggravated at an outside situation. The biggest challenge is to side-step the momentary relief taking a trade gives you because you realize that taking that route is just a way to replace one feeling (frustration) with a very temporary feeling of being in control.

In the 4th case, wise traders are working with coaches or psychologists to unravel and then disconnect the past from one’s risk decision making. The results from untangling character patterns from trade expectations is very real. It also makes the 3rd category less cumbersome to deal with because fractal emotions fuel standard trading emotions.

Many people just don’t want to go there. The good news is that makes doing so a competitive advantage for those who have the courage to do so.