Maybe the toughest challenge in trading – or market risk decisions – is resolving the conflict over now or later? Should I get in now or later? Should I get out now or later? One can throw a whole bunch of so-called facts at the question and still be no closer to a satisfying (or potentially correct) answer.
Psychologically, and often unconsciously, the major motivator within the question is the desire to avoid feeling like one made the wrong decision. Probably the worst mental state in trading is decide to cut one’s losses and then have the position immediately or almost immediately reverse and go in the originally expected direction. In fact, it is this possibility that keeps all kinds of traders – from the semi-pro with 35K to the ostensible pros at JPMorgan in losers.
In other words, if a trader attempts no other feeling analytics (yep, you read that right – feeling analytics) in their quest for better performance, they should work with just this scenario. Given that the now or later question is made hundreds of times more difficult through the fact that now or later can be 1, 2, 3 …minutes, hours, days… – or in other words essentially an infinite number of “nows” and “laters”, knowing when this feeling is in operation (and learning how best to handle it) can make a big difference in a trader’s results.
Academics call this the fear of future regret and while not well known, there are actual mathematical models representing this very issue – how we in many decisions, factor in the possibility of feeling bad in the future. More precisely, how we attempt to avoid regret. After all, it is a lousy place to be – wishing one had done something different when one easily had the chance to.
Attacking the reality of the feeling head-on – knowing it IS going to occur – and handling it in ways that actually work (feeling, articulating, experiencing versus acting out), WILL. improve. your. bottom. line.