In many ways, many traders end up shrugging their shoulders to the tune of “oh well I will do better next time”. The question becomes /what exactly/ will make them perceive, decide and act “better” the next time? I mean it isn’t like there aren’t tons of methods and tools to help a trader with their decision making, their psychology and their emotions.

Maybe, could it be, that the tools have a fundamental flaw?

IMO it is – and that flaw is literally in understanding how the brain – when dealing with uncertainty – makes a decision. Based on my research for my upcoming book (McGraw Hill, 2011) MARKET MIND GAMES, the sequence is like this.

1. Contextual pattern matching – does what I am looking at look like something I have seen before? This step is to identify what it is you are looking at it. (i.e. is this my trade set-up?).

2. Application of a percentage of belief in what you think we you are seeing. How much confidence do I have in what I think is the pattern match? THIS IS THE KEY MENTAL STEP THAT HAPPENS MOSTLY UNCONSCIOUSLY AND COMMUNICATED TO YOU ON A VISCERAL FEELING LEVEL!

3. The emergence of a perception that underlies a decision and an action.

4. Acting – or the “behavioral expression” (Credit Kerry Ressler of Emory on Charlie Rose for that exact term) – of the feeling of confidence in the contextual analysis.

So…. how much “intellect” is involved? Well in the traditional sense of the word, the intellect is the historical learning that allows step one to take place. In the new paradigm of emotions, not all that much. Eric Kandel, the Nobel Laureate, said on Charlie Rose recently – “Everything we do MUST have an emotional charge”! (May 26, 2010, Brain Series #8).

Most traders spend all of their time on the pre-cursors to all of this – gaining the intellectual background. If they don’t have the results they want, they stay stuck in the pre-step 1. Instead I and my clients who have tried it, highly recommend getting analytical about steps 2 & 3. The context of confidence or context of feelings that one brings to the perceptual process is literally EVERYTHING! Without knowing that “fC” (and the U-fC for unconscious feeling context), the only choice you are left with is to act out feelings without knowing what is happening.

Get out ahead of it – and it will put you “in the zone” much more often!