Thursday, June 04, 2015

Trading Emotionally With Intelligence

An excellent recent article outlines some of the qualities shared by people who demonstrate a high degree of emotional intelligence.  Emotional intelligence refers to our ability to understand our feelings and make use of them in constructive ways. As the graphic depicts, that requires a high degree of self-awareness (knowing what you feel) and the self-management capacity to channel feelings in constructive ways.  Emotional intelligence also includes social awareness of the feelings of others and the ability to make use of that information constructively in relationships.

I've consistently found that the best trades emerge from situations in which the head and gut are aligned.  That means that one is both analytical and intuitive:  you know something is right and you feel it lining up.  Many of my worst trades have occurred when I relied on an analysis to trade a market and have not had a strong feel for the trade.  I've also lost money going with feelings and flying in the face of patterns I've carefully researched.  When intelligence and emotional intelligence come together, an idea makes deep sense.  That is what provides traders with the confidence to hold positions through choppy conditions.  It's a great example of how performance hinges upon some of our softer strengths.

Cultivating emotional intelligence begins with work on awareness.  We can respond constructively to our experience if we're not mindful of that experience.  We are always in a relationship with markets--what are we feeling in that relationship?  How might that be related to what others are feeling?  How have those feelings helped or hurt my performance recently?  How do I feel when I'm trading at my best?  At my worst?  Structuring a journal to observe emotions and identify what we can learn from them is a great way to build self-awareness.

Emotional intelligence begins with the insight that our experience provides information.  It's another brain processing the world for us.  The emotionally intelligent trader learns from that information.  Many good trades come from watching the reactions of other traders.

Further Reading:  Developing Emotional Creativity