Sunday, January 24, 2016

The Key To Overcoming Frustration In Trading

Dale Carnegie was right; many times it's not our work that runs us down, but our emotional responses to the work.  Fear and greed often get first billing in discussions of traders' emotions, but it's frustration that I encounter most commonly.  Traders become frustrated when they feel they miss moves; they become frustrated with losses; they become frustrated if they make money and feel they should have made more.  This is why changing the dynamics behind frustration is the single greatest psychological improvement traders can make.  

To be sure, frustration can serve as a motivator.  After all, we become frustrated when our desires and goals are thwarted.  Learning from what is holding us back can give us the motivation to overcome those obstacles and ultimately succeed.

We can't channel frustration constructively, however, unless we're first aware of the frustration.  It is the mindful awareness of frustration than enables us to pull back, assess the situation, and move forward in a positive way.  If we're not aware of the frustration, we can't pull back, and we're most likely to act impulsively out of that frustration.  Those decisions are rarely good ones.

"I'm really frustrated right now; this is not when I should be trading," is something I've told myself more times than I can count.  I'll take a short time out; I'll take the rest of the day off--I'll do what it takes to address the frustration and re-enter markets with a fresh mindset.  I can only guess how much money those decisions have saved me.  When I act out of frustration, I'm placing the trade because of me--not because of genuine opportunity offered by markets.  When we plan trades and rely upon best practices, we trade mindfully and proactively.  When we act on frustration, we trade reactively--and often violate those best practices.

To stay proactive, we need to use frustration as a cue to stop and reflect, not as a spur to act.  Frustration can become our friend if it becomes our prod to improve who we are and what we do.

Further Reading:  Turning Around Your Trading