9/16/2025 - Think about the mind state of the Olympic athlete or the Broadway actress or the neurosurgeon. Above all, they are focused on what they are doing. They are in the zone of performance, and they experience that zone to be pleasurable. They're immersed in doing something they love.
The opposite state from being in the zone is being so focused on outcome that we can't enjoy the performance itself. Imagine a basketball player constantly looking at the scoreboard or the actor anxiously scanning to see how the audience is responding.
When outcome becomes more important than the process of doing, we become attached to our ups and downs and lose the joy of being in the zone. We learn most effectively when we're in the receptive zone that processes experience deeply.
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9/15/2025 - Hybrid trading is generally considered to be the use of quantitative signals and systems to support discretionary decision-making. What I'm finding is that, for someone with short-term trading experience, hybrid trading can also be the use of discretionary pattern recognition to best enter and exit trades generated by quantitative signals. In such trading, emotion actually supports quant trading. When a signal starts playing out in real time, there is an "aha!" experience that says, "Now is the time!" For example, a breadth pattern in which funds are flowing away from value and defensive stocks and toward growth shares might be significantly associated with positive market returns over the next two weeks. When we see the market sell off on a short-term basis and then find support above its prior oversold level, our "aha!" pattern recognition alerts us to opportunity. Emotion actually helps us get larger in the backtested trade. The experienced trader often senses and feels when a researched opportunity is playing out, creating very positive reward relative to risk.
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9/14/2025 - The most important emotions in trading are fulfillment and frustration. When we tackle challenges that make use of our talents, we experience satisfaction and a sense of meaning and purpose. When we tackle challenges either in ways that don't make use of our talents--or if we simply lack the talents necessary for success--we experience frustration.
To be sure, skill development is crucial to success and all performance challenges bring their own unique learning curves. We don't travel those curves successfully, however, if we don't have the basic talents needed for success. That is obvious in sports such as basketball and Olympic skiing; it's also obvious in the arts. Traders often want to believe--and unscrupulous vendors are happy to promote--the idea that success is simply a function of learning the right skills. Without core talents of information processing, pattern recognition, and multiple learning styles, attempts at skill-building will fall short.
When our approaches to markets fits our talents, our skill development is accelerated and that is intrinsically rewarding. We enter the performance zone when we are aligned with our talents. Trading can't be profitable if it's not deeply fulfilling.
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9/14/2025 - When traders reflect on emotion in trading, their first thoughts often go to impulsivity, greed, and fear. What I've emphasized in the upcoming book is that the experience of positive emotion is necessary for trading success. It is positive emotion that shows up as our first market alerts, as we sense opportunity before we consciously identify and make sense of it. It is also positive emotion that pushes us to find learning lessons and inspiration even in our losing trades and days, and it's positive emotion that connects us with others so that we can all benefit from teamwork.
The problem with overtrading and poor risk management is not just that they lose us money. They also prevent us from the positive experience that we need to energize our trading growth. Perhaps there is no better trading self-assessment than to ask ourselves whether our trading is giving us energy or draining us; whether our trading is inspiring us or whether it's holding us back from our development.
If there is no positive emotional P/L to our trading, surely we will not reap the financial rewards of markets.
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As I noted in the previous post, my research has been identifying edges that play out over a period of many weeks. I'll be discussing those in future posts. As those edges play out, you can identify short-term market situations where traders are getting stopped out of positions that will ultimately play out. You can feel the traders' panic, and you can use that emotion to enter a longer-term position with very good reward relative to risk.
A therapist feels a client's emotions, but does not become attached to those feelings. Emotions are information, but only if we can become observers of our emotions. Our trading problems result, not from the presence of emotion, but from the absence of focus.
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