BarroMetrics Views: Self-Awareness
I come from a family where we were taught to:
- Accept and be aware of our feelings and
- Articulate them in the appropriate way and context.
Today neurology is providing evidence that this homespun wisdom has a basis in reality. The conclusion I draw from the learning is rather than to seek to trade unemotionally, we need to make feelings the partner of our reason. The first step in this process is to form the habit of being aware of our emotions.
My current trade serves as a good example of what I mean.
Regular readers of this blog know that my trading is in an Ebb State:
- I suffered simultaneous losses in 6 instruments in the first quarter; and
- to date, I have not been able to make a substantial recovery. Still there are some signs that a recovery is around the corner.
Yesterday I took a trade in the ES at 944.75 (full details are available in my Forum posts - part of the free weekly video service). Yesterday, I read the market well enough:I identified the type of day and the likely high (all this in Forum entry posted at 11:10 am EST). But at the end of the day, this is what I saw:
Figure 1 Normalised Volume
My immediate reaction was: ‘Oh Sh..!”. This sort of response raises a red flag for me. It signals conflicting, unarticulated feelings. When I catch the response, the first thing I do is dig out my diary and start writing.
In this case, the conflict was just below the surface: yesterday’s end of day chart pattern signaled a possible reversal to come- my gut feel says it will probably be a test of the original breakout zone, 956 to 966 (basis cash S&P). Now readers know that my first priority is the preservation of my capital; but since the market had traveled only 10 or so points in my favour, I would normally consider such a move as noise. But…
…because of the current results two contradictory feelings had come in:
- What if I exit my positions and the market takes off? I’d miss my chance to recoup all my losses - perhaps my only chance?! (of course this is unlikely but here I am recounting what I wrote as I explored my feelings).
- What if I don’t exit and market does test 952 to 963 (basis Sep)? I’ll be stopped out and then I’ll have to reconsider getting back in neat where I was stopped out? Perhaps I should lower my stop below holding Primary Sell Zone of 953 to 865 (basis Sep)? But that would make the risk too large?!!
Now all this came out only when I took time to explore the sentiments behind” “oh Sh..!”. Once I articulated the feelings, I laid out a course of action - exit 1/2 and bring the stop for the remaining 1/2 under last night’s low. In this way, I protect myself and still have some participation if the ES continues up.
The point is this. If I had not brought forth the ‘hidden feelings’, I probably would have made a less than optimum decision for me. Understanding the importance of feelings and the role they play in trading success is key to our ability to achieve our trading dreams.
Refer this blog post to a friend or colleague…
