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Scott Phillips: Dealing with strong feelings while trading


You are going to laugh.

At me, not with me.

I noticed an old problem come back to bite me on the ass. Of all the trades I took this week there was one I really thought was a lock. One of the 4hr Mechanical System trades.

I wrote about it to the list. Posted it on my facebook.

Of COURSE it didn’t work.

And I was feeling a bit sheepish about it. More than a bit sheepish, I was positively embarrassed. I didn’t want to mention it, actually.

That would have been a total dick move though. I’ve had thousands of losing trades and I’ll have thousands more. And I don’t want to pretend to be some guru asshole, either.

It got me to thinking. I took a few trades this week. I took OTHER trades that lost that didn’t bother me. Why did THAT trade upset me? What was it about it? It was actually smaller than my usual size, it wasn’t even a hit to my account. i was very slightly up for the week.

And then I realised.

The 4hr Mechanical System works by selecting one or two markets which are in strong trends for the day, and then trading those markets like a robot.

In the very act of choosing a market to trade, I automatically started the process of being biased towards that view. Of wanting it to play out the way I predicted.

Which is a sucker thing to do but here’s the thing.

We ALL have the same bugs in our mental wiring. Mine didn’t disappear when I learned to trade. They really do have to be worked on all the time.

The takeaway is that ALL systems are somewhere on a spectrum between “trading robot” and “loose guidelines”.

The more room to manoeuvre you have in any system the better your potential returns will be (as a general proposition).

Nothing for nothing though. The more freedom you give yourself in your trading systems the stronger the feels you are going to get. The more skill you have to maintain to trade perfectly.

Because trading perfectly is the goal. Not making money.

It is entirely possible to trade perfectly for the whole week and still lose money.

And that hurts. But that is the VERY HIGHEST SKILL IN TRADING. The boss mode, the wizard ninja shit.

The primary skill of the expert trader is to lose well. What is losing well?

Losing well is losing according to your trading rules, and being willing to feel all the feelings that arise from that loss.

Here’s how I manage the process.

FIrstly I clean my mental room. What I mean by that is that I complete all my trade spreadsheets and revisit the screencapture of every trade for the week, one at a time.

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I ask myself, was this a trade according to my rules? Did I break my rules?

If I can get to the end of that list without having to say “fuck what was I thinking?” then I’ve traded perfectly.

At that point if I’ve done my job but still lost money I try and connect with what a psychologist calls my “inner child”.

Basically I imagine there is a 5 year old version of me which is my emotional self. I try and feel my emotions when I do that, which might be a tension in my chest. It might be a feeling of pressure in my guts, but whatever it is, emotions usually have a physical component you can pay attention to if you concentrate.

What I do is try and congratulate myself for a week of hard work, and tell myself that I really traded well (if I did) and express sympathy that it hurts that I still didn’t make money.

If I didn’t trade well I still need to do something. I enter it in my spreadsheet and I take the time to remember how and why it happened. Was it a one-off mistake, or did a small thing set off a pattern of bad trading? I try and remember every little detail I can. This is important, the more detail you build up about the mistake the more likely you are to recognise and catch it next time.

You are spending a few minutes here saving yourself from future mistakes.

After all you can’t go back in time and erase your mistake, but you CAN stop yourself from making the same mistake 20 times in the future!

And then I forgive myself. Very important.

This is the way to fix pretty much every trading psychology problem you will ever have.

Feel your uncomfortable feelings.

Seriously. That’s it in a nutshell.

You have a feeling of shame after losing a trade. You bundle that up and shove it down deep inside you where you don’t have to feel it. Maybe you distract yourself with facebook, or by eating something, or fucking something or buying something.

But the feeling is still there. And what happens when you don’t feel your feelings is you end up doing weird stuff in your trading life. And personal life too, for that matter.

If you are unwilling to take a small loss by exiting a trade… you always end up taking a big loss. Every real trader knows this to be true.

So FEEL your feelings. Let them sting. Feel that burning secret shame and fear. By doing that we never feel the need to act out on them.

Most people act out on their feelings by cheating on their diet, or jerking off to internet porn, or spending 6 hours on facebook. That’s not gonna kill you.

But if you let that same bullshit go on while you have a trading account it WILL cost you money.

Check out my Price Action Masterclass here

Scott Phillips


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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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