Learning to read your emotions is the key to achieving your peak performance
“Learning is a gift, even if pain is your teacher.”
– Michael Jordan
When the topic of emotions is discussed in the context of trading, it is mostly with regard to how they affect performance.
Indeed, if you’ve ever had any of the following experiences, you might be tempted to think of emotions as evil:
- Move your profit goal out of a greedy attempt to commit murder
- Chasing the market for fear of missing out
- Overtrading out of anger to make up for losses or mistakes
- To think that you can outsmart the market because of overconfidence
- Holding on to a losing trade for too long because your confidence cannot take another loss
But seeing your emotions as inherently bad makes no sense.
Realistically, emotions are inevitable – as a human, it is simply not possible (or even desirable) to eradicate them completely.
In addition, when properly managed, emotions are an essential source of energy for increasing performance.
Anger, for example, can be a phenomenal source of energy.
Michael Jordan used anger as motivation, largely because he was dropped from his high school basketball team to become one of the greatest basketball players of all time.
Some traders are best when they are mad.
Others only achieve their maximum performance when they have their backs against the wall and are exposed to a lot of pressure.
However, the downside of using anger or fear to promote optimal performance is that most people lack the ability to control their emotions.
In the hands of a beginner, anger and fear can be extremely volatile.
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Jordan and other elite artists like him have their emotions under control.
You’ve figured out how to maintain the right mix of emotion, energy, or fuel to consistently perform at your peak.
This also includes the right mix of emotions.
Another important aspect is stability. Imagine sitting on a small boat in choppy seas, trying to board another boat that has been pulled alongside.
The unpredictability of the waves makes it difficult, if not impossible, to correctly anticipate when to jump from one boat to another
So it is when you are trying to get into the zone when your emotions are fickle. You can do it, but the chances are slim and big mistakes are likely.
On the other hand, when the seas are calm or your emotions are stable, it is much easier to reach the zone consistently.
Mapping of your service area
When it comes to execution, everyone has their own range of capabilities, both mentally and tactically.
You are probably intuitively aware that you have one too.
It is easy to tell whether you are best or worst.
But have you ever stopped thinking carefully about the different levels of your performance?
Most of them don’t. For the sake of simplicity, I’ll describe the concept here and refer to these levels as A, B, and C games
When you perform at the A-game level, your emotions are clear and stable.
You are in or close to the zone so you make quality decisions as there are no negative emotional disruptions in your process.
Any mistakes you make at this level are caused by something technical – such as knowledge not yet acquired or a recent market change that you have not yet identified.
To be honest, it’s a bit of an exaggeration to even mention these mistakes.
You wouldn’t say that a toddler made a mistake if they fell shortly after taking their first steps.
Your attempts to take your A-Game higher are no different.
These “learning errors” cannot be prevented.
They are an integral part of the process.
On the other hand, your C-Game is full of emotional volatility and that is the main reason for your poor performance.
You make mistakes so obviously wrong you know seconds later. At this level there is nothing tactically new to learn.
You know what you should have done, and that’s why you quickly realize it was a mistake.
At that moment, you lacked access to the knowledge and skills that you normally rely on, either because excessive emotions caused your mind to malfunction or you did not have enough energy to think properly.
Some traders don’t make big, obvious mistakes.
Her mental game is so advanced that her C game is made up of more subtle mistakes.
For example, you might be prone to reading too much into price action and forcing trades that don’t have a strong indication of an advantage within your strategy.
Regardless of whether the mistakes are big or small, your weaknesses live in the C-Game.
These mistakes create emotional chaos, cause your perspective to be out of sync, and lead to fundamental errors in terms of your reach
The nature of your B-game is more complicated.
In your B-game, you are likely making some minor tactical mistakes – things that you need to improve that are not very obvious.
If it were obvious, it would be a C-game bug.
You will find that some emotions are preventing you from being in your A-game, but not enough to pull you into your C-game.
From a mental and emotional point of view, one of the biggest differences between B- and C-Game is that in B-Game you have the impulse or thought to make a C-Game mistake, such as forcing a trade or one to close too soon, but instead you retain the presence of mind, mental energy, and emotional control to avoid it.
In the C-Game, your emotions are too strong and you can’t stop yourself from forcing or dropping out too soon.
In the A game, the impulse or thought does not happen or it is so small that you hardly notice it.
The key to unlocking the backend of your game and eliminating your most common mistakes while running it is to correct the performance errors that are causing your C game.
Even if you are a seasoned trader with more than 20 years of experience, some inefficiencies still cause your worst mistakes.
This is true regardless of whether your mistakes are significantly less serious than the mistakes junior traders make.
Every trader has inadequacies, no matter how skilled or experienced they are.
You cannot escape the allure of your C-Game by focusing solely on improving your trading knowledge and skills.
If you only improve on the technical flaws in your C-Game, your inefficiencies will continue to generate the same level of excessive emotion. They will make different but still obvious mistakes.
This strategy is not wrong; it’s just inefficient.
You will continue to experience unnecessary ups and downs in your execution and your performance will continue to lag.
To move your entire game forward, you need to move your C game forward.
And in order to do that, the main thing to do is to fix the errors that are causing your C game.
3 STEPS TO IMPROVE YOUR INTELLECTUAL GAME
As humans, we will never achieve lasting perfection, especially in an industry that is as competitive and dynamic as retail.
But by working systematically on your mental game, you can steadily improve your performance while staying energetic, confident, focused, and motivated.
Here are three steps to get you started:
- Acknowledge the important role of emotions. Emotions provide data about how we operate, for better or for worse, on an unconscious level. They provide information about a wide variety of things, including our underlying belief systems, prejudices, goals, perspectives, mistakes, ingrained habits, desires, and illusions. This is important because what happens at the subconscious level has a direct impact on your thoughts, actions, and trading decisions.
- Treat your emotions as Signals. Instead of fighting your emotional state, get curious about what your emotions are trying to tell you. As a trader, you use signals all the time and, depending on your expertise, you are more or less adept at using these signals to take advantage of them. Think of your emotions as the indicators you follow in the market.
- Develop a system. By developing a system for reading your emotions, you will learn to eliminate the mental and emotional volatility caused by your underlying poor performance. What arises automatically is an intense drive, but with greater stability. You benefit from the Jordanian anger without the turmoil. The process of reaching the zone becomes easier and less complicated. And you will enjoy your work more in the long term, reduce the risk of burnout and increase your earning power.
To find out more, read my latest book, The mental game of trading:
A system for solving problems with greed, fear, anger, confidence and discipline.
About the author
Jared Tendler, MS, LMHC, is a leading expert on how your mental game affects performance.
Its client list spans 45 countries and includes esports athletes, financial dealers, some of the best poker players in the world, a senior pool player and several PGA Tour players.
Author of two highly acclaimed books, The mental poker game, and The Mental Poker Game 2, Jared is writing a book about The mental game of trading and hosts the popular podcast, The mental game.
In addition to his writing and 1: 1 coaching, Jared was previously also head of sports psychology for the eSports organization Team Liquid.
He was a key factor in their success as they won multiple championships including The International 2017 (DOTA2), the Intel Grand Slam (Counter-Strike) and four League of Legends Championship Series (LCS) titles.
Jared’s straightforward and hands-on coaching approach has helped numerous clients solve their mental gaming problems and achieve top performance.
After earning a Masters Degree in Counseling Psychology (MS) and becoming a Licensed Mental Health Counselor (LMHC), Jared began his coaching career in 2005.