For some, these days can be their best money makers – they know how to push the pedal to the metal when the time is right. For others, they tend to be their worst days – the think they have missed it, they fade the move (it will revert right?) and then give up and go with it – at the exact wrong moment.

So for many traders, it is a day of frustration. For some, it is a day that induces them to prove how smart they are by 1) finding the turn 2) finding the turn again. This usually ends up with their largest loss of the month.

Want to be the pedal to the metal trader? First you have to curtail the need to be right, to be contrary or give in to feeling you missed the move. How do you do that?

Ask yourself – what am I feeling? If I am really honest with myself, what do I WANT? Don’t tell yourself not to want it and don’t try to deny it. Let yourself feel and express whatever you feel. THEN look at that and ask yourself if you want to act on that feeling, if it will make money to act on that feeling. Once you have that answer, make a decision about what to do in the market.

Then repeat the sequence –

1) Your brain will NOT make a decision without emotion and  2) Emotion signals meaning – even to your eyesight.

These facts leave us with no choice but to get better at using our emotions as data. They tend to be the communicator between the unconscious (where according to some 95% of the activity takes place) and the conscious. So… why wouldn’t you want access to the parts of your brain where 95% of the thinking is being done?

I know it isn’t easy to do but the strategy should be to re-orient your perspective to one anchored in understanding your feelings and emotions. This is palpably different than using your intellect to try to override or change how you feel.

It also is NOT about just acting on how you feel. That is confusing actions with feelings and emotions.

Knowing your own emotional (social) context is your risk management key and predicting the emotional (social) context of key influencers (Central bankers on at least two continents as well as operating M.O of HFT traders (IE what is everyone else doing?) is a key to market predicting. Work with the first and the second becomes easier.

While we wait for me to finish my book – check out The Social Animal by David Brooks.

For all practical purposes, no one really knows what a downgrade of US debt means. We might be able to say it means higher interest payments or certain entities having to sell US debt but in reality, because this hasn’t happened before (at least not in any recent institutional memory), we can’t have that context that is so important to judgment calls under uncertainty. This might mean that nothing much will happen on the opening in a few hours – everyone will be looking around to see how other people perceive it.

Of course, the knee jerk reaction is to think the markets will sell-off. I hate to go out on a limb …. but …. I suspect that at first at least (i.e. the first 12-24 hours) won’t be /that/ clear. The context – both social and emotional – has yet to be created.

Next, when you get in the market, your position either starts to work – or it doesn’t. The latter is actually easier – a loss is a loss and you know it. Oh sure maybe it will turn around but… it is clear. And of course, it doesn’t feel that great.

Relatively however it generally feels better than a winner. WHAT? you say?

Well think about it – when a position starts to work you are faced with an impossible decision scenario – wait for more but risk reversal, get out now but risk not getting more …or put a trailing stop – which means by definition you will get less than you could have had.

None of us can change the fundamental uncertainty of trading – no matter how many clever combo’s we put on our charts and no matter how many experts we work with. So to give yourself the psychological leverage that can set you apart … get used to the anxiety of ambiguity. (see posts below for some help).

To learn how to handle the very real frustration and disappointment of winners – expect it. Winning is going to tap into “anticipated regret” or more properly stated  -  the avoidance of anticipated regret.  But the bottom line… the vagaries of the market induce regret almost no matter which way you turn.

If you know that going in, you have an edge vis a vis those who don’t. And what percentage of those you are trading against do you suppose do not know – or accept – this? … See… there you go.

1) Turn on the computer in the morning (9:15 AM EST)

2) Place an order at the “Bounce Line”

3) Make money

4) Turn off computer at 11:00 AM EST

5) Do what ever the heck you want to do for the rest of the day

>

> This may sound too good to be true. Heck, it DOES sound too good to be

true, but it’s not. There is nothing like doing this for a living.

> Many do, and they are no better than you… they simply have an

education… and our targets!!

>

> The best part about — is our ability to SHOW you this happen in real

time. Come watch this simple process above happen day-in and day out for Free. We will give you complete access for 5 market days to see for yourself with no risk by clicking on the link below.

Without talking directly to him, one can only speculate but when you ask why a billionaire risks everything – his Sutton place life, his family – for a mere 50 or 60 million, you have to look beyond the useless cries of “greed”. (Some neuroscientists wouldn’t even call greed an emotion…). The typical trader motivation is fear of future regret or FOMO – fear of missing out.

I think in this case, the feeling like he was on the inside, the feeling that he was the critical cog in a powerful wheel- in a way he probably didn’t feel deep down inside, explains the risk he took.

Looking at the social-emotional context may not avert the damages from the next crook, but at least if we look to comprehend the real reasons – we have a better shot at not getting “risked” by something we didn’t understand.

As it turns out, people who spend all of their time thinking about the right model of human decision making think in terms of subjective or even personal probabilites. This means that you make a judgment including the context of what it means to you.

So for example, you might choose to skip a trade because even though it fits your scenarios you know you aren’t in a position – for whatever reason – to manage it. In this case you know the subjective or personal probabilites of it working out are slim – regardless of the market itself.  This is the real world.

Now we even have to go one step further and add regret into these subjective probabilities – will I feel regretful or joyful if I do or don’t take this option? Why? Aren’t we supposed to be over regret?

Some research shows regret to be the most powerful motivator. I know it certainly is the one I hear on the phone.

Adding subjectivity – how much you believe in something or the personal context you are in (won’t be here to manage the trade maybe) and then adding regret or potential regret AND MAKING IT EXPLICIT and known… will help you make better decisions under uncertainty.

But in any event, the point I want to make is that Mondays and particularly Mondays after a holiday sit within one of the many special contexts of markets. In this case you have not only the Monday after a long Spring Break but the Monday before the Fed pulls a totally new move that everyone (at least in the media) is talking about.

Now you may try to trade pure chart patterns… but the big boys trade charts and context (social context really – or trading other people). Given that they do, they will be paying attention to this NYC Rainy Monday and the context within which it sits. For the independent who thinks they can’t  or won’t or shouldn’t do that – it will still pay to take an extra patience pill as the markets open up.

I know everyone likes to get back to trading… but the payoffs aren’t worth it. Let the big boys take the lead and make something happen. Then jump on their coattails. Otherwise, you will have a few small losers – or scratches – and you will have debited your psychological capital to the point that when the game really starts – late today or not until after Tuesday – you will be spent.

What if we stopped and asked ourselves the people question first? What if we said, what will different time frame players be feeling/doing today? Next month? What if instead going straight to the numbers we started with the over-arching question we really wanted to know – will someone sell this asset for less in the future if I short it now.

Why bother you might say? Aren’t the numbers enough?

Well no – first of all does any number in the market really have any meaning? Aren’t they all relative to the numbers that came before? So in other words, all market numbers have meaning only in context.

Well that is a funny thing because the latest neuroscience shows that /everything/ we do only has any meaning in context. Particularly when we have to judge uncertainty – which is about all of life except algebra – we use context. We pull data that we aren’t even conscious of ….

What could happen if we consciously set out to put our brain to work in the context that it is really working – predicting other people (theory of mind) and using numbers just a tool – understanding them only as the language being communicated across the electrons?

The solution to this isn’t to think harder, find another system or add something to a series of charts. The answer lies within each trader. It first demands understanding the basics of psychological capital – managing yourself with more care than you monitor your charts – but beyond that, the real way to reduce the number of times you have to ask yourself that “wtf” question is to understand the sequence and more importantly the unconscious meaning to your actions.

We all know that actions speak louder than words so it is possible to work backwards from what you do to what it means. Armed with what it means, you have the first step towards changing the behavior.

Now this culture is still under the spell of the superiority of the intellect (which by definition means the inferiority of non-cognitive dimensions like senses, feelings and emotions) but that is changing rapidly. Neuroscience now compels us to look at what is going on below the level of consciousness. There are literally hundreds of studies now showing the power of what we are NOT conscious of.

Now many people are afraid of knowing their unconscious. The good news about that is for anyone who is willing to get to know themselves and the meaning behind what they do, there is a built-in edge (that you can control) over every trader who won’t or can’t do that work.

The markets work in psyches as authority figures because indeed they are – no amount of arguing, imploring or pleading will change what they do. The are the ultimate implacable listener. This brings up many issues – need to be right, habit of rebelling, desire to be perfect and get “their” approval – all of which will coalesce into a pattern of behavior that will NEVER be changed by the intellect alone. It begins with simple fractals of experience from early in life and as adults, those simple fractals combine and recombine to create our perceptions, decisions, context of feelings and “baggage” that fuels that never-ending “Why did I do that ?”

Solving it is indeed possible. It just requires giving up the resistance to knowing the unconscious meanings – and being open to having and creating new emotional experiences. For each time you do it, it is a risk well-managed or a trade better executed. What will that do to your year-end results?