What is this blog about anyway?

In short, it is supposed to be immersion in thinking about trading and behavior from a totally radical perspective – one where your emotions and feelings matter more than anything else. They will influence your perception of risk and in turn influence your decision making and the trades you take.

We get a little zealous about it because we see how powerful this realization is to so many traders. It also applies to all traders – from the newbie to the quant in Greenwich. How can that be? Well the underlying idea of you can’t make any decision without emotion is a human reality. The idea that we like to rely on numbers and probabilities MORE than we like to rely on squishy mushy feelings is well proven.

Why? Well for one – and it is a big one – it is easier. We know what to do with numbers while the qualitative aspects of feelings are something we have assiduously and theoretically wisely avoided for as long as we can remember.

That fact doesn’t change the real fact that without those feelings you can’t decide what to wear. It doesn’t change the fact that there is emotional motivation in every trade. It doesn’t change the fact that there is impulsive emotional energy in every deviation from the plan.

What it does do is mean that if you really want to make it in this business – regardless if you recently started or if you were laid off from JPM or even if you are at one of my friendly funds in NYC, the key to more effectively assessing risk is to get in line with your psychological capital. Or better put, get your psychological capital in line – front and center – and always the thing to be managed alongside of the probabilistic or mathematical risk.

ALWAYS.

Tags: trading psychology

This entry was posted on Wednesday, June 10th, 2009 at 10:53 am and is filed under Emotion Analytics, Learning Psych Cap. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.