The question I get all the time is “Okay I buy this idea that emotions infuse all decisions and that is indeed the way the brain works, but how do I handle that any differently?”

Regardless if you are building a probabilistic model to trade gold against oil or tape-reading the E-mini Sp’s on a high-frequency, sub-one-minute time frame, the key questions are

#1) Am I aware of being nervous or excited in any way?

#2) If I can sense any such feelings, ask yourself, what is really driving this feeling? Is it your investors, the head of the trading desk or your own need to trade well? Furthermore, what is the unspoken expectation? This is the key. There will be one.

#3) How true is the unspoken expectation? Also, are there alternative outcomes instead of the one you are imagining?

At this point, you will have begun to use your emotions as information and your brain will most likely be more calm. You will also have more alternatives in your head for whatever decision you are faced with.

Let me know if it works -

This entry was posted on Tuesday, September 30th, 2008 at 6:05 pm and is filed under Emotions & Decisions. 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.