Is Venting Emotion Good for Trading?

ventingDoes venting emotion help a trader regain focus or does it exacerbate emotional and physical arousal and interfere with concentration and decision making? Research actually suggests that venting emotion after a traumatic event can lead to worse psychological outcomes. The key seems to be whether the venting allows for a reprocessing of the stressful events. If the venting leads to new ways to interpret what has happened–new perspectives–it can be helpful. If there is no such transformation of the stressful event, venting can simply amplify stress responses and reinforce them. Venting in a social manner to gain control can constitute good coping. But losing emotional control simply reinforces a sense of lost control.

Is Venting Emotion Good for Trading?

Does venting emotion help a trader regain focus or does it exacerbate emotional and physical arousal and interfere with concentration and decision making? Research actually suggests that venting emotion after a traumatic event can lead to worse psychological outcomes. The key seems to be whether the venting allows for a reprocessing of the stressful events. If the venting leads to new ways to interpret what has happened–new perspectives–it can be helpful. If there is no such transformation of the stressful event, venting can simply amplify stress responses and reinforce them. Venting in a social manner to gain control can constitute good coping. But losing emotional control simply reinforces a sense of lost control.

Goal Setting

Competitive goals can lead to burnout. Michael Jordan who is a compulsive competitor, exhausted himself in continually reinventing new ways to spark the fire in his enthusiasm.

Destination goals, such as, “I’ll get to this particular place by x date” tend to be difficult to maintain since the reward exist in the non-existent future.

Process goals, are increments of cumulative experiences that instantly offer rewards in the present of now. For example, when I first started day trading, I made no attempt to make a lot of money immediately. My immediate goal was to learn market dynamics without suffering major financial losses.

I convinced myself that once I learned how to not loose money, probability favors my chances of starting to make money!.

This approach allowed me to (1) maintain my self-confidence, (2) stay in the game without capital blow-out, (3) develop a non-emotional response to rapid fire decision making, (4) handle small draw down with minimum psychological upheaval, (5) visualize the feeling that I will be doing this for the next 50 years, and (6) secure the knowledge that my journey was a life long commitment to learning.

I believe it is good to set smaller challenges that generate rewards in the present and not in the non-existant future and let the long term goal of consistence of profit flow naturally from a great set of process actions, such as system design, indicator design, system testing, placement of trades, etc.

“It is the very foundation of strategy to be able to adapt to any situation and continue fighting without losing heart. You gain this ability by practicing day in and day out with intensity.”
–Miyamoto Musashi

Trade Like an O'Neil Disciple:Must Buy -Must Read !

Here is my brief review. Detail review will follow later.
In a year around 40 to 50 books on trading are published, I read most of them, there are very few which have actionable trading ideas and can help you enhance your trading skills. Trade Like an O’Neil Disciple: How We Made 18,000% in the Stock Market is one of the best books I have read in recent years. I am already reading it second time and taking extensive notes.
If you are growth/ IBD/ momentum/ CANSLIM kind investor you will find practical ideas and some new ways of entering and exiting trades. You will also learn how explosive returns are possible under right circumstances using those methods.
The book also goes in to details of short selling and has couple of good short selling strategies.
The book is not for beginners and those looking for simple methods without much effort, you need to have some foundation about growth and momentum investing before appreciating and understanding it.
A must buy for growth/momentum investor who want explosive returns…..

Book Review :Elder, The New Sell & Sell Short

Most traders have read Alexander Elder’s Trading for a Living, originally published in 1993. Elder has, of course, written other popular books such as Come into My Trading Room (2002) and Entries and Exits (2006). His latest work, The New Sell & Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines (Wiley, 2011) is an expanded second edition of his 2008 book. It comes with a built-in study guide: three sets of questions and answers. Although it is a paperback, the charts and graphs are printed in color and the stock is of high quality.

The first part of the book covers Elder’s signature contributions to the trading literature: psychology, risk management, and record-keeping. It is brief because we’ve been there before, but Elder does describe some new ways to keep records—an ongoing project because he believes that “the single most important factor in your success or failure is the quality of your records.” (p. 341)

Part two tackles the all-important question of how to exit a (long) trade. Elder offers three alternative scenarios: sell at a target above the market, be prepared to sell below the market using a protective stop, and “sell before the stock hits either a target or a stop—because market conditions have changed and you no longer want to hold it.” (p. 59)

Elder then moves on to shorting stocks, futures, and forex; he also has a section on writing options. Finally, he points out some lessons of the 2007-2009 bear market. (more…)

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