The emotions in markets are off-the-charts

Do you feel it?

comic about warnings
Fear is the strongest emotion but greed isn’t far behind.
What we’re seeing in the markets and in the world right now is extreme emotion. Collectively, I believe that COVID-19 has left everyone an emotional wreck.
We all agree that the fears from the virus have diminished but what has replaced that is a mess. It’s all anecdotal but I’ve come to believe the series of events around the coronavirus has elevated individual and collective emotions — like every day is a full moon.
The fear around the virus has left some kind vacuum and people are trying to fill it.
You see it in people’s lives, in protests, in anger but you’re also seeing it in markets. There has never been a market like this. People are throwing away their hard-earned savings on idiotic gambles on bankrupt companies.
But it’s not just the stupidest of the stupid. The uncertainty in the world is extreme and there’s no reflection of that in risk assets. The transition from fear to greed to euphoria is nonsense.


Conquering Your Fear

So, what can you do about the fear that keeps you from following your trading plan and maintaining your commitments? How to overcome fear that keeps you from following your trading plan. Well, let’s begin with what causes fear.  Fear stems from a perceived threat that may or may not be real. Threat begins as a perception and a thought.  In other words, when we have interpreted that an event is threatening our physical, mental, emotional, social or spiritual well-being we have given that event a meaning.  Now, meaning is a crucial process that controls not only what you perceive but how you perceive it. For example, that price action is moving toward my stop and that means that I’m going to lose in this trade (the movement of the price action may or may not take you out and at this point it is only an opinion but it is often treated as a fact).  In other words, the meaning here would be activated by a limiting or irrational belief about the inevitability of losing, and this in turn would prompt another limiting belief about what that says about you; i.e., “I’m a very poor trader and a loser because my stop loss was hit.”  It often continues to spiral downward from there.  So, what you are thinking is the genesis of the emotion that you experience…the fear.

Secondly, fear determines what you choose to do.  This is where you become immobilized or act in erratic illogical ways that increase your risk and destroy your desired results.  At this point it is important that you identify the thinking/beliefs that are fuelling the fear.  Here is an important question to ask; “What must I be telling myself or believing to feel this fear.”  This introspective inquiry will help you ferret out the underlying fear based programming that created that belief and in-turn developed the fear response in the first place. (more…)

Emotional Makeup is More Important Than Intelligence

  • I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.
  • As I recall more than half the course revolved around developing the right attitude, guarding against debilitating emotions, how to think about risk, and how to handle success and failure.
  • Teaching the turtle system itself doesn’t take very long. I was saying you need less than 12 degrees of freedom in a system; versions of the turtle system had three or four.
  • We spent a lot of time talking about our theories on how to control risk; that was actually the bulk of the course. Attitude, emotional control, discipline; those things are harder to teach. All the turtles learned the system and learned the strategy; that was the easy part, but some of them brought the right attitude and right mental set to it and they prospered and became very rich. Others had a more halting career and did not succeed as well. They had the same training, but maybe they did not have the same emotional make-up.

Ego in Trading -Anirudh Sethi

There is something about yourself that you may really not know. Something that you will deny even exists in you until it’s too late to do anything about it. It’s among the reason you rise up in the morning, the sole reason you suffer the shitty boss, the sweat, the blood and also the tears. This is because you would like people to understand how attractive, good, generous, wild, funny and clever you actually are. “Fear or revere me, but please think I’m special”. We share an addiction. We’re approval junkies. We’re all in it for the pat on the back and the gifts. The “hip, hip, hoo-rah.” check out the clever boy with the badge, polishing his trophy.


Because we are all human, we do not want to accept that we are wrong about anything, including trades. The ego wants to uphold a perfect version of ourselves allows nothing more but successes not failures. Many traders collectively lose many dollars trying to guard the ego’s version of reality. Our goal should be to trade without ego.


“The greatest enemy will hide in the last place you’d ever look.” Caesar 75 BC


You must recognize what’s keeping you from taking your trading to another level. The majority of the time, it’s your ego. How many times have you made a great trade and walked away with your chest puffed out thinking ‘I am the greatest trader in the world?’


“The only way to get smarter is by playing a smarter opponent.” Fundamentals of Chess 1883


The market always reminds you the person in charge. Try to always use same way to approach each trade, ditch each previous trade when entering a current one. Reset your mind and expect to lose money on each trade, and this could assist you recover from the super-trader ego after  a pleasant winning trade! Ego must be left out of your trading. Check your ego at the door, have a stop loss, and stick with your plan.


The ego may be a person’s sense of self-esteem or self-importance. The ego is a mental construct that can be both on a conscious and unconscious level. An ego is that the self-concept that an individual tries to guard and keep safe from pain and destruction. A trader has got to trade the maths and their own trading system and abandoning signals and their trading plan in favor of their own ego may result in stubbornness, self-delusion, and big losses.

  1. Most market predictions are ego based. A trader wants to be ready to say they called a top or a bottom or had an excellent stock pick. Signal and system-based trading may be a path that removes the necessity to predict you simply
  2. Stubbornness is an emotion that flows from the ego as it does not want to be proven wrong. Many times, this results in letting a losing trade still run against a trader. Egos do get trouble taking stop losses because they hate to be


  1. Egos lock into being bearish or bullish and let their opinions lead their trading. Following the particular price trend creates better odds of success than having an opinion on what should happen
  2. You should not let trading consume your entire life. The markets should be just one of several belongings you neutralize life. A diversified life outside the markets with friends, families, hobbies, learning new things, and staying healthy will assist you keep perspective during losing streaks and draw downs in trading
  3. A profit and loss statement can not define your self worth. Your profits are more of a mirrored image of whether the worth action is conducive to your method currently not whether you’re an honest trader or not. Your egos have got to be determined by whether or not you followed your trading system with discipline, consistency, and risk management.



Hold Your Position Until the Trend is Invalidated, Do Not Let Go of Your Position. Be Willing to Experience Your Anxieties

  • Maintaining a commitment is particularly important when it comes up for a test.
  • Somewhere along the line of keeping your commitment you may get a feeling that you don’t like.
  • If you are willing to experience the feeling, it can transform into an AHA that supports your commitment.
  • If you are unwilling to experience the feeling, you might abandon your commitment to try to make the feeling go away. That only results in having to feel the feeling after all.
  • The more you are willing to experience the feeling of bumping into walls, the less you have to bump into walls.
  • Trading requires skill at reading the markets and at managing your own anxieties.
  • People have a Conscious Mind and Fred. Fred wants to communicate feelings to CM so CM can experience them and gain experience and share it with Fred so Fred can learn how to react. This is how we manufacture wisdom. When we don’t like our feelings we tie them in k-nots and do not experience them. This interrupts the wisdom manufacture process, and draws drama into our lives.
  • K-nots, protect us from truth and keep our lives in drama. To untie k-nots, fully experience whatever appears in the moment.
  • When you keep your eye on the prize and are willing to experience all the feelings that arise, the prize soon becomes yours.

Reminder: OPEC meeting begins today

Will Russia agree to the proposal to reduce output by more than 1 mil bpd?

That is the key question as all eyes turn towards Vienna over the next two days. As things stand, the expectation is that OPEC members – namely Saudi Arabia – will be pushing for output cuts of 1 mil bpd at the very least.

As mentioned yesterday, the usual case is that Russia always plays hard ball in the lead up to the meeting but then they always cave when it comes to making a decision.
So far, the market reaction is telling something similar despite murmurs of Russia rejecting the proposal of a 1.2 mil bpd output cut yesterday.


NOW is all that matters when it comes to executing that next trade

Lao-Tzu was an ancient Chinese philosopher and writer who coined the following phrase:

If you are depressed you are living in the past.
If you are anxious you are living in the future.
If you are at peace you are living in the present’

In relation to trading, living in the past may relate to a bad trade you made. Maybe you risked too much and took a heavy loss. Or perhaps you made an impulse trade centred on FOMO which ended badly.

If you replay negative experiences over and over, it can lead to depressing thoughts. And an inability to move forward, clean the slate and inability to execute the next trade. It can also lead to revenge trading and the urge to make up for past losses quickly.

On the flip side if you are living in the future, anxiety can set in. You end up worrying about your future trades and the money side of things. The bills you have to pay. A list of endless hypotheticals start entering your mind.

Yet when it comes to trading, or anything else in life, living in the NOW is crucial. Learning from the past and planning for the future are ok. Yet executing and focusing on what you are doing right now is most important.

We need to remember as well that the market doesn’t care about our past losses. Nor does it care about our future bills. So although worrying about these things is natural, it’s not going to help us succeed with our next trade. In fact it will likely create unwanted blockages towards future success.

Being and working in the present though eliminates negative thoughts and reduces anxiety. It means you are working afresh from a blank slate. With that next trade being completely independent of any other you have recently made.

Doing the right thing right now is what is important. Not the mistake you made last time. That is ‘old news’ and no longer matters. So focus purely on what is in front of you. Plan the trade, trade the plan and refuse to be tempted by impulse or micromanagement. Two actions that are often influenced by past actions combined with future expectations.

Trade in the NOW and affirm to yourself that the NOW is all that matters when it comes to executing that next trade.

Wisdom from Gerald Loeb

1. The most important single factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.

6. There is a saying, “A picture is worth a thousand words.” One might paraphrase this by saying a profit is worth more than endless alibis or explanations…prices and trends are really the best and simplest “indicators” you can find.

7. Profits can be made safely only when the opportunity is available and not just because they happen to be desired or needed.

8. Willingness and ability to hold funds uninvested while awaiting real opportunities is a key to success in the battle for investment survival.-

9. In addition to many other contributing factors of inflation or deflation, a very great factor is the psychological. The fact that people think prices are going to advance or decline very much contributes to their movement, and the very momentum of the trend itself tends to perpetuate itself.

10. Most people, especially investors, try to get a certain percentage return, and actually secure a minus yield when properly calculated over the years. Speculators risk less and have a better chance of getting something, in my opinion.

11. I feel all relevant factors, important and otherwise, are registered in the market’s behavior, and, in addition, the action of the market itself can be expected under most circumstances to stimulate buying or selling in a manner consistent enough to allow reasonably accurate forecasting of news in advance of its actual occurrence. The market is better at predicting the news than the news is at predicting the market

12. You don’t need analysts in a bull market, and you don’t want them in a bear market.

US President Trump says Congress have reached a deal on debt limit suspension

As if there was ever going to be any doubt the US would once again add to its gargantuan deficit

Trump says a deal has been reached between Congress and the White house
  • debt limit ratcheted higher
  • for the coming two years
For those with a stick up their you know what – this is not a real photo, K?
US once again add to its gargantuan deficit


SUN TZU gives a very clear and succinct reason for his military treatise in the first three sentences when he says,

“The art of war is of vital importance to the state.  It is a matter of life and death, a road to either safety or ruin.  Hence it is the subject of inquiry which can on no account be neglected.”

Here is my interpretation for traders: 

“The art of trading is of vital importance to the success of the trader.  It is a matter of financial life and death, a road to either consistent profits or significant loss of income.  Hence it requires much thoughtful study that cannot be neglected.”

 SUN TZU and THE ART OF WAR                       THE TRADER and THE ART OF TRADING

Important to the StateImportant to the trader
A matter of life and deathA matter of financial life or death
Road to safety/ruinA road to consistent profits/significant losses
Subject of inquiry not to be neglectedSubject of thoughtful study not to be neglected

As we continue to explore SUN TZU’s ART OF WAR, keep the above table in mind for everything that follows in his treatise will be shaped by SUN TZU’s foundational premise, which is this: since war is a given fact whoever engages in it best be prepared because the warrior’s very survival is at stake.

Trading is war.  If you have been trading long enough I do not have to convince you that it is so.  Thoughtful study of the market and how we relate to it is the key to our success and our very survival.

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