Spock the Trader
Do you remember Spock from the television series Star Trek? I do. I remember him because he was always so calm and collected. This guy never seemed to get frazzled. Nothing bothered him. You could cut out his heart and he would say something like, “That is no logical,” whereas most of us would say, “Stop cutting out my heart.”
After all, this was the guy who said:
"Emotions are alien to me. I'm a scientist."
--Spock, "This Side of Paradise", stardate 3417.3
Of course, Spock would make a great trader, would he not? He would be able to take a 500 standard lot trade and sit back and calmly evaluate his options, and have a slice of Targ or Bark or whatever it was that Vulcans ate.
It seems that there is a myth that has been heavily promoted throughout the world of trading – the myth that successful traders lack emotion.
This is a load of crap. Emotions are central to successful trading. Spock will show us why.
Lesson #1:Use Your Fear
Everyone is afraid of something. If you think that you are not afraid of anything, then bully for you. You are dead. Hope you enjoy the afterlife.
For the rest of us humans, there are fears. And traders have some of the most rational fears in the entire world. Most traders, after a significant losing trade, become fearful of putting on more trades. We start to wonder how long it will be before we lose our entire account. We do some math in our head and we realize that if we keep losing, we’re going to have to get a job, or dip back into more savings. This kind of fear is not productive.
But the truth of the matter is that we cannot avoid it. We can’t get rid of the fear entirely.
You can overcome – or deal with – this fear by preparing better.
"Insufficient facts always invite danger."
How much time are you spending on your preparation every day? Are you waking up, switching on the computer, and taking trades?
Don’t do that anymore! You need to wake up and instead of going straight to the computer, try some of the following things to help you get into the right frame of mind:
1. Meditate or pray.
2. Read your trading plan (you do have one, right?)
3. Call your mother?
4. Eat a piece of fruit
5. Read a chapter from a book on trading
6. Sit and quietly think about a trade that went very well, something recent, and picture in your mind doing that again.
When you have done that, make sure that you spend time getting familiar with where the market is. Are trades that you planned the night before ready to execute? What if the trades have opened already?
Consider following only one currency pair, especially early on in your career as a trader. If you work full time this is even more important. You can’t follow 5 pairs every day. You don’t need to and it’s not productive. When you focus on one currency pair, and you learn everything there is to know about that pair, you reduce the anxiety associated with trading.
Most of us are frightened by what we don’t understand (trading is full of surprises, too). You can reduce your fear substantially by becoming so familiar with a currency pair that you understand how it moves, when it moves, what economic reports move it most, what moving averages work with it best, and so on.
Don’t skimp on the time that you give yourself to get familiar with a currency pair.
Consider the following situation: you wake up to an alarm that goes off when a trade you planned the night before is trigged. What do you do? Generally, you rush to the computer and you start trading.
But let’s slow things down a bit. Even if the trades you have prepared the night before have already opened, please take just 30 seconds and prepare yourself mentally. Sit quietly for a moment. Take a deep breath. Picture in your mind how you will react to seeing a profitable trade, or a losing trade. Imagine yourself handling the trade with poise and confidence, just like Spock would expect you to do.
Is this you, when you’re in a trade?