Tuesday, November 18, 2008

Doug Goeckel - Masters of Excellence / Tuesday November 18, 2008


Today's Interview

Emotional Management and Trading
This week I feel lead to discuss with you the importance of emotional management DURING a trade. Our bodies are very fearfully and wonderfully made. Our creator has designed each of us to be prosperous and filled with joy. He does however warn us about fear and our emotions. It is critical that we examine this a bit further. I believe that this may be a benefit to many traders.

Over the years I have studied the affects of stress on trading. The brain chemicals that are released when an individual is stressed actually alters the mind's ability to think and respond appropriately to the situation. When stress is consistently introduced (during trading for our focus) it will actually trigger chemical reactions in the brain and body as if it were being attacked by a strong allergen. I came across a study that I would like to share. A psychologist by the name of Michael Meaney PhD, wrote the following, While the chemicals are signaling systems of body, the brain is running amok in a person who is overly sensitized to stress. What happens is that sensitization leads the brain to re-circuit itself in response to stress." He goes on to say , "The brain is signaling the body to respond inappropriately. We may not think we are getting worked up but our brain is treating it as though our life were on the line."

When you are sensitized to stress on a continual basis the bio-chemicals that are unleashed by stress may result in the body responding as if it were in a life-threatening situation. It switches on nerve circuits that ignite the body's fight-or-flight response. The adrenal glands are the major part of the body's stress system.They manufacture and release the true stress hormones—dopamine, epinephrine (also known as adrenaline), norepinephrine (noradrenaline), and especially cortisol. The body and mind are responsive to the adrenal hormones for example, blood flow and breathing where even minute changes in levels can significantly affect health. Cortisol directly impacts storage of short-term memory and high levels of cortisol may kill off brain cells crucial for memory.

Stress can age you and negatively affect your health. In addition, the stress can shift you into a reactive mode and not responsive mode when in a trade. I encourage you to take the appropriate steps towards self control and emotional management.

I have been there and I have been able to work AND overcome these emotional responses. It takes discipline and self control.
Here are a few suggestions to manage stress during trading:

1) Have a support system that will listen to you and build you up as a trader.
(Mentor, coach, spouse)
2) If your emotions are high during a trade such as a flushed face, sweating, accelerated heart beat, talk yourself through it.

You have done your work, you were prepared for the trade, take the trade, and emotionally detach.

Since we all use stop losses (RIGHT?) you have to look at the money that you have put into the trade as gone... and that it is working for you. If it is not working for you, then your stop loss will take over the trade and end it for you. However, based on your probabilities, it mathematically should be working for you more times than not.

3) Take deep breaths and continue to breathe. Do not hold your breath (it will not move the market) until you come to a point of managing your emotions. It is essential that we do not train our brain to go into stress mode when we trade. You can do it, it takes discipline.

I have an entire manual devoted to the mind. I believe it is more important than technical knowledge. You can learn technical analysis and commit to seat time, but your mind needs just as much IF NOT MORE development and training for trading.

As always Best of Success!
Douglas Goeckel

For information on Doug's upcoming class, email doug@excglobal.com

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