Be Objective

When your money is on the line, you can't help but feel a little uneasy. What if you lose? It's hard not to put some of your ego on the line with your money, and when you lose, feel hurt. Winning traders, though, keep cool. They don't ride a roller coaster ride of emotions, feeling euphoric after a win and beaten after a loss. They take losses in stride. However, it's hard to stay objective and completely unemotional.

The perspective you take when you look at a past setback, such as a major financial loss, can dictate how you feel about it, specifically the intensity of the emotions you feel. The way people look back on, and think about, a past event can influence the emotions they experience. Past research studies have shown that if people emotionally distance themselves from past events, they remain relatively unemotional, and are then able to look at events more abstractly and rationally. For example, you could be self-immersed in a past setback by going back in your mind to the specific time and place where the setback took place and relive it as if it were happening all over again. If you try to remember the experience vividly, you are bound to start intensely feeling the same feelings you felt during the original experience.

What's the best way to review a past setback? First, you don't want to immerse yourself in your emotional past. You want to look at the past from the vantage point of a detached observer. Look at your past as if you are completely indifferent, as if it is merely a fictional character in a book or a movie that you just don't care about. Second, don't focus on what specific emotions you are re-experiencing. Instead, while you look at yourself as a detached observer, focus on the reasons that the "emotionally distant you" is experiencing specific emotions. The worst thing you can do, however, is to become immersed in the past. When people try to relive a past event, they feel upset, regardless of whether they focus on what specific emotions they experience or why they experienced them. In addition, even if you take a detached perspective, focusing on the specific emotions you experienced, instead of focusing on why you experienced them, will make you uneasy.

Setbacks are commonplace in trading, but you don't have to let a setback upset you. Emotionally remove yourself from the situation. Look at it all from the perspective of a detached observer, and rather than focus on what emotions you are experiencing, focus on the reasons you are experiencing them. If you can stay detached and logical, you'll stay calm. You will take losses in stride, recover quickly, and think of creative solutions to tough, complex problems. And in the end, you'll trade like a winner.