Shawn:
Compliments for starting the thread... terrific place for people to discuss the role of emotions in trading.
However, I wonder if the real problem is a trader's emotions, or its just the nature of the beast that we're trying to wrestle. In today's DAT trading climate, a trader can be bushwacked in myraid different ways. A set-up that works today, doesn't work tomorrow etc.
For instance, Maria (CNBC) mentioned this morning that traders now view the upcoming Fed cut as a no-win situation. If Mr. Greenie cuts 1/4 point, the market will tank from disappointment. If it is 1/2 point, market will tank since it indicates that the economy is in a terrible shape and would take longer to recuperate. Yet, when Greenie cut the first time, the market took off!
Then, we have situations like PMCS.... a loved stock yesterday, and a puke stock today. A short term trader, having bought the stock on a "perfect high probability set-up" a few days ago wakes up this morning with a 45% loss on the investment. What does such an event do to her/his emotions?
Analysts contribute by pouring salt into the wound. They love PMCS at $100, but hate it at $50. What does this do to a trader's emotions.
Take yesterday as another example. Greenie brought better than good news... his stamp of approval on tax cut, plus a definite certainty of further rate cuts (when he pronounced that enconomy is now at zero). What does NAZ do on this positive event? Tank!! What does such irrational market behavior do to a trader's emotions?
Then, we have the so many "shoulda, coulda, woulda" gurus. They keep wagging their fingers at traders with definitive gestures of "how to do it the next time". Except that, the next time, the market will behave differently under similar circumstances.
Thoughts? |
