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Euphoria is very pleasant, uplifting, and inspirational. But it is an emotion that a trader must avoid while trading. This is because euphoria will prevent you from perceiving the market as it is. Often euphoria will give you an emotional feeling of invulnerability. If you begin to believe that every trade you make is a winner, you are allowing your unconscious mind to overwhelm your conscious ability to reason. In short, your ego is now making the trading decisions, and as you know this is very bad for your equity. Euphoria is crippling to a trader's abilities because it is such a strong emotion. Anger and euphoria affect your ability to perceive the market to the same degree. |
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The best thing a trader can do while under the influence of either anger or euphoria is to mentally shift gears until these emotions no longer influence the conscious or unconscious mind. |
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An important point I need to stress here concerns learning. A few paragraphs back I mentioned how novice traders believe that becoming better at market analysis will lead to consistent profits. The implication is that more market knowledge means more consistent profits. Consistent profits originate from valid beliefsnot knowledge of the market. I would like to expand on this point. Novice traders fail to obtain consistent profits with more knowledge of the markets because of their underlying beliefs. The chief underlying belief is that by obtaining more knowledge they will be able to control their risk, and more reliably predict where the price is going. Novice traders are attempting to control their fear (risk) by more knowledge. They are attempting to meet certain primary needs. They want to satisfy their needs for certainty (the ability to determine where the price is going), for variety (increasing the variables they examine), and for significance (more complicated or esoteric indicators). |
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Novice traders are on a quest for more knowledge in an attempt to eliminate the pain the market can inflict. They want to eliminate the amount or intensity of the fear they are experiencing. The problem is that they are doomed to failure. The more esoteric their indicators becomeand the more powerful their computersthe more they are attempting to escape from accepting responsibility. |
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Let me ask you a few questions. Do you think the market will exist 100 years from now? Do you think that our technological abilities will be much more advanced? Do you think that novice traders in the future will be using much more advanced computers, computer models, and indicators than they are today? Why are they using these new "tools"? |
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Am I saying that more computing power is counterproductive, that becoming more knowledgeable about the market or using esoteric mathe- |
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