
The "observing ego"
Hi traders!
In trading, we have to deal with uncertainty, conflicting information, misleading signals and other frustrating things. It’s no surprise that we often lack discipline - we don’t know what to rely on. Mindset of a trader, when you are ok with the fact of losing ground under your boots from time to time, is hard to develop. Probably, trading is the most frustrating occupation of all existing occupations. Of course, professional traders keep this frustration on low level – but nevertheless there will be too many situations when your best laid plans go wrong.
I won’t be mistaken if say that ability to deal with frustration/regret is one the most important psychological abilities of professional trader.
There are situations when frustration becomes so strong, that it crosses emotional pain threshold of a trader and he starts sending orders to his trading terminal just to avoid this unbearable feeling.
Small (controllable) portion of frustration can be useful though like small portions of poison can be useful for our body. If we are frustrated, we will concentrate, try to avoid destructive actions next time, we will note – what market conditions leaded to our loss e t.c.
So, every emotion can have either destructive or positive effect on our trading. Emotion can be better compared with energy for action – it focuses our attention, drives our behavior. But when it starts dominating in our mind, it starts to control our mind – in this case we are no longer are acting in our best interest.
How to take back this control to ourselves? When we are most disciplined?
We are most disciplined when we are not indentified with our emotions, when we operate from the «meta position», psychologists call it «observing ego». It can be best compared with peaceful place inside our mind - the more we are rooted in this place, the more we are capable to control our mind and actions.
There are basically two ways in psychology to increase our ability to operate from «observing ego» - one is psychotherapy when person should dig deep and find reasons for his primary trauma that leads to increased emotional threshold in some situations. If primary reason is understood and trauma is cured, emotional threshold of a person can increase and self-control will not be a problem. Drawback of this method is that we have to visit a therapist and it can take much time – up to several years.
The second approach is called «сognitive psychology» and it helps person to «switch on» the observing ego by conscious effort.
Method that cognitive psychologists offer to their clients is to take notebook and immediately write down all your thoughts and feelings that run through your head when you are upset and frustrated. After you have written it down, you can speak it out loud – it helps to reduce emotional pressure. Trick in this method is that when we start writing, we are no longer identifying with the person who experiences emotions, we start observing them instead. We are not «traders» at the moment we are writing – we are rather «coaches» or «writers». That’s exactly what we need – this practice helps us fix our mind in «observing ego» and increase its presence in tough situations – next time you will notice that you will be better prepared for the same situation.
Good luck!