Engaging your Inner Observer is an easy, yet very powerful, technique that will help you conquer the negative trading emotions that undercut aspiring traders.
The Problem: Negative emotions cause us to lose composure
For many traders, the negative emotions of anxiety, fear and even anger elicited by either trade uncertainty or outcomes is real. For some, these morph into panic or paralysis. Regardless of how this condition manifests itself, it has a detrimental effect on our psychological well-being and to our trading P & L. These emotions do not lend themselves well to someone aspiring to be a long-time market participant. It’s just not sustainable.
I have a powerful way to deal with these emotions that I’d like to share. As you’ll soon discover, this technique works both inside and outside the markets.
Back in the day, there was a person close to me that used to know how to push all the right buttons to upset me. I am quite sure that the behavior that elicited my response was not intentional, but never the less, it really bothered me. Encounters with this person left me feeling angry and upset. It got to the point of me being angry and upset BEFORE I ever saw the person. Many times, I literally felt sick.
Solve the Problem: Employ and Develop your Inner Observer
George, my counselor at the time, introduced me to a powerful technique to solve my issue. Visualize yourself as a scientist / observer hovering above yourself and the situation…. anticipating, thinking ahead, watching, jotting down notes but not personally involved. When the barbs from the other person come, they are directed to a third person……not you the scientist / observer. Because you have extracted your emotional body from the situation, it takes all the energy and resultant negative response / reactivity away. When I practiced this technique, I found myself able to interact with this problematic person very effectively……he no longer bothers me. Doesn’t mean we’re all buddy- buddy now, but I no longer let his actions throw me into a tail spin the way it did before.
Now, when I am in any situation that is causing me to feel anger, stress, resentment or any other unwanted emotion to take hold, I activate my inner observer. I remove my emotional self from the situation and let my inner observer take charge.
Now let’s consider the situation many of we traders find ourselves. Becoming emotionally attached to stocks and trades. Attaching our moxy as traders to outcomes either good or bad. Experiencing that roller-coaster of fear, elation, depression, anxiety, insert your emotion here. Not a great place to be.
When you’ve had enough of the pain and suffering that comes with this trading lifestyle, read further.
How to use your Inner Observer in Trading
How can we use this in trading? Remember, you are an observer of yourself, the trader. Hovering over your right shoulder watching, taking notes, giving advice from a third – party perspective. Your new-found observer friend might make some comments like this…..
- Oh look……Jennifer is overweight biotech and her stocks are not performing. Hell, the whole sector is being destroyed. Hey Jenn, may I ask you a question …… Why are you trying to be a salmon swimming upstream? Wouldn’t it be easier to go with the flow? Are you here to make money or only if it’s from biotech stocks? I know, I know, you love the sector and you’ve had prior success, but the hot money is gone. Let’s close these losing trades and go find where the money is flowing. It shouldn’t be that difficult. Hey look, defensive issues have turned the corner. Let’s look for an A+ set up!!
- Hey John, it’s me again. I been taking good notes and recently I’ve noticed something. When you place trades on your favorite set of stocks and they don’t do what you want, you get frustrated and upset. When I conduct scientific studies, I use mice. When I release a mouse at the beginning of a maze, I don’t bite my fingernails or worry, I simply watch. The mouse will do whatever it wants. I don’t get upset if it breaks right or left, but I do make sure to write down the results. Netflix, Amazon, and your other favorites are just random mice. They aren’t your friends, don’t have brains, or know what you want them to do. Stop personalizing their behavior. Winner or loser, it’s just a trade. Just be sure you’re doing your homework and executing a tight process that you know has a positive expectation over many trades.
I hope that from these 2 examples you get the idea. Your inner observer takes away your emotional attachment to the stocks / sectors and frames the problem as a scientific exercise. This method quells the reactivity to the trade.
Become friends with your Inner Observer
Your inner observer will help keep you on the path of becoming the calm and confident trader you want to be.
I talk to my inner observer all day long. My inner observer looks at my trades. He reminds me not to get married to trades, to honor my stops, to fill out my trade plan. We talk about all kinds of stuff. When I get mad at a losing trade he asks if I would get mad at a mouse for turning right instead of left. He encourages me to follow my process and to develop new ones that are even better. Yeah, your inner observer can be a real help. With some development and nurturing, your inner observer will likely become one of the best friends you ever had. One who keeps your feet on the ground and eye on the prize, especially during rough patches. I encourage you to make your inner observer part of your winning team.
Let me know how it works for you. Drop me note and share your story at [email protected]
Thank you for spending time here; hope it helps!!