In the dynamic world of trading, emotions can often feel like a double-edged sword. They can give so much enegery - and at the same time completly destroy your decisions. So how can a good management with emotions while trading look like? 

When I first met John, he was a passionate trader but often found himself in a cycle of frustration. After experiencing a series of losses, he would react impulsively, trying to recover his funds through revenge trading. “I just couldn’t help myself,” he confessed. “It was like a switch flipped in my brain, and I was chasing my losses instead of sticking to my strategy.”

Recognizing this pattern, we decided to delve into the brain model of Dan Siegel, which emphasizes the importance of integrating emotional and rational thinking. The hand model of the brain illustrates how different parts of the brain function together. The wrist represents the brainstem, which controls basic functions, while the fingers symbolize the higher-order thinking in the prefrontal cortex - so exactly that part of the brain we need when we trade. So for traders, understanding this model is crucial because it highlights how emotions can override rational decision-making, especially during stressful trading moments. By recognizing when their emotional brain is in control, traders can take steps to regain focus and make more informed decisions.

The Breakthrough Moment

During one of our coaching sessions, we used Siegel’s hand model to visualize the brain's functioning. “It’s like I can see it now,” John exclaimed, pointing at the wrist and fingers in the diagram. “When I’m in that emotional state, my rational brain just shuts down!”

This realization was a breakthrough for John. Together, we began to implement practical strategies to help him regain control over his trading decisions.

1. Mindfulness Practices: I introduced John to mindfulness techniques that allowed him to pause before making decisions. “I never thought just taking a few deep breaths could change everything,” he shared. “Now, I can step back and assess my emotions before diving into a trade.”

2. Personalized Journaling: We created a tailored trading journal for John, where he could document not only his trades but also his emotional state during each session. “Writing down my thoughts helps me see the bigger picture,” he noted. “It’s like I’m having a conversation with myself, and I can identify when I’m about to make an emotional decision.”

3. Emotional Regulation Techniques: I equipped John with tools to manage his emotions effectively. Whether it was visualization techniques or quick physical exercises, he found ways to ground himself during market volatility. “I’ve started to reframe my losses as learning opportunities,” he said. “It’s empowering to know I can control my reactions.”

4. Building a Supportive Community: I encouraged John to connect with fellow traders in our coaching community. Sharing experiences and insights helped him feel less isolated. “Hearing others talk about their struggles made me realize I’m not alone,” he reflected. “It’s inspiring to see how we can all support each other.

The Transformation

As our sessions progressed, John began to experience a profound transformation. He no longer viewed losses as personal failures but as integral parts of his trading journey. “I feel like I’ve gained a new perspective,” he shared with me. “Now, when I face a setback, I remind myself that it’s just part of the process.”.

John’s newfound awareness allowed him to approach the market with confidence and clarity. He started making decisions based on analysis rather than emotion, leading to more consistent results. “I can’t believe how much my trading has improved,” he said. “I’m not just recovering my losses; I’m actually growing as a trader!”. 

Conclusion: Your Journey Awaits

Working with John has been a rewarding experience, showcasing the power of understanding our brain’s mechanics in trading. If you find yourself struggling with similar challenges, remember that you’re not alone. Together, we can unlock your full potential, conquer the pitfalls of revenge trading, and create a strategy that reflects your true capabilities.