Psychology of Trading & Emotional Intelligence

Dr. Pierce is a psychologist and trader. She says the challenges of trading bring out a lot of emotional issues. If a new trader isn’t used to taking risk, for example, then taking a risk and losing money can feel horrible. Of course, doing well can be ecstatic. Harvard Business Review wrote about a similar concept, “Why do some managers seem to enjoy unpleasant on-the-job learning experiences while others just want to quit? Emotional intelligence has something to do with it, according to a study of managers by Yuntao Dong of the University of Connecticut. The researchers found that a highly unpleasant developmental experience increased turnover intention about 20% among managers with low emotional intelligence but slightly decreased it among those with high EQ. Managers with high EQ, the ability to understand and manage emotions, reframe their developmental experiences as valuable opportunities rather than as threatening situations. SOURCE: No Pain, No Gain: An Affect-Based Model of Developmental Job Experience and the Buffering Effects of Emotional Intelligence” EFT is a technique that helps people quickly dispel negative trauma and the emotions associated with them. Markets are commonly described as ruled by fear and greed. When you remove the emotional hooks in your life, you’re freer to make more rational decisions. Those living in the Denver area might consider visiting Charlene Bensen, LPC. Her contact info is: EFT is her specialty. As someone who teaches investing I see two common mistakes. One group of people, most often men, make a brave stab at trading and hope the venture is successful. Another group, sometimes women, recognize a good trade but are too timid to take action. That’s one of the reasons we created 10 trading rules to help minimize the impact of emotions of trading – available free. See sidebar. We also have seven forecasting rules that help our students to both time a turn and evaluate a trade’s probability of success.