Our body experiences everything we think and feel. Except for our feelings and thoughts affecting it, the human body runs on an intricate chemical mechanism that also influences our mental and emotional world. In trading, the role of body in decision making is often disregarded.
But if we were to actually to pay attention to our body’s messages, a completely new aspect of things would reveal itself. Everything we feel emotionally reflects on the body and often, the bodily symptom becomes conscious faster than the emotion that underlies it.
We may start noticing that the market is becoming volatile. There is an unexpected news release affecting the euro pairs, especially EUR/USD. We have two positions open on the Euro and while our rational self tells us that the worst case scenario would be to hit our stop-loss, we feel incredibly tense. Our muscles are tightening and our breathing turns irregular. There may be a knot in our stomach or we may be having a headache. Our body is telling us that something has changed in our emotional state-we are anxious.
Noticing our bodies’ messages is of great importance in acquiring emotional awareness. It is also a valuable indicator of possible future behaviour. If you experience the physical symptoms of anxiety, even if you don’t realise that is anxiety or worry you are feeling, you are bound to act in the most common human manner: do everything to stop your arousal and return to a “normal” state.
As we have seen in our Emotions section, most of the times anxiety is accompanied by risk aversion, so in the example mentioned above, you may have closed your trades immediately after noticing market volatility without letting them run until S/L levels are reached. This could be a prudent move in the specific example as S/L don’t always work if the market becomes extremely volatile. Alternatively, if you were up for an adrenaline rush, you may have felt the exact opposite-excited and exhilarated- and went all the way in.In this second instance, you may even have got lucky and made a nice profit. What matters the most is, if your decision has been made according to your risk management plan or it was just based on wanting to FEEL(excitement) or NOT FEEL (anxiety). Your risk management plan should include information on how you would deal with existing open trades in unpredictable and extreme market conditions. If it doesn’t, then you may act more on an emotional or idiosyncratic base.
But even if you do have a risk management plan,you may be tempted not to follow it in examples as the one mentioned above. That’s mainly due to lack of emotional awareness and its consequences on your trading decisions. Precisely because it may be hard to identify which emotion we are feeling at a certain time, we can start simply by noticing our body.
- Is there tension, is there heaviness, fatigue, restlessness, energy?
- What is my body’s reaction telling me?
- What emotion could that be?
- What could I do next?
- Will this act serve my trading plan and investing goals?