How trader’s mind works?

Our mind works in a few primary modes. A plan prepared at ease is rational, well considered and reasonable. However, just before the trade, strong emotions appear and rapidly the same plan seems weak and not suitable for the market.

Why emotions take over trader's mind?

If we think rationally, the brain is dominated by the activity of frontal lobes.

When emotions (fear) occur, the amygdala dominates. Amygdala is the center that is responsible for the response to a threat. It prepares our body to fight or run away. It is a very powerful survival mechanism and works today just as it did thousands of years ago. And it is still as necessary. It's what helped our species survive on the planet.

But when the amygdala starts to act (because strong emotions have appeared, what our protective systems identify as a threat) our perception of the situation changes: This is why we view and judge the same situation in a different way.

The prescription is as below:

The main thing is to be aware of this mechanism. It is strong but it can be prevented or even blocked, these methods are learnt by special units troops.
Awareness alone can make you not give up and try to come back to rational 'sober' thinking.

If you have a good concept and a plan (always note it down, just a simple note, a few lines) - then after some time come back to the situation that earlier “froze” you. Did the market move as you expected? Was your plan right? If many times the market confirms your assumptions (concept and plan), it means that you are doing a pretty good job. So you have an extra motivation to work on overcoming the amygdala and doing things in spite of it.

Most people, over time, become used to the 'danger' and stress in such situations is reduced.


'My emotions are somewhere in the background' - Joe Ross.

For those who haven't I would absolutely recommend reading the Chimp Paradox by Steve Peters. Really excellent breakdown of the characters of personality and how these characters interact with useful exercises on how to learn to control them.

Great post!

Thank you for your thoughts! Check out my profile for more, I post few times a week.

It depends on traders trading skill; good skilled traders are very professional in their trading! On the other hand, most of the newbie’s are full of emotions!

How a trader's mind works depends on their approach towards trading and how they plan out their strategies. Managing emotions can be rueful but is a must if they wish to gain profit rewards on a regular basis. Experience is everything and traders must give themselves time to adjust to the market sentiments to trade successfully.

Akasuki posted:
It depends on traders trading skill; good skilled traders are very professional in their trading! On the other hand, most of the newbie’s are full of emotions!

In my experience of working with traders at all levels, it is clear that 90% of beginner traders' problems are due to poor system/strategy knowledge. Emotions at this level are just a result of that. Most emotional problems will disappear once you have mastered the strategy and tools. 90% of advanced traders' problems are psychological.

A pro traders mind needs to be like an emotionless computer just looking at the facts and analysing them

Very true! You articulated it really well. I would also like to add that if traders refuse to accept change and have a broad outlook, it will get tough to survive no matter how skilled or knowledgeable they may be.