When your inner voice tells you to get out of a trade, listen! As it is YOU who is telling you to do so!

- Michael Levin

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August 31, 2007

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This is as tough an article as I have had to write. It is Friday, the day before a nice long weekend and I agreed to write an educational article that would make a difference to you the reader.

I picked this subject on purpose because I like to really make a difference in the lives of those I come in contact with in the trading world, whether I meet you or personally speak to you or not.

In “being more conscious” of who you are while trading I am specifically talking about how we as people, can often have a hunch or a feeling about things in life (trading or otherwise) that we almost “know” is going to happen but because we may or may not be attuned to our inner guidance, we sometimes let things slip and then ask ourselves why we did or didn’t do something. The level of consciousness we have when trading can be THE most effective tool we have.

This is way off the subject, but when I drive, I have a way of knowing when people ahead of me are going to shift lanes before they do it and before they even start to move to the side that they are changing lanes to. This isn’t significant by any means but it is an attuned state of being while driving. In a similar vein, I can almost sense when a police car is near me or hidden somehow. I windup not running that yellow light when I shouldn’t because of some sense that it isn’t the right time and invariably there is the police car hidden in that gas station on the corner and he turns on those lights and catches the guy next to me as they went through the yellow/red light obliviously.

In trading, no matter how good or bad you may be on a given day, week or month, we all have the sense of when to pull the trigger on a trade. OFTEN, this sense is like the combination of the tuner and the speakers on a stereo.

The tuner part is what we are tuned into and how clearly we are on the “station” broadcasting what we want. The “speakers” part is how loudly we hear it.

How often have you been in a trade that is going against you and these “feelings” of dread come over you like you “know” that you OUGHT to be getting out? Really now, think about it. Where do you think those thoughts/feelings come from? Do you listen to them, like a song and do nothing or do you listen to them as though they are part of your guidance system to help you become a more profitable trader?

Don’t poo poo what I just said as some spiritual drivel, this is very important. We all have an inner guidance system that is there to help us in any endeavor we choose and in trading it can be one of the most important “tools” we have. Can you imagine using a tool that you can’t really see? Is that even possible? You bet!

How do you even come up with your trading ideas? If you are a grains trader or an energy trader or an index trader, you may only have 3-5 things you can trade and either be long or short or have some sort of strategy using spreads and/or options. But how do you come up with what you eventually do?

Are you watching CNBC or Bloomberg to see what they are saying and then trade against that? Some do, why is that? Is it because that strategy usually works? Then do it because it works. Or, do it because you see the action on your screen and you get the “feeling” to do it because it feels right to you. But notice why you are doing what you are doing. It is usually because of how you “feel” about a trade rather than how it “should trade”.

Our feelings about things are what guides us in many ways and our attunement to our own feelings are what enhances what we do.

Recently I was in a trade on a position that I had just put out in my blog and the next day it opened up and I “felt” like the position had hit a high for the day and I sold and actually made a 90% profit on it net-net. I felt great! I felt great also because the position fell almost back to where I bought it. I felt vindicated in my decision strategy, I felt smart and a little cocky to sell at the high. I don’t know what brain chemicals were released into my bloodstream, but I felt amazing.

My next 2 trades though, were abysmal as I was still caught up in my ego-high of my last trade and I had somehow “tuned out” of my own “inner stereo system” and chose trades that I wasn’t in sync with and I wound up giving back all of my gains by the next 2 days. What is worse is that I got caught up in it and started beating myself up for knowing better and not following my instincts.

That is sometimes what hurts more than the financial loss of a trade. It’s when we know we could have been better and we weren’t. It’s when we look back and say “what was I thinking/doing?” It’s when we actually come to the point of:  WHO was doing that trade, what part of me took over the decisions to pull the trigger?

No matter how good we are at any one time, we are much better for our level of consciousness in our trading than in any one trade. Like in baseball, when we hit it hard to the outfield and it looks like it is going to be a hit, but is snagged by the outfielder on a great catch, we can at least take solace that we got “good wood” on the ball. We hit it the way we are “supposed to” and we allow the odds of doing the right swing at the right pitch to generate our gains/wins.

When a batter in baseball swings at a bad pitch, he knows it as soon as he takes the swing. But because he doesn’t hit it, he can move on to the next pitch in that at bat.  But in trading, like that same batter sometimes when we swing at the bad pitch and it’s the one where we strike out, then that at bat is over and then we can either beat ourselves up over it or learn from it and become better in the process.

This is also why “systems” seem to beat most humans in the trading realm. Systems purely act (notice I didn’t say react) on the programming put into them. A breakout system does not “try” and buy a bottom as an entity is falling apart, but a countertrend system might. A moving average crossover system does not go long or short UNTIL the moving averages cross over and a signal is given, although a human might.

A system has no “feel” and it has no “should I” or “could I” methodology to it. It has NO consciousness and it doesn’t have intuition or even neurotic tendencies to help it or hurt it. Humans do and they are most often “run” by those emotions when their level of consciousness is low.

So how do we become more conscious of our feelings and tendencies when we trade? I find that keeping a log of my trades and why I made them BEFORE I make the trade is such a valuable tool. It brings my level of consciousness up a few notches and allows me to at least take a better swing at the market then just trading how I may feel when my feelings are locked into the fear/greed that the market lulls us into. By saying out loud why I got in and where I am looking to get out and allowing the real underlying variables of the trade to shine through, makes me more conscious and a better trader.

Also, quite importantly too, is noticing where I am a good trader and enhancing that, rather than trying to be a trader that I am not. I will expound on this in another article, but for now, start to be more conscious of what kind of trader ARE you that works, rather than what anyone else is doing. By doing that you focus on what works rather than what doesn’t and you can become better at what you are good at, vs. what you may think you want to be good at.

A couple of good books on this subject are Eckhardt Tolles “The Power of Now” and Mark Douglas’s “Trading in the Zone”, both should be in every trader’s library.

Michael Levin is a Consultant to Platinum Trading Solutions. He has been in the Financial markets since 1981, having been a broker and trader on the PHLX Equity Options floor in the 1980's and ran trading firms in New York in the 1990's to 2002. Mike briefly set a record in the options trading division of the US trading Championships years ago.

Trade the Platinum Commodity Spread Program COMPLIMENTARY for 60 days

PLUS, for a short time only, receive 30 days complimentary access to the Platinum Weekly email market performance update! This system works! Long only commodity funds that buy and hold huge quantities of futures contracts in many commodities have become a very powerful force in the market. These funds act in a very predictable way and the Platinum Commodity Spread Program has found an ingenious way to profit from the price movements of the spreads caused by these long-only funds. The Commodity Spread Program is now offered on a limited basis by Platinum Trading Solutions. Go here to learn more.