In the world of trading and investing, there's an intriguing phenomenon known as 'emotional stacking' (shout out to Jared Tendler’s book “The Mental Game of Trading”). This refers to the accumulation of underlying emotions over time that can suddenly surge, influencing your trading decisions at the most unexpected moments. These emotional outbursts can defy logic, leading us to act contrary to our well-laid plans and seasoned judgment.
I experienced this firsthand in a recent oil trade I executed at the market open. There had been an OPEC meeting over the weekend, and the resulting news seemed like it might provide a good opportunity. I was keen not to miss out, driven by emotions that had been building up from past missed opportunities.
But here's the rub: I was aware that the market was already gapping up into a known resistance zone. I remembered the pattern from previous similar situations where the market initially rose before entering a prolonged decline. But in spite of this knowledge, I let my emotions override my reason. I bought in, hoping for some miracle outcome on the bullish side.
The result? A rapid, significant loss, just as logic would have predicted. The emotional buildup had influenced my decision, leading to an unwise trade.
But this incident served as a wake-up call. Recognizing my emotional state and the mistake I'd made, I stepped away from trading to process my thoughts and feelings. This brief pause allowed me to regain my clarity. When I returned to trading later, I was able to execute a much more reasoned and successful short side trade.
The key takeaway from this experience is the importance of awareness. Recognizing when your emotions are beginning to influence your decision-making process is crucial. This awareness allows us to mitigate the effects of emotional stacking, stick to our original trading plans, and make more informed decisions.
Sharing this experience, I hope it will help others identify similar situations in their own trading journeys. The ability to acknowledge and manage our emotions in trading is an essential skill. And as always, remember to keep your seat at the table.
Stay focused, and as always, keep your seat at the table!
Jaymes R.