Tangibility of anticipation
Trading psychology is the sum of many parts, i.e., a group of behaviours exhibited in the process of financial decision making.
Trading in itself is a complex endeavour, filled with challenges that evoke feelings of stress, anxiety, and fear. These emotions inevitably lead to decisions that could be considered irrational, biased, or simply poor, resulting in subpar trading outcomes.
Knowing how to manage the effect of these emotive factors requires looking inward and recognising not only what you’re feeling, but also the influence these feelings could have on a trade. It also means acknowledging that those gut emotions or intuition otherwise known as trading instincts maybe impacted by external influences. One being the concept of ‘tangibility of anticipation’.
Tangibility of anticipation is one of three core components of trading instincts, the other two being sensory-derived bias (using information that may be biased) and avoiding the vague (fear of the unknown).
Tangibility of anticipation typically comes about when the anticipation of an outcome becomes the focus, rather than the achievement of that which you anticipate. So strong does this feeling become, it takes on a life of its own, dimming the process of attaining the actual objective.
In other words, the idea of winning becomes more thrilling than the actual win itself. Tangibility of anticipation can however hinder profitable trading outcomes by stifling the act of ‘doing’.
Undoing learned behaviours
As with most things in life, that which becomes habit can be unlearned in order for new habits to be formed. This is just relevant in the context of ‘tangibility of anticipation’.
Reducing the risk of becoming addicted to the ‘what if’ can be achieved by developing self-awareness. It means taking a step back and recognising that a certain emotion or habit has begun to override rational thinking. It’s acknowledging that subjective thought-processes are impacting objective data. So how does one unlearn that which has become so entrenched in decision making rationale?
- Build a trading plan that sets out the parameters by which you will enter or exit trades. By creating a framework with the steps leading to a particular trading decision, you’ll be less inclined to lean into emotions. Remember, while trading instincts serve a purpose, they should be relied on based on knowledge and data, not subjective reasoning.
- Don’t be scared of making mistakes. They are an inevitable part of the trading journey and present a great learning opportunity.
- Engage in ongoing trading related education to ensure that you have a good understanding of the markets and potential trading outcomes. This includes staying informed about global news and events, as well as important economic announcements.
- Set definitive objectives. Define what you want to achieve from trading and attempt to make that your focus. Try not to let your feelings push common sense aside. Emotional resilience comes with focusing on simple strategies that will help you attain your financial goals.