Psychological capital must be handled with the same care as monetary capital and trading strategy.

Filming a human brain making a risk/reward/probability decision now shows us that thinking and feeling are inexorably intertwined. Neuroscientists can reliably disprove the outdated “rational actor” idea.

Traders of course don’t need a lab to convince them. They already
know this. Yet, the competition to create and sustain alpha rather insidiously asks humans to perform as living, breathing black boxes.

In reality:

• Research suggests the optimal state for traders includes
  an element of emotion.
• Emotion "fires" before rational thought
• Now, however, after decades believing in the mechanization, very few traders or coaches understand what to do with the palette of feelings induced by the markets.

• The trick is not “have no fear.”
• The feeling is not the enemy.
• Dismissed fear is - because it will escape - in an unwanted trade - sooner or later - every time!

The trick lies in learning a new paradigm for handling
emotional energy.

Recognize that psychological capital is every bit as important as trading strategy and monetary capital - maybe more important!

Don't take our word for it -

"Thanks as ever for talking to me.

UK Money Manager, Spring 1007.