Mastering Uncertainty in Trading

Well, if you're trading the markets, you're dealing with uncertainty every day. There's never an absolute trade that you're confident in. And there were ways to deal with that. And our guest today is Randy Howell, he's a trading psychologist. He's going to talk to us about that. Randy, thanks for being here.

Thank you.

Well, there's always uncertainty in the markets. Of course, we're never totally sure a trade is going to work out. Before we get into it, what's the difference between that and actually having a real fear and that holding us back from success?

Well, once you recognize that uncertainty is the rule, if you see yourself as a surfer on an ocean, on a wave, you know, the wave could care less if you're there or not. And it's really uncertain until you develop the skills, the edges, to be able to surf it properly. Same thing applies in trading, is that uncertainty is the rule. However, if you're walking in and triggered to fear rather than say, the risk of uncertainty, what happens is suddenly you start thinking fearfully, you start finding fearful solutions, you start hesitating, or you might do impulse trading to get out of the trade and the uncertainty, you need a different emotional state. You need to be able to build and develop impartiality, a sense of courage and a sense of powerful discipline. All that lives within you and you can grow it so that that dominates the thoughts in the mind.

It seems that the best traders I've talked with are able to make really good trading decisions even when there's a lot of uncertainty and they're not exactly sure what the outcome will be. What's the difference for them? What have they done to be able to do that?

Well, it may be they've been phenomenally lucky and born into families where learning how to deal with uncertainty was encouraged. Most of us do not grow up in families that deal with uncertainty. Well, we end up trying to be perfect. We're trying to avoid mistakes. So what happens is a really good trader moves beyond focusing on loss, focusing on making mistakes. He's looking at probabilities and is into curiosity. And he's developed the kind of what I call the impartiality to evaluate. But he's also developed the instinctual ability to be able to intuitively take his hunches to a different level because he's not accessing the intuition from something like fear. He's doing it from a serious, a different part of himself. And that is what emotional regulation and the development of what I call the heroes within the self can actually Bring forth.

All right, so if I haven't grown up in that environment where I'm used to dealing with the uncertainty, is there a way I can kind of develop that?

Oh, absolutely. We're all born with these instinctual potentialities. It's learning to develop the courage to be able to confront what I would call our psychological demons and to disperse them and to replace those beliefs with much more powerful beliefs that it open. Whatever your beliefs are, that's what you're going to find. And if you're going to look at an ocean, like if I were to get on a wave in Hawaii.

I would end up in fear. Okay. Yet I've seen 14 year old boys on 50 foot waves having a joyride.

Does that mean necessarily just getting in there and actually doing it, actually trading and working through that?

Well, there's a wonderful thing about trading is that most of us spend a lifetime avoiding our psychological demons in trading. They're going to stalk you, they're going to find you. And trading offers the incredible environment of getting in tune with yourself, developing yourself psychologically so that you're a better human being in a lot of domains, including trading. But you have to understand trading is going to provide a platform that's going to give you a scalpel to look at your psyche and and you're going to have to reorganize it to be a really good trader.

Randy, thanks for your time.

It's been my pleasure.

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