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segunda-feira, maio 04, 2009

Controlling Your Impulses

Controlling Your Impulses

The winning trader shows self-control. Definitions of self-control vary. In
the trading world, self-control may refer to controlling impulses or
controlling emotions. The term "discipline" is often used to describe the
trader who can control his or her urge to abandon risk limits or avoid giving
into fear and greed. Seasoned traders may have learned to control impulses,
but novice traders need to develop this skill. It takes practice, hard work,
and determination.

Some people show self-control in some circumstances but not other
circumstances, they give into their impulses. For example, some people have
an easy time controlling their diet and staying thin, while at the same time
have trouble controlling their spending. That said, other people may have
trouble showing self-control across a wide variety of settings, and may be
overweight, deep in debt, and a chain smoker. Sigmund Freud conceptualized
self-control as a personality trait. He viewed self-control as related to the
anal stage of psychosexual development. During the anal stage, children are
taught to regulate their bodily functions and to use the toilet
appropriately. Some children overdo it and are a little too overly
controlled, while other children lack self-control. Freud claimed that people
who are "fixated in the anal stage" show problems with self-control in many
areas of their life. Some people, for example, are overly clean and orderly
while others are unkempt and sloppy.

A study by Tangney, Baumeister, and Boon (2004) showed that people differed
in terms of the personality trait of self-control, and that higher scores on
their self-control scale were related to a higher grade point average, less
fear and anxiety, and less impulsive behaviors, such as binge eating and
alcohol abuse.

How well do you control your impulses? I have placed a variant of the
Tangney, Baumeister, and Boon (2004) self-control scale below (It is a short
version in which many items were re-written for easier scoring.)

Answer each item on a 5-point scale in which 1 = not at all like me and 5 =
very much like me.

1) I am good at resisting temptation.

2) I have an easy time breaking bad habits.

3) I am not lazy.

4) I do not say inappropriate things.

5) I avoid doing certain things that are bad for me even if they are fun.

6) I have no trouble refusing things that are enjoyable.

7) I have a great deal of self-discipline.

8) People would say that I have iron self-discipline.

9) I do not let a desire for pleasure and fun keep me from getting work done.

10) I never have trouble concentrating.

11) I am able to work effectively toward long-term goals.

12) I have no trouble stopping myself from doing something impulsive, even if
it would very pleasurable.

13) I never act without thinking through all the alternatives.

Scoring: You should have a score for each of the 13 items that range between
1 and 5. Add up the scores to arrive at a total score.

What score did you get? In the study by Tangney et al. (2004), participants
had scores between 15 and 63. The average score was about 39.5. In general,
if you scored between 30 and 48, you scored in the average range. If your
score was above 56, it was extremely high (less than 5% scored as high as
you). If your score was 22 or below, your score was extremely low (95% of
people scored higher than you).

Some people have no trouble with self-control. They like rules and enjoy
following them. They resist temptation and control their impulses. They
follow social rules and avoid self-indulgence. Other people struggle with
self-control. They have trouble controlling their spending, eating, and

If you scored low on the self-control scale, are you doomed? Will you
struggle controlling your emotions during critical moments of trading? I
prefer to think not. If you have trouble with discipline and are a little
impulsive, you can learn to develop more self-control and discipline while
trading. First, keep in mind that you don't have to be disciplined all the
time. You only need to be disciplined when you are putting on a trade. It
sometimes helps to remember this fact. It eases some of the pressure to think
that you only need to be focused when you make specific trades, rather than
during all waking hours, or outside of the trading realm. Second, it is
essential to outline a very detailed trading plan. You should specify exactly
what signals tell you to enter a trade, and what signals tell you to exit.
Some traders make the mistake of leaving some of these factors unspecified,
figuring they can just extemporize when the time comes. But this approach
presents problems for discipline. When you don't know what to do
specifically, you will be sloppy and less likely to maintain self-control.
Third, it is important to make sure your energy level is high, yet your
stress level is low. Psychological resources are required to maintain
self-control and discipline. When you are tired and worn out, you have little
energy left over to focus on managing your trade. To keep your mental edge,
it's vital to make sure you are relaxed, rested, and energized. If you
aren't, you'll tend to make careless mistakes. Discipline is vital for
trading success. It is essential that you develop a sense of discipline. The
more disciplined you can trade, the more profits you'll realize.

Do you have any trading psychology questions? If you do, please feel free to
write to me at mshopshire@earthlink.net. I'll answer them in future issues of
the Mental Edge Newsletter or you can comment on

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