Psychology of Trading, Part 4

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Unconscious vs. Conscious Emotion

Do you ever feel like your mind is working against you?  I relate it to the opening scene of my second favorite Russell Crowe movie.

In this article we will be taking a look at the role unconscious emotions can play in our trading and decision making.  Denise Shull is a performance coach and neuropsychologist who works with hedge funds, athletes, and others.  She founded the ReThink Group which works to “leverage the latest neuroscience and psychological research into how thought, feelings, and behavior actually interact… to train clients to perform better under market and competitive pressures.”  Denise was also hired by the show Billions to work as a consultant to be the inspiration behind the creation of the character Wendy Rhoades.

Shull has an interesting discussion in the below podcast.  She notes, “The worst decision you make is always from acting out some feeling you usually don’t know you have.”

Podcast: How to Turn Bad Emotions into Good Decisions

In the podcast, Shull begins by encouraging her clients to notice what they are feeling, correctly labeling the emotions, understand why they are feeling them, where they are coming from, and then choose which of their feelings they would like to act out on.  She discusses that feelings, whether good or bad, have information attached to them that are designed to help us.  Think back to Dimasio’s gambling experiment.  The healthy patient’s subconscious emotion was working out that there was a problem with the bad card decks before their mind was consciously and intellectually aware of it.

“Taking action takes away the static of the feeling.  People take action so much of the time simply because it gets rid of a feeling, and makes them feel better.  The research shows if you can come up with the right word to accurately label the feeling, you will be less likely to mistakenly act on the feeling.”

Denise Shull

Denise also discusses in the podcast that she never wants to get in the way of a client’s coping mechanism. She does encourage them to progressively learn to tolerate waiting to take action until they understand what information their feeling is giving.  It’s a balance she says.  In part 7 of our series, I will discuss some healthy, natural ways to cope with stress, anxiety, and difficult emotions.

One of the tools I took away from her book “Market Mind Games” was the process of keeping a journal of my emotions while I was executing a trade. From a trading standpoint, this is the place to be honest with yourself.  What am I actually feeling?  Not what am I supposed to be feeling, or want to be feeling.  I want to be able to distinguish if what I am feeling is relevant and appropriate to the current situation I am facing, or are my emotions reacting to a previous experience I had.  Is what I am feeling impulsive or intuition? 


I also think it is important to keep an ongoing spreadsheet of your trades, including:

  • Date of trade entry & price
  • Date of trade exit & price
  • Percent gain/loss
  • What you were seeing in the trade, strategy
  • What emotion you were feeling when you entered/exited trade
  • Description of the emotion.  Why were you feeling it?

This should then be considered data that needs to be analyzed.  Which strategies yield the highest win rate.  What emotions yielded the highest/lowest win rates.  As you go through this process, continue to act out of the strategies and emotions that are yielding the best returns, and begin to investigate the problem areas.  What strategies aren’t working, and why?  Change.  What emotions that you are trading out of are causing you problems, and why?  Where are they rooted?  Investigating these issues are key to understanding yourself, your makeup, and freeing yourself to become the best version of yourself.

Are you trading to get excitement because you are bored?  Are you avoiding something, and trading for the adrenaline rush to make yourself feel better?  Are you attempting to make an enormous profit quickly to solve a problem in your life?  Were there problematic issues earlier in your life that have trained you to react in a pattern when certain emotions or memories are brought back up?  These are important points to bring into your conscious thought, and work to make needed changes in your life and mind that will allow you to trade successfully from a healthy mind and emotions.


For me, I began the process of tracking and investigating my emotions a few years ago.  I found that as I was diligent in writing about what I was feeling, the feelings began to remind me of different experiences from my past.  I started writing and thinking about those.  These are the rabbit holes that you can go down into to examine what is happening at an unconscious level, affecting your decisions and behavior.

The areas I examined had little to do with trading.  They had to do with relationships and my image of myself.  I saw things in my life that I wanted, understood how to obtain, but were sabotaging in various ways.  I saw ways I was treating myself that I would never treat anyone else.  Understanding where these areas were rooted in my past, and then consciously thinking through how I would handle and interpret them today was one pathway to change.

For example, one of the areas I put a lot of study into was the subject of adoption.  I was not adopted, but someone close to me was.  As I looked deeply into the subject, it was amazing to me how closely the lives of the vast majority of adoptees around the world mirrored each other.  Most seemed to struggle with the same issues, and have similar life experiences. They were all acting out of a similar emotion. What they had in common was the emotional wound of losing their mother at birth.  It is now known as the “primal wound” (Nancy Verrier, The Primal Wound). This is the most vivid example I have seen that demonstrates the power and ability of subconscious emotions to influence decisions and behavior.

The power of emotion to drive behavior moves me, particularly subconscious emotion.  The unique nature of the adoption wound is that it happens at or near birth.  At this moment of infancy our brains are going through their most explosive period of growth.  Neural connections and pathways are being formed that will be the basis of our mental framework.  However, as an adult, an adopted individual won’t have any conscious memory of the power of the loss of their birth mother and family, although most act from it unconsciously.  The effect of this is an increased risk of issues surrounding grief & loss, identity development, and self-esteem.  While these emotional wounds remain in the subconscious state, their effects can be seen through fear of further loss/rejection, anger, depression, anxiety, substance abuse, workplace issues, relationship issues, and elevated rates of incarceration and suicide.

I can hear a number of you saying to yourself, “But, can we not simply control our emotions, and act out of our intellect alone through an exertion of our free will?”  Psychologist Rollo May does an excellent job discussing this subject in his book “Love & Will“.  He suggests that the chief problem of patients in our time is their inability to feel.  In discussing the subject of apathy he states:

“The human being cannot live in a condition of emptiness for very long:  if he is not growing toward something, he does not merely stagnate; the pent-up potentialities turn into morbidity and despair, and eventually into destructive activities.  The feeling of emptiness generally comes from a people’s feeling that they are powerless to do anything effective about their lives or the world they live in.  And soon, since what he wants and what he feels can make no real difference, he gives up wanting and feeling.  Apathy and lack of feeling are also defenses against anxiety.  When a person continually faces dangers he is powerless to overcome, his final line of defense is at last to avoid even feeling the dangers.”

Rollo May (Love & Will)