It's Just Emotion Taking Me Over

To gauge what the students have learned so far, teachers create exams at the culmination of every major lesson. In the House of ZFT, our first exam is handed to us through a Buy button. (see The Three Musketeers)

The cut point was at -8%. The area of maximum tolerance. When that point is reached, you sell all your positions without ifs and buts. It was higher than the standard -4 to -5% of the ZFT system as we have exposed only a tenth of our portfolio value. It was a trial run, a knowledge check of sorts. We bought our musketeers (stock picks) on a Friday. And we do only one of two things: hold the positions for a month or sell when the cut point is hit. No in-between. 

On a Thursday, merely six days later, we sold. Two of our stock picks did not even last a week. They crashed and they burned. It was our first exam, and I couldn’t help but feel we’re failing it.

“First mission is a disaster”, I lamented.

“Mission failed tayo, dalawa agad”, echoes another.

The conversations within the group carried the same defeated tone. The excitement that bubbled a week ago seemed like a memory of distant past. In reality, it is not so much about money lost as it is about newly-found confidence slipping away.

“Ako ata pinaka-unang nag-cutloss kahapon, ‘di ko lang sinabi kasi nakakahiya.”

Our portfolios did not take much of a beating, but our egos did. I imagine that a class of thirteen very eager minds working in concert to pass a group exam would fare better. I didn’t think we’d get a perfect score, but I certainly wasn’t expecting we’d get stopped out as early as we did. I guess that’s the stock market for you, serving the humility pie when you least expect it.

I looked forward to our next class after we inevitably had to cut our losses. I was wondering how Zee would react, what he would say. Come Friday night, I didn't think the lesson would be... juicy.

It was juicy like Jessy. Appropriately, our latest topic was about money management and how to avoid being emotional when trading.

Zee posed a question to kick off our class.

This is how I saw it. Emotions come out to play when something of significance is at stake. If you don’t involve real money in it, how else would you take the test seriously? 

"If you don't put money in your trades, 'di kayo matututo," Zee added. 

And that is our goal ultimately, that is the reason why we are here in the first place—to learn. It may mean we’ll have to take a few hits, endure several sleepless nights, get our egos bruised again and again. But if in every wound, there is a lesson, I’ll take it any day.

Emotions. They said that there are only two fundamental emotions in this world: love and fear. All other feelings that we experience—happiness, sadness, contentment, greed—stem from just either of the two. Every positive emotion comes in a place where there is love and every negative emotion where there is fear. To learn how to control love and fear is not only difficult, it is herculean. 

Emotion is the very definition of human beings. This is why out of all the lessons we have to fully grasp in this course, taming our emotions would prove to be the most challenging. Neither advanced technical weaponry nor a well-thought out trading plan would allow you to execute a trade flawlessly once emotions come trickling in. This is something that every trader has to continuously learn. 

And that’s when pieces will fall into place, the moment we take responsibility for the choices we make. The moment we stop blaming others for the misery we are in.