July 25

Embracing Market Uncertainty–A Short Guide

By Yvan


The market likes to throw chaos our way. Uncertainty is its nature.

Even with routines, systems, and processes that are supposed to make things a little more peaceful, organized, and predictable, sometimes, the market will do the unexpected–like gapping well below our stop, reversing course just when it’s about to hit our target price, handing us a string of losses…

That’s when things get hectic and complicated, especially in our minds.

But, how sane we can remain in the midst of all this market uncertainty determines how well we do in this field.

So, how does one get good at handling market uncertainty?

The answer is very simple: it’s practicing the art of embracing.

The Practice Of Embracing

Let’s see what this practice entails.

First, you need to understand that when the market throws uncertainty your way, it’s not necessarily a bad thing.

The situation is not inherently stressful; it’s not inherently anxiety-inducing, it’s just your mind making up stories about how and why it is so.

In other words, it’s all perception.

The problem isn’t outer circumstances, the problem is our internal stories and expectations we’re holding on too tightly.

Our minds don’t usually like chaos and uncertainty. We naturally crave order and certainty, and that’s what we unconsciously expect out of life and project onto the market.

So, we come up with stories to explain why we want things to be a certain way instead of accepting them as they are.

This creates inflexibility in our minds… and, by being so rigidly attached, we are causing our own difficulties in trading.

Now, here’s the good news: if we ourselves created the ideals in our minds by thinking too much about the past or by projecting too much into the future, we ourselves have the power to change it.

The simple solution is to just practice embracing market uncertainty.

What if you let go of all the stories about how you want things to be, and instead created a new story: the situation in front of you will unfold the way it will… and you’ll be okay!

Embracing Is Accepting

Accepting trade outcomes as they unfold with stability of mind… this is true power. If you want to go Zen monk style in your approach to trading, this is the way to go!

Acceptance means seeing the beauty of each moment, no matter how it unfolds, no matter what the outcome is, no matter how uncomfortable or painful it seems.

Acceptance is knowing intimately that market uncertainty can’t hurt you; that everything is just made-up stories and that you have the power to change that by changing your perspective.

To be clear, I’m not suggesting that you should just sit there and passively wait for your fate. No!

You should have a reliable trading system/strategy. (hopefully you do)

You should understand that strings of losses are natural consequences of market uncertainty.

You should understand that your system or strategy is there to protect you against that market uncertainty as much as it possibly can, but it can’t give you certainty of outcome in the short term.

You should understand that trading is a probabilistic endeavor and that short-term results are noisy and don’t mean much.

You should learn to assess your performance over longer periods. 

You should focus on minimizing or completely eliminating discretionary losses (losses that originate from trading errors based on fear or greed).

Embracing Is Understanding

Any situation is inherently neutral. Again, what is painful or uncomfortable are the stories you tell yourself.

So, when the stories arise:

1. Notice them.

2. Notice that you are getting frustrated, or anxious.

3. Notice that your stories and expectations are causing the difficulty, not the situation itself.

4. Understand that the stories are not always true or relevant, or even helpful.

5. Accept the mental stories that are causing you to struggle–your mind is only trying its best to keep you out of harm’s way.

6. Return to the present moment, a point in space and time that is neutral, with no expectations, no stories, just seeing the situation afresh with a clear mind and an open heart.

7. See the beauty and perfection of the moment in front of you.

8. Redirect your attention to your trading process and plan.

Easier said than done…

I know. But the difficulty comes from two things:

First, you don’t like to let go of the stories and the expectations you hold. You want things to be the way you want them to be. You want control over things.

It’s normal… it’s human nature.

And second, you find it difficult to truly be present and see the perfection of every moment of life (even the ones wrapped in uncertainty). Things often don’t live up to your expectations, so seeing the beauty in them is foreign and uncommon.

This is also normal.

But again, the answer to these problems comes with practice.  You gotta start somewhere, so don’t use those difficulties as excuses… because there go the mental stories again.

In Summary

So, whenever you have difficulty with market uncertainty,  this is an opportunity to practice embracing it.

And what a wonderful opportunity it is.

How can this situation be your teacher? How can you open up instead of recoiling?

Feel the internal struggle. Feel the sharp edge in your chest when things start to fall apart and get messy. Feel the frustration in your torso and belly. Let yourself feel all of that, fully!

Notice what’s going on in your mind. See how you can let go of the stories and expectations.

Then see how everything is just an opportunity. 

When time and again you’ve practiced this act of opening up; of embracing things as they unfold, when you’ve refined this skill and have it fully integrated into your psyche, the world (and the market) will finally become your oyster.

 

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Memorable Lines From This Post

The market likes to throw chaos our way. Uncertainty is its nature.

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The problem isn’t outer circumstances, the problem is our internal stories and expectations we’re holding on too tightly.

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Our minds don’t usually like chaos and uncertainty. We naturally crave order and certainty, and that’s what we unconsciously expect out of life and project onto the market.

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Acceptance means seeing the beauty of each moment, no matter how it unfolds, no matter what the outcome is, no matter how uncomfortable or painful it seems.

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Whenever you have difficulty with market uncertainty,  this is an opportunity to practice embracing it.

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