How To Deal With Uncertainty | A Short Guide For Traders

By Yvan


When global markets feel a little toppy and uncertainty rears its ugly head, we’re reminded how much a critical role trading psychology plays.

Uncertainty is naturally hard for us humans. We don’t like it, we crave knowledge about the future in the same way we crave food or sex.

Our brains perceive uncertainty as a threat, and they try to protect us by funneling our attention towards things and narratives that purport to give us certainty. But oftentimes, it’s only an illusion of certainty that they provide.

If we are to become better traders, uncertainty needs to be embraced instead of feared.

Uncertainty is not bad in itself and it shouldn’t be something to be avoided. Uncertainty is a natural aspect of financial markets; in fact, it’s the reason why there is so much opportunity in this space.

Uncertainty and opportunity are intertwined–they’re two sides of the same coin.

So, uncertainty has to be embraced and (dare I say) even loved. I strongly believe that this is the trader’s main mission if they want to thrive in the market—and not only make money but be happy doing so.

We can learn to open up to uncertainty and be at peace with a simple shift in our mindset.

Here’s how:

#1- Stop Resisting

What we resist persists. There is real truth to this aphorism. Instead of resisting, practice acceptance.

To practice acceptance, we must surrender our resistance to uncertainty, and also to our emotions about the whole situation.

This surrendering allows us to see the reality of the situation with a little more clarity because it frees us up to move forward, rather than paralyze us.

Acceptance doesn’t mean that you won’t feel frustrated anymore, or disappointed, or confused by the state of things. But allowing uncertainty to be as it is—and acknowledging our feelings about it—puts us in a better position to move forward.

#2- Find Healthier Ways Cope

When we feel uncertain, our brain activates our dopamine systems. This encourages us to blindly seek things that are comforting even if those things are unproductive. This can be drugs, distractions, food…

In the market, often, uncertain traders will seek the guidance of technical analysis gurus to help them feel secure and safe with their trade or investment decisions.

When our views are comforted this way, the dopamine rush gives us short-term bursts of pleasure. And it’s very addicting.

But these so-called trading gurus don’t know more than you do about the future. They’re just throwing shit at the wall and seeing what sticks.

Instead of turning to trading gurus for comfort, we do better when we preemptively comfort ourselves in healthy ways.

Meditation, journaling, tuning out the news, reducing risk, or even taking a risk-off approach… those are much better ways to cope with rising uncertainty.

#3- Become Aware of Your Biases

Technical analysis, fundamental analysis… those are all conjecture and provide limited insight into what really moves markets.

That doesn’t mean they’re not helpful, but they’re not crystal balls either.

And often when we try too hard to gain insights about the future, we do this to a point of very diminishing and even reversing returns. Because we’re just confirming our biases. So, this is something to pay extra careful attention to.

#4- Stop Worrying

Many of us worry when faced with things outside of our control. Our minds work overtime to try to predict the future and avoid nasty surprises.

Worrying makes it seem like you have control over uncertainty. Maybe if you just stress and agonize over the current situation long enough, if you think through every possibility, or read every trading guru’s predictions, you’ll be able to control the outcome.

Unfortunately, it doesn’t work like that.

Chronic worrying doesn’t give you more control over uncertainty—things that are by definition out of your control. What worrying does is just rob you of enjoyment of the present moment. It also saps your energy and keeps you up at night.

So, stop worrying. Meditate or journal if you feel things are chaotic inside, but stop reinforcing that cycle.

#5- Know What’s In Your Control

Uncertainty exists on a spectrum ranging from high to low. Sometimes there’s a lot of uncertainty in the market, sometimes there’s little.

While you can’t control external factors, it is your job as a trader to know when uncertainty is high or low. Instead of worrying about the uncontrollable, focus on taking action over the aspects that are within your control.

As a trader, what’s in your control is your trading plan and strategy. By focusing on those, you’ll switch from ineffective worrying to active problem-solving.

And since all circumstances are different, sometimes you’ll find that all you can control is your attitude and emotional response. The way you do that is by bringing acceptance and curiosity to your experience (see #1).

In the midst of uncertainty, we still have control over our attention. We can turn off the anxiety-provoking news and the doomsday FinTwit predictions. We can also drop our ruminations and negative fantasies by attending to what’s actually happening in our inner world.

This allows us to cultivate calm, open-mindedness, and non-reactivity.

#6- Challenge Your Need for Certainty

You have positions on, and you don’t know exactly how it will go? That’s OK. In fact, you can embrace this not-knowing … it’s like reading a good book or watching a good movie and not knowing how things will unfold. That’s part of the fun, right? Well, it’s the same thing here.

Can you follow your trading plan even though you don’t know what the immediate outcome will be? Can you do it by being completely open to how things might turn out?

With the right trading psychology, embracing not-knowing can be a beautiful thing– a beautiful act of opening up to the nature of financial markets and flowing with it.

As you move along this uncertain path, notice what you can notice, learn what you can learn, and trust that you’ll be fine.

For sure, you might flop on your face, but of all likely outcomes, what’s the worst-case scenario? If you’re not betting the farm, then it’s probably nothing too bad, right? A failure is just a way to learn, grow, and get better. It’s not the end of the world.

#7- Be Kind to Yourself

When things are out of your control, it’s easy to become overwhelmed by fear and panic. You may think that bottling up your feelings or unleashing them on the cat will provide the best outcome. But doing that only makes matters worse.

When you can’t control a situation, you can still actively face up to difficult emotions—even the most intense ones. Allowing yourself to experience them with kindness and acceptance can help you reduce stress and better come to terms with uncertainty, and find a sense of peace as you deal with its unique challenges.

One thing to be aware of is that some people are better at dealing with uncertainty than others. So, don’t beat yourself up too much if your tolerance for the uncertain and unpredictable is lower than trader X on Twitter.

Be kind and patient with yourself and the situation. Chances are that you’ve overcome stressful events in the past—and you’ve survived! Give yourself credit for that. Reflect on what you did at the time that was helpful and what you might like to do differently this time.

#8- Lower Your Expectations

Last but not least, expect less! Expectations will lead you into cycles of hope and fear while keeping you glued to your screen like an addict.

It’s really not a healthy way of spending the very limited time you have on this earth.

Now, I understand, when we’re stressed about something, it can be hard to look away. But you gotta grow out of that mind state one way or another.  Because compulsively checking your PNL or the news or what this or that trading guru is saying or doing only keeps you wound up.

So, lower your expectations, embrace the fact that anything can happen, and try your best to limit your check-ins, especially during vulnerable times of day, such as right before bedtime.

Conclusion

The market is the embodiment of uncertainty. Knowing how to live and ride with that uncertainty is your main goal as a trader. The better you become at that, the better your odds of achieving massive success.

This path of embracing uncertainty isn’t anything you can’t handle. Many traders have done it, and are currently doing it. So, you can do it just as well as anyone.

Every time uncertainty rises and you feel the contraction in your body, see it as a calling to open up and accept. Turn towards it instead of away from it. Try this new way of doing things rather than indulging in your old, unhelpful patterns. See how it goes.

Learn to dance with uncertainty with a smile on your face.

 

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Memorable Lines From This Post

Uncertainty and opportunity are intertwined–they’re two sides of the same coin.

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What we resist persists. There is real truth to this aphorism. Instead of resisting, practice acceptance.

Click to Tweet

So-called trading gurus don’t know more than you do about the future. They’re just throwing shit at the wall and seeing what sticks.

Click to Tweet

Technical analysis, fundamental analysis… those are all conjecture and provide limited insight into what really moves markets. That doesn’t mean they’re not helpful, but they’re not crystal balls either.

Click to Tweet

With the right trading psychology, embracing not-knowing can be a beautiful thing– a beautiful act of opening up to the nature of financial markets and flowing with it.

Click to Tweet

Expectations will lead you into cycles of hope and fear while keeping you glued to your screen like an addict. It’s really not a healthy way of spending the very limited time you have on this earth.

Click to Tweet

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