Tilt in Trading
In our recent episode featuring the excellent Jared Tendler book, The Mental Game of Trading, we briefly discussed tilt, but saw that obviously it needed to be a much larger discussion! The topic of tilt in trading is a big one and is an experience that every trader I know of has battled with at one time or another. The actual word tilt is both a noun and a verb and generally means a slope, slant, or leaning angle. But the term tilt that we make reference to in other episodes and for today’s discussion originated actually from the arcade game pinball where players would literally tilt the machine to avoid losing their ball. It is also a very common term in one of Jared Tendler’s other main world's - poker. It refers to the experience of a player that gets really mad or frustrated and then plays really poorly as a result. I do love the quote from the book when he is explaining this where he writes: “It’s more fun and descriptive to say ‘I tilted,’ rather than ‘I got angry and made some terrible decisions.’” Oh goodness do I understand that emotional response in regards to trading!
Tilt sort of tip toes in real sneaky at first and then before you know it accelerates very quickly!! Something in my trading day starts to go sideways and not as I had planned it. What I have found to be ironic about my tilt days is that it can often become an outcome despite starting out with a really strong morning. For example, all the top 10 premarket routines that we covered in a previous episode were executed and I’m arriving at my charts ready to play my best game. So picture me once the market opens being super patient, no FOMO, live recording journal entries to keep up my understanding of context, letting her reveal a clear direction and give a set-up. I’m like sooo in tune with my levels, scanning data, good self-talk, and coaching, affirmations, and communicating occasionally with my people what my intentions are. Ready to make winning choices! Alright, so I start to see a setup of what I believe is my pitch! It’s in my trade plan, price is seemingly being either accepted or rejected at my critical levels, my bigger TF is supporting my direction. I have live data giving me a good idea if buyers or sellers are in control, some good pattern and rhythm supporting my trade. I mean we have no lack of tools to help us out in trading. However, even with all that on my side, and a decent usually, never perfect but solid entry things can still go from calm and calculated to confused and chaotic. There’s a number of reasons why a trade goes against us, stop loss not appropriately placed, maybe due to not the best fill price or tightened too soon not wanting to accept full risk. Sometimes a trade goes straight into profit and that’s the best feeling! You are in sync and riding her so well, then your target gets missed by a tick or less than and you didn’t act quick enough to take profit. You could have questioned your target being too conservative and widened to take more, just to kick yourself seeing that your original target would have been hit and now she’s rebounding with force. Or maybe your read was just totally wrong and now the bias bug starts to eat at you and now you’re on a mission to prove you’re right. Any one or more of these outcomes can happen on any given trading session. They’re part of the game, but when internalized and scrutinized in a manner that brings about feelings of regret, lack, and frustration–you are entering the TILT danger zone. Sound like anything you have experienced? It is just SO EASY to slide down that slippery slope.
In general, emotions are powerful in life and in our bodies. They carry substantial weight with how we make decisions, and with what we say and do, especially in fast paced environments. When you are day trading, choices with executions must be made in real time and with real risk on the line. So, important financial outcomes are won or lost based on our choices with only seconds to make certain decisions sometimes! Price can rapidly approach your level and then it is potentially the time to engage depending on the price action there. Can you always act with clarity and logic in those moments? That’s the goal. To execute based on your trade plan, your system, your predefined risk management, and your rules. But, if you have already taken a loss, or jumped the gun and got in too early - essentially if any added challenging emotional strain has been placed on you, there will be emotions involved. The extent to which we allow those emotions to take control will dictate the extent to which we may tilt. I have also heard tilt in trading defined as a situation in which a trader behaves within the state of a strong emotional agitation and either cannot or doesn't want to control his actions. We all know the power of a strongly agitated state. We can see red or have a blur of vision all together. That stress response causes the body to flood us with adrenaline and cortisol, similar to rage, and that leads to an elevated heart rate, breathing rate, and anxiety level. For sure, we are no longer observing the market with peace, curiosity and logic. But, rather, with offensiveness, aggression, and a righteousness that makes it much harder to back down from. And an important factor with trading that we’ve also mentioned before that is highly relevant here, is that trading is a solo sport for most of us ‘retail traders.’ So, we are alone at our screens without a boss supervising our moves and our trade management. We can easily really let our guard down and play with that fire. But the aftermath will often be hard to accept.
“The stock market is a device for transferring money from the impatient to the patient.”
~ Warren Buffet
Yes, emotion regulation is at the core of what we must master if we want to avoid tilt. So then, how do we do that? Is there a way to avoid it, or at least limit it? You know where we are going with this - that D word again. This is the job of a specific and detailed DISCIPLINE system! Again, Jared’s The Mental Game of Trading book gave us an amazing template to become aware of how our mental and emotional levels come into play with our technical levels. Below, we provide his example of how we can go from strong to weak.
Mental and Emotional level
10 - Energized, totally consumed by the process, waiting for the market to come to me, not concerned about money
8 - Wondering why it’s not working and trying to convince myself that it still can, a bit on edge, leg bouncing
5 - Heart rate accelerating, moving the mouse faster, care what other traders are thinking , and looking for something newsworthy, thinking about how to end the day green
2 - Can’t step away even though I know I should, checking P&L every 10 mins, my body feels itchy
Technical level
10- Taking action only at my predetermined spots and being able to let the trades play out
8 - Have trouble letting go of losing positions and looking to enter sooner than my strategy tells me to
5 - Forcing trades for valid reasons but not my ideal
2 - Over trading, getting in and out positions more randomly, moving my stops
Moreover, Tendler’s book The Mental Game of Trading was packed full of ways to understand ourselves better and strategize for improvement. Towards the end, Jared advises that things may actually get worse before they get better. And that does make sense too. As we learn more about ourselves at deep levels, it will expose areas that we didn’t even know existed and we have to start from scratch with understanding them and targeting them for improvement to develop greater competence. He puts it like this: “Being more aware of your emotions can also feel like you're taking steps backward. Greed, fear, or tilt can feel more intense when you pay closer attention to them. These are not actual steps back. Rather, you are becoming aware of what had previously been ignored.” Yes, we’ve experienced that! When we are journaling about and discuss a struggle that we are trying to push past, I swear sometimes it just keeps popping up! But, with increased awareness and focus on something, that makes sense too. Like the whole example of researching a car you want to buy, reading and learning all about it and pondering the choice of it. Suddenly, you now see that car everywhere. But they’ve always been in the mix on your roads, you’re just noticing them more now that you’re looking! It seems that the main point that he urges with this is just know that you are on the right track once you’ve identified your biggest struggles, and keep adjusting your game and working at it. As we like to say, it’s always strategy season and sooner than you realize, the work we all do at our process will matter as we inch along our paths!
So, how long does it have to take? To really master your emotions, commit to full consistency with your discipline, and always execute with patience and purpose? Hahaha - The truth? - A lifetime! This will be a never ending work in progress. No one is perfect, and we weren’t meant to be. Nor do you have to be in order to be profitable in trading! And no matter where you are at in your pursuit, you can still enjoy the journey, ride the highs and lows and grow through them. A realistic goal is to work diligently to slow the frequency and depth of your tilt sessions and over time the impact will substantially decrease. To drive this home, we have a quote from an OG trader and hedge fund manager Larry Hite, where he said: “Throughout my trading career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.” Tilting essentially throws the gates wide open to risk and is not sustainable for lasting success as a trader. So, sure, the term tilt is more fun to say than anger and revenge, but the risk is serious and must be treated as such. Identify, target, and correct, and then repeat that process until you are safely executing week after week. That is growth and will lead to maturing and significant profitability as a trader!
Tilt is a very real barrier to success and is a phase of learning to trade that we must navigate as we push through the crazy challenging pursuit of trading. We don’t want to hold anything back from you guys. Our whole point here at Market Mamas is to be authentic and real about this very hard world we choose to engage with every day. And we for sure have made some poor choices in the emotional space of a full on tilt. And on more than one occasion. Rite of passage? Maybe. Did we choose to learn from it and grow stronger and more resilient from that lesson? Hell yes we did, and you can too!!! Hold your discipline and patience guys, Miss Market is abundant. But we have to manage ourselves in order to be able to receive from her abundance! Our best trading days are ahead!
And, because we referenced him and his work so much in this episode, as we think he’s amazing even though he doesn’t yet know we exist (lol), here’s the link to Jared Tendler’s website with so many truly incredible resources and his coaching program that we image is seriously amazing! https://jaredtendler.com/