Emotions in Trading VS Emotion in Life
It needs to be understood that emotions are a part of life and can’t not be ignored or locked away. The important thing is how we deal with them. Do you let your emotions control you or do you take control of them?
We first need to understand why we have emotions:
Emotions help us to take action, to survive, strike and avoid danger. To make decisions and to understand others. They can help a decision-maker determine which aspects of a decision are the most relevant to their specific situation.
Emotions are like a double-edged sword:
They help you see problems in a new light or they create problems that aren’t even relevant.
Emotion reduces anxiety or increases anxiety.
Eases depression or creates depression.
Let’s move onto emotions when it comes to trading:
Emotions are great when you are with friends, writing or watching a movie but when it comes to trading, they are pure kryptonite.
If you feel like you need to rationalize or defend the trade you have just made, then this a clear sign of emotion. Be surgical with your trades!
Do not let one bad trade ruin your day, this is counterproductive. Stay focused and reject the emotions and self-loathing. Move on!
We should be following structure as long as it is profitable, all the while looking for signs of rotation.
You can never go broke by taking profit.
Be mindful of your mood and confidence level.
How actively and carefully you define your risk will have major implications on the long-term health of your wallet.
Your goals should be humble, and your approach to reaching them methodical.
Money is made waiting.
If you spend your time obsessing over old losses you have a high probability of generating new ones.
After a big loss – Thinking you have to make the money in the next trades is a bad idea as you do not have a good feel for the trade and so you are likely to repeat the same mistakes that cost you money in the first place.
Always stay patient, stick to the System and don’t let yourself get caught up in the emotions of trading. Be patient, be careful and choose your trades wisely.
You should be a cold calculated sniper, focused on the mission at hand.
Monitor your emotion and aim to be neither too high or too low – stay grounded and focused.
If you are not willing to lose it. Don’t put it on the exchange.
Learn to accept and embrace the risk.
Traders should put on a trade without the slightest bit of hesitation or conflict, and just as freely without hesitation or conflict, admit when you were wrong.
If you are unable to trade without the slightest bit of emotion or discomfort (specifically, fear and greed) then you have not learned how to accept the risks inherent in trading. This is a big problem, because to whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.
Redefine your trading activities in a way that allows you to completely accept the risks is the key to thinking like a successful trader. Learning to accept the risk is a trading skill. It is one of the most important ones you can learn.
Disciplined Traders: Developing Winning Attitudes.
Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful.
It’s when you’re winning that you are most susceptible to making a mistake, overtrading, putting on too large a position, violating your rules, or generally operating as if no prudent boundaries on your behavior are necessary.
You create your own outcomes, the market doesn't care or feel anything towards you.
The way you think (is extremely important) Think it - Believe it - Achieve it
The best traders stay in the flow because they don’t try to get anything from the market; they simply make themselves available so they can take advantage of whatever the market is offering at any given moment.
Accepting the risk means accepting the consequences of your trades without emotional discomfort or fear.
Each trade is a new trade. No, matter if you won or lost your last trade, it doesn't impact your current trade.
If you are fearful, you can't learn something new and it will make you forget the bigger picture.
No one knows what is going to happen next, so stick to the strategy.
What you think does not matter - What you see can be changed - What you feel is emotion which is not needed when trading.
Every trade is different, there is no such thing as certainty in life let alone trading.
To eliminate the emotional risk of trading, you have to neutralize your expectations about what the market will or will not do at any given moment or in any given situation.
Learn to trade with NO expectations.
Create a carefree state of mind that completely accepts the fact that there are always unknown forces operating in the market.
“Losses are simply the cost of doing business or the amount of money I need to spend to make myself available for the winning trades.”
When you really believe that trading is simply a probability game, concepts like right and wrong or win and lose no longer have the same significance.
A Trade in three phases:
It needs to be understood that emotions are a part of life and can’t not be ignored or locked away. The important thing is how we deal with them. Do you let your emotions control you or do you take control of them?
We first need to understand why we have emotions:
Emotions help us to take action, to survive, strike and avoid danger. To make decisions and to understand others. They can help a decision-maker determine which aspects of a decision are the most relevant to their specific situation.
Emotions are like a double-edged sword:
They help you see problems in a new light or they create problems that aren’t even relevant.
Emotion reduces anxiety or increases anxiety.
Eases depression or creates depression.
Let’s move onto emotions when it comes to trading:
Emotions are great when you are with friends, writing or watching a movie but when it comes to trading, they are pure kryptonite.
If you feel like you need to rationalize or defend the trade you have just made, then this a clear sign of emotion. Be surgical with your trades!
Do not let one bad trade ruin your day, this is counterproductive. Stay focused and reject the emotions and self-loathing. Move on!
We should be following structure as long as it is profitable, all the while looking for signs of rotation.
You can never go broke by taking profit.
Be mindful of your mood and confidence level.
How actively and carefully you define your risk will have major implications on the long-term health of your wallet.
Your goals should be humble, and your approach to reaching them methodical.
Money is made waiting.
If you spend your time obsessing over old losses you have a high probability of generating new ones.
After a big loss – Thinking you have to make the money in the next trades is a bad idea as you do not have a good feel for the trade and so you are likely to repeat the same mistakes that cost you money in the first place.
Always stay patient, stick to the System and don’t let yourself get caught up in the emotions of trading. Be patient, be careful and choose your trades wisely.
You should be a cold calculated sniper, focused on the mission at hand.
Monitor your emotion and aim to be neither too high or too low – stay grounded and focused.
If you are not willing to lose it. Don’t put it on the exchange.
Learn to accept and embrace the risk.
Traders should put on a trade without the slightest bit of hesitation or conflict, and just as freely without hesitation or conflict, admit when you were wrong.
If you are unable to trade without the slightest bit of emotion or discomfort (specifically, fear and greed) then you have not learned how to accept the risks inherent in trading. This is a big problem, because to whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.
Redefine your trading activities in a way that allows you to completely accept the risks is the key to thinking like a successful trader. Learning to accept the risk is a trading skill. It is one of the most important ones you can learn.
Disciplined Traders: Developing Winning Attitudes.
Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful.
It’s when you’re winning that you are most susceptible to making a mistake, overtrading, putting on too large a position, violating your rules, or generally operating as if no prudent boundaries on your behavior are necessary.
You create your own outcomes, the market doesn't care or feel anything towards you.
The way you think (is extremely important) Think it - Believe it - Achieve it
The best traders stay in the flow because they don’t try to get anything from the market; they simply make themselves available so they can take advantage of whatever the market is offering at any given moment.
Accepting the risk means accepting the consequences of your trades without emotional discomfort or fear.
Each trade is a new trade. No, matter if you won or lost your last trade, it doesn't impact your current trade.
If you are fearful, you can't learn something new and it will make you forget the bigger picture.
No one knows what is going to happen next, so stick to the strategy.
What you think does not matter - What you see can be changed - What you feel is emotion which is not needed when trading.
Every trade is different, there is no such thing as certainty in life let alone trading.
To eliminate the emotional risk of trading, you have to neutralize your expectations about what the market will or will not do at any given moment or in any given situation.
Learn to trade with NO expectations.
Create a carefree state of mind that completely accepts the fact that there are always unknown forces operating in the market.
“Losses are simply the cost of doing business or the amount of money I need to spend to make myself available for the winning trades.”
When you really believe that trading is simply a probability game, concepts like right and wrong or win and lose no longer have the same significance.
A Trade in three phases:
- Entry: The first phase commences when direction has been confirmed and requirements to enter have been established. You begin getting excited, your heart pumps a little faster, you sit up in your chair. As your entry point gets closer, you start to lean toward the screens. As the entry gets closer and closer, you start to feel nervous. You begin to think you are missing out, and that you should have already entered the trade (This is FOMO). Then it begins to pull back, which by the way you wanted to happen, but you begin to start questioning whether the entry point is still valid. You ask yourself, is this just a pullback or is it reversing? All of a sudden it does a quick spike up ... Followed by a quick dump. Now your heart is really pounding and your finger on the mouse is shaking. It looks like the right time to enter; all the right confirmations are present, but you just do not feel it is right and you are seeing all these other signals telling you that it is the wrong setup! At that very moment you need to decide if you are going to listen to your emotions or follow the process and systems you have be taught. You cannot do both. DECIDE!
During the Trade: You finally make the decision and pull the trigger to enter, but that does not calm your emotions. In fact, the emotions keep coming, and keep coming even more powerfully. You hear yourself say, “Yes! Yes! It’s going in my direction. My entry was perfect.” But then, “Oh no! It’s starting to go against me. My feelings were right. I shouldn’t be in this trade but wait, it’s now coming back in my direction!” “Yes! Keep going!” “Wait! Oh no! It’s going against me again.” You start to frantically search for signals to help you decide whether or not to stay in, or exit the trade. Your heart is still pounding. Your mind is saying that since you have some profit, you should take it and run. “Don’t give it back! Exit! Exit! EXIT!” You give in, you exit.
After the Trade:
At this very moment, you are now calm. You survived. Your body and mind are safe from losing and you also made some profit. But wait! Your trade starts to rise again. Without you. “Damn it! I knew I was right. Why did I get out?
What was I thinking? Yep, it hit my profit target too. FK!” The frustration of not sticking to your plan all of a sudden start to sink in and you begin to get angry and frustrated. Now you have to decide if you are going to keep trading or walk away.
What I hope this scenario illustrated to you is that when your setup starts to appear. Your uncertainty will be unleashed. Your emotions will be triggered to protect yourself from losses, but instead you want to invoke your hyper senses, so you focus on your execution rather than the outcome. This is the emotional intelligence you are looking for in order to become profitable.
I have linked any amazing idea to this article that I believe will help you just as much as this one. (NFA - Just my thoughts)
Thanks for reading and have a success week ahead!