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6 Tips On How To Control Emotions While Trading

  • How to detach your ego.
  • How bad is over-trading.
  • How satisfying is work from home.
  • Sticking to your trade.
  • Learning to take a break.

Hollywood depicts trading as a rosy experience that promises nothing short of wins and cheer. For amateur traders who carry this misleading perception into their trading careers, they are awaited by a conflicting reality of what Forex and stocks’ trading is. Sleepless nights, consistent inaccuracies and crippling losses-these are not very alien concepts to trading gurus.

Before you master your art, feelings of uncertainty, nervousness and sometimes overexcitement are some of the emotions you will encounter on your trading adventures. Learning how to restore sobriety even on days when emotions hit an all-time high is what sets apart a good trader from a legendary trader. If you are a trader who struggles to stay afloat the emotional roller coaster of the trading world, here are a few tips that will work for you.

1. Detach Your Ego From Your Trade

When it comes to trading, every beginner thinks they’ve done all the research they need and its finally time to swim upstream. After your first few losses, you realize that trading is a learning curve and detaching your ego from it will do your career tones of good. Trading is solely based on strong analytics, and a confluence of factors comes into play.

You have zero control over demand& supply, stock valuations or interest rates for example. Ego trading will give you the illusions that you are right, even on days when you are patently wrong. Some of the signs of ego trading include:

     · The market forces to go your way

     · Refusing to backtrack even when you realize you are heading south

     · Overtrading

As a trader, learning to listen to what the market is saying at a specific time is what will propel you to some impeccable wins. It doesn’t matter whether you are right or not, as long as the market wins, you win too. In such a game of sheer probabilities, self-absorption is your greatest enemy. Quit personalizing your trade and don’t let losses break your self-esteem. Remember, it’s a learning curve.

2. Do Your Home-Work

A prepared trader is always a step ahead of the game. One perfect strategy if you want to steer clear of destructive emotions is preparing well for a trade. Ensure your research is up to date and that you familiarize yourself with the latest market trends. This puts at a better place emotionally and casts away emotions such as fear, anxiety, and uncertainty.

The research will broaden your view of what trading is in addition to giving you an insight into when it is best to trade. Analyze as many trades as you can, look for news updates and be keen on marking the resistance levels on your charts. Prepare adequately before the markets open so that you have time to focus on executing everything you’ve learned once they do.

Make sure your curiosity drives you to unearth something new about trading daily.  Knowledge will boost your confidence and keep you afloat even on days when the market throws the worst your way. As you research, take into account the profiles of trading geniuses. Learn from their triumphs, mistakes and navigational advice.

3. Plan Your Trade And Stick To It

Portrait of a confused broker
Confused broker thinking of investment solutions

The fears that accompany being a first time trader or one with limited wins is that you want to test different waters. Typically, there exist different types of traders in the market, and knowing which one you are can be of great help. Identify a trading strategy that concurs with your personality, and if it makes you comfortable work with it. Quit the nomad mentality that will only have you switching from one strategy to another with no substantial results. If you subscribe to this way of doing things, then frustration is coming your way.

If one strategy doesn’t work the first time, that’s not enough reason to ditch it and pick up a new one. One lesson you should learn is that no strategy promises all wins.  Whether you choose a support and resistance based strategy or swing trading, ensure you bet the ranch on it.

Successful trading calls for focus and discipline and one way of demonstrating this is through your consistent trading.

4. Take a Break After Three Consecutive Results

Sometimes routine can be overwhelming, especially if the results are consistent. Taking a breather after three repetitive outcomes is a good way of keeping emotions at bay. Even at a time when the market is hot and excitable, a break is mandatory.

For this reason, psychologists advise that the best way to overcome a losing streak is to retrospectively change your strategies.

Find something to take your mind off the deep sense of failure; something entirely different from trading.

Most traders often feel as though they are incompetent and such feelings often have a touch on their future trades. Consecutive losses will negatively affect your overall outlook of trading, and the outcomes altogether.  

The same way a losing streak can break you down and crash your trading esteem, a winning spree can also pump you up and birth overconfidence.  You’ll probably start feeling like an epitome of trading success, and this mentality may lead to overtrading. You will end up overlooking certain trading specs, and in turn, belittle the bigger picture. Leaving when applaud is loudest will also help in clearing your mental space.

As much as you can, don’t look at your profits or losses when making a trade. Even if you do, keep in mind that it is not a reflection of your self-worth and today’s trade is not dependent on any past outcomes.

5. Quit Reading Guide Trading Books During Your Trade

Yes, doing your research before trading is a great idea, but during your trade? Certainly No. We get tempted to try out new ideas as soon as we learn them. This may work in other aspects of life, but certainly not trading.  Trading with a book in your hand will cloud your judgment and pave the way for misplaced trading strategies. As a result, you will be unsure of what you are doing, and in the process feel overly anxious.

Reading as you trade may also make you have unrealistic expectations. Imagine being on the page where George Soros banked over $ 1 billion on Black Wednesday, just as you are on the brink of placing your trade. Suddenly you are compelled to take in every single piece of advice that Soros has ever given, and duplicate his exact trading results. If you want to avoid disappointments, keep the books away when its time to trade, especially those that depict the FX market as some ‘Get Rich Quick’ scheme and above all trust your gut feelings. If a certain position does not feel right, leave it alone.

As a seasoned trader, sometimes you get overwhelmed by emotional forces that are beyond your control. On some days positive outcomes will pump you up, and on others, you are left feeling like you’ve mortgaged your whole future. If you want to escape this emotional adventure, avoid being over-consumed and embrace limitless positivity in all your trading endeavors.

Head shot positive confident businessman
A businessman sitting at office desk smiling looking at camera showing hand gesture thumbs up sign symbol of good result, recommendation and success in work or study

6. Confidence and Enthusiasm

Confidence and enthusiasm are important emotions you’ll have to support yourself. You should use these in each trade you open. Confidence is the closing of every good trade. If you don’t have excitement or confidence in you, then there is a good possibility you are not in the ‘right’ path.

By ‘right’ i mean the suitable trade related to your trading strategy. The idea is to keep yourself operating only good trades. Making sure you have confidence in trade will help secure profit.