Why managing your emotions when trading is essential to your development

Oct 31 • Between the lines • 1984 Views • Comments Off on Why managing your emotions when trading is essential to your development

stress-computerMany successful traders will testify that learning to trade was one of the most difficult challenges they’ve experienced in their adult lives. In many ways it’s impossible to fully describe the emotional roller coaster we ride to eventually find a system and strategy that potentially reaps rewards. The journey is incomparable to anything else experienced and its hard to articulate the highs and lows we experience on our individual and unique journey towards becoming proficient  and then ultimately profitable.

I’ve questioned several successful traders regarding their early day experiences and the reaction is generally the same. They stop talking, pause for thought, their eyes focus on some distant point and their voice changes in tone and becomes hushed in volume, as they begin to describe some of the extreme personal lows they suffered during their formative trading years.

The range of emotions described by our traders is both fascinating and alarming in equal measures, but there were several key constants regarding what we’ll term our “traders’ recovery”; most traders developed the same coping mechanisms which eventually helped to pulled them through their low points. And those low points were very, very low as evidenced by some of these confessions…

  • I could have easily thrown something at the monitor.
  • I smashed my keyboard as I just couldn’t understand why price wasn’t going my way.
  • I was sure I was cursed.
  • I couldn’t stop talking to myself, my wife actually become concerned.
  • I’ve never felt rage like it.
  • How can these small candle shaped objects cause me so much misery?
  • I kept talking to the market telling it to “take it all off me” now rather than later.
  • I clicked the mouse to buy and just walked away, thinking “who cares?”
  • I’d lost interest whether I’d win or lose.
  • The despair at failing was similar to experiencing a personal tragedy.
  • I discovered my own version of hell.
  • I couldn’t sleep, seriously, I also lost my appetite.
  • This “thing” just took over my life.
  • I felt like a hermit, I lost enjoyment in everything.

You’d need the ‘DNA’ of The Terminator not to recognise one or more of these emotions that we suffer at the start of our adventure into trading. Some might say it’s an inevitable unforeseen consequence and that “we have to go there to come back”. However, if you were fortunate enough to have had an expert, a trading mentor, who guided you through those early days, could a lot of the pain been avoided? Yes, it could have been avoided and it’s with that in mind that we’ll make some helpful suggestions and coping strategies.


Stop trading

It’s a relatively simple suggestion but vital. If you find that your emotions are getting the better of you, due to having a severe account drawdown, then simply stop trading. The market will be there the next day, month, year. However long it takes you must regain your composure before trading again.


Dial down the risk to pennies or cents, or move back to demo trading

It’s probable that our trader is risking too much per trade. They then become agitated as they struggle to recover their losses by increasing their risk, or gambling. It’s more important that our trader recovers their equilibrium irrespective of the loss already experienced. They need to dial down the risk, to perhaps 0.1% of their account balance, until they begin to once again feel a spark of enjoyment returning to their trading.


Diarise the days’ events

This is not a suggestion for a trading plan, if our trader has become over-emotional they’re probably not trading to a plan, or with a plan. Here we’re suggesting that traders should diarise their daily routine in order to establish when they’re suffering with their emotions. Are they feeling stressed when their set up occurs, when the trade is developing, when it comes time to close are they hesitant? This simplistic diarist method helps our trader to focus on the now, by slowing down the whole process. And this diary can eventually begin to form part of the overall plan, in it our trader can highlight all the days events, perhaps use a code in the diary as a reminder of when the emotions increased.



Automation is in fact a skill set in its own right, it’s an escape from emotional trading that is far too easily recommended to new traders, but it’s an extremely difficult skill to enact for the inexperienced. In order to automate our trader will need a high degree of trading skill. For example, what are they going to automate, a strategy that they don’t have 100% faith in? Automation will without a doubt strip away the emotions involved with trading, but only once our trader has developed real and tangible overall control of their emotions. In fact automating too early could cause more problems than it solves, therefore automation as a solution should be treated with a degree of care and skepticism.


It’s good to talk

Talk on forums, talk to other traders through Skype, talk to your broker, talk to folk who don’t trade. Talking through your problems on trading forums, if you’re genuine and open, can really work wonders. There are many trader’s who will have experienced our trader’s pain and be more than willing to help. Our trader should also consider talking to their broker, in who’s office they’re be many current and former traders ready to lend a sympathetic ear.

We’ve highlighted just a few measures traders can take in order to reduce their stress and emotions from trading. Should any readers have other suggestions then we’d be delighted to receive them.

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