Learn To Manage Emotions For Steady Trading

2021-07-19

This question more than a decade ago fueled the creation of Simpler Trading…

“How do I manage emotions while trading?”

Traders everywhere struggle with how to handle the often striking emotional ups and downs of trading. All traders have good trades and bad trades which automatically creates emotional highs and lows.

Through the emotional journey the Simpler focus is on a single job — growing our accounts so we can enjoy the freedom lifestyle.

What’s the key to traders managing their emotions?

The answer is simpler than you might think.

Trading offers so much opportunity that actually attracts people who don't like rules and don't like structure — free thinkers, entrepreneurs, risk-takers.

Ironically, those who enter the market without rules tend to get their heads handed to them.

Not managing emotions can lead to bad trading decisions, like…

  • Letting “FOMO” (Fear Of Missing Out) trick you into chasing trades along with the crowd instead of waiting for high-probability setups
  • Trying to win back losses with “revenge trades” (inevitably leading to more losses)
  • Taking profits too quickly or hanging on to losses way too long

A trading plan is a must or the markets will play you like a fool. Trading and its emotional journey mirrors life.

As we go through life we experience pain and suffering and trauma. And, this is all different for each person.

That life trauma gets stored in the mind and body. In trading, like life, when the market  moves against us, all of that trauma gets released in the form of emotions.

And all of a sudden, we freeze. We can't do anything because we're experiencing that trauma versus actually trading our plan.

Traders who are unaware of this emotional phase are guaranteed to fail.

Traders can learn to overcome emotions and the key is to have a plan… and follow that plan.

Books have been written about emotions and the effects on trading.

The main idea here is that if you have a trading plan, and you follow the plan, you have a powerful tool in place to help you override emotional reactions.

We Saw: Market drops heavily again as virus fears grow  —

  • Politicians call for more spending to help economy
  • Oil takes a hit as car demand continues growing
  • Questions of short-lived recession be renewed

We’re Watching: Watching movement, guarded on participation —

  • Continued selling pressure into end of week
  • Avoiding getting caught in any brewing storm
  • Setups that keep cash in place and limit risk