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How to tame your emotions in trading

Trading psychology is a very important side of an investment strategy. The whole system cannot work effectively without it. Many sources tell us that the mental element accounts for almost 80% of the success of the whole process of trading profitably. In today's article, we will talk about how to effectively deal with excessive emotions when trading.


Each of us is sooner or later affected by a moment when we start to wonder whether trading is for us at all. Such a reflection usually occurs after a series of losses and frustrating attempts to quickly salvage the situation, which end up in yet another blow to the account. We tend to act irrationally, inflating positions and going against all logic. Is there any effective method to prevent this? It seems to me that there is no single way that will take the "doom" of losses off our hands. Here are some tips you can use to tame an overly emotional approach to the market. You don't have to apply everything at once. Just pick the things that appeal to you most and incorporate them into your own trading plan.



A pause after a series of losses 


It is said that boring trading is profitable trading. And there is a lot of truth in this. If you find yourself falling into overtrading after a series of losses, take a short break. Sometimes it takes a bit of a cool down to re-enter the market. This will not only allow you to calm your emotions, but above all to relax a little. Professional traders do not work 24/7 - they are only in the market when they know they have the best chance of making money. 


Opportunities only exist today!


Working with market beliefs is a topic for a separate article or even a book. On the occasion of your next trading sessions, sit down with a piece of paper or notebook and write down exactly what your emotional states are when entering into positions. Also write down your thoughts and beliefs about the market at any given time. This will help you capture what you are really thinking about when entering and running positions. Often, when the trading day is over, we can't remember in the heat of emotion what prompted us to enter a position - the signal or the thought. So it's good to work with yourself to catch misconceptions about the market. Here are some of them:


  • opportunities are only today,
  • the market is bound to rebound,
  • I only enter when I am sure it will be a profitable trade.


Keeping a diary


A common mistake that causes our trading to become emotional is the lack of trading statistics. It's hard to improve something in trading when we don't have a faint idea of what our numbers are. We need to know what series of losses we have, when is the best time for our trading or what session brings the most profit to our account. It is good if we keep statistics for a few months (about three is the minimum) and have them based on at least a few dozen positions. In addition, the logbook has an element of routine and self-discipline to it! Every profitable trader knows how hard it is to work it out!


Find an oasis of calm


You may already have rituals - meditations, affirmations, exercises - that help you 'break up' excessive excitement. It's worth implementing these before trading so that you are fully calmed, tranquil and focused.


Sitting 24/7


You don't have to follow a position 24/7. If you do, it means that your risk is too high and forces you to constantly monitor the order. However, if this is not the case, once you have thrown in a trade, try to analyse remain charts on a "clean platform" - i.e. one where you have no orders posted.