Trading can be one of the most emotionally taxing activities that you can partake it. The emotionally highs and lows that result from our successes and failures as traders can really take their toll and eventually cause many would be traders to quit before they ever get a chance to realize their full potential. In order to avoid this you need to learn how to control your emotions and stop them from derailing your trading career. This is one of the most critical steps in becoming a trader, and for many the most difficult. With that in mind I have outlined 3 tips that have helped my immensely in my own trading with the hopes that they will help you control your emotions and improve your trading.
Guest post from visionsofaffluence.com
1. Think Before You Act.
This may seem like a no brainier but many times when you make trading decisions those decisions are not coming from your brain at all, but rather are the product of your emotions. These emotion based decisions are almost always detrimental to your trading. It is these decisions that lead to you moving your stop back because you just know the market is going to turn around, or to open a position that is too large for your account size, or to quickly jump back into the market without doing any analysis following a loss. All of these more often then not turn out to be horrible decisions. Decisions that could have been avoided had you took the time to really think about what you were doing. I know that the markets move fast and that you may feel like if you take too long to pull the trigger the opportunity might pass you by, but personally I would much rather let a good opportunity pass by because I spent too much time thinking about it than to jump into a bad trade simply because I didn’t think enough.
2. Keep A Journal Of All Your Trades.
When I first began trading and someone first told me that keeping a journal would help my trading improve I completely ignored them. I thought to myself “a trading journal? I don’t need that” and boy was I wrong. A trading journal is one of the best things a trader can do to learn about him self and improve his trading. Writing down every trade you take, why you take it, and the outcome its outcome is one of the quickest ways to improve as a trader. When you write all of that down and read it over later soon patterns begin to emerge. You soon realize certain thinking patterns you have seem to cause you to lose over and over and these thought patterns are invariably emotion driven. By keeping and reading a journal you will be able to recognize the emotional pitfalls that you are most vulnerable so that when they occur during your trading you will be more able to realize this and say “hey these are my emotions talking” once this occurs you will be able to resist the direction they are pulling you in and instead take the time to think and let your logic guide you on the best course of action.
3. Make A Plan And Stick To It.
A Trading plan is essential to a trader’s ability to avoiding the emotional pitfalls associated with trading. Without a plan you are doomed to failure because there will be nothing in place to guide your actions. You will be a small tree in the emotional twister that is trading, flying violently through the air, moved from one place to the next with no firm roots to hold you in place. In order to grow the roots that are necessary to hold you in place against even the most violent of all tornadoes you need a trading plan. The power of the trading plan is that it is created when you have no emotional demons at work. Your trading plan is made up when you are not in the market and as a result are thinking at your most rational. This is important while trading we are susceptible to irrational thinking, but you have a trading plan that you follow without out question then that eliminates the need for you to think and stops you from letting your emotions get the best of you and hurt your trading. All of this however, is contingent upon you being disciplined enough to stick to your plan no matter what. Many traders make the mistake of ignoring their plans and end up paying the cost. Your plan is only there to help you. In fact in the world of trading it is the only friend you have.
Those are my tips for controlling your emotions. I hope that you are able to use them in your trading. These tips are not meant to be exhaustive they are simply a few things that have helped me become a better trader and I hope they can do the same for you.
Jason Madison
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