Every trader at one point or the other feels like searching for the solution to the question – How to control emotions when trading? We know that emotions are the biggest impediment to our trading success, but then also we let our emotions run our trade and sometimes end up in big losses.
When we depend on emotions, sometimes we do wrong things for the wrong reason, like we buy a stock predicting that it will surely go up. But when it doesn’t go up, we hold on to it for our ego. We feel it difficult to accept that we were wrong. There are many such examples of the similar kind.
So the only way to successful and guilt free trading is to control emotions when trading. The four emotions that traders feel concerned about are hope, greed, fear, and regret. Suppressing of these emotions is requisite to become satisfied and successful. After a lot of research, I have come to the conclusion that the sure way to control emotions is to make the process of trading more mechanical. Here, mechanical doesn’t mean the reliance on tools or software’s only, but about making the trading actions mechanical.
How to do mechanical trading? Well, the way is, follow a strict plan. Make entry and exit based on that plan only. Sounds easy, but feel difficult to implement, isn’t it?
7 Proven Tricks to Control Emotions When Trading
The seven tips that I am delineating here can help you to a great extent. Follow them to control emotions in trading and see the results for yourself.
A pause of 5 seconds
Before making an attempt for your next trade, pause for a few seconds and give a thought that if this is right or if this is exactly you should be doing. Look at your chart objectively and think what a professional would do in such a condition. This pause of a few second sometimes turns the table for you.
Wait for a candle
Sometimes, early entries and misleading signals leave the traders in a mess. So wait for a candle before making any of your decision. This may improve your performance as a trader. When you will give this concept a try, I am sure that you will find it difficult, but this is how you will come to know how emotions drive your decision.
Take decisions candle by candle
It is proved by experience that mid-candle decisions are mostly impulsive decisions. It is always advisable to the new traders to not to make mid-candle decision as it may severely affect them. This may sound impractical, but it is true. Once you apply this method, you will be able to see for yourself, that how you are a victim of impulsive trading decisions. Try to take decisions candle by candle, if you want to control emotions when trading.
Prepare a physical checklist
Listing of all the entry criteria really helps a lot to run away from emotional decision making. Write the entry criteria’s in a list and then keep the list visibly near you. This helps you to be disciplined mentally.
Also Read: Risk Management Strategies for Traders
Detach charting and Trading
Although, relying on neutral charting tools when following the market is advisable, but sticking to a single charting tool may lead you to make emotional trading mistakes. How? Actually, when traders chart and trade from the same platform, they found themselves only a click away from making an entry in the new trade. As the orders always wait on the screen in their front, they can easily get impulsive by the thought of profit. The screen always creates a thought of urgency in the mind. So if you can separate your trade from charting, it will help you to control your emotions when trading.
Develop your own trade plan for short and long terms
Never focus only on one side of the market. As this will boost your urge to open a trade and work on it based on your emotions/opinion. Always write a trade-plan beforehand and try to include the long and short term plans in that. This will help you to control your emotions even when the market looks bullish or slump. Always stick to your plan regardless of the temptations offered by the market.
Do not pay heed to others’ opinion
Not only in trading, but in every field, if you do not trust your method and abilities and follow a consistent approach, you will not get anywhere near success. Be clear and precise about your rules and approach to trading and then move forward. Sometimes, we change our best rules after being impressed by the opinion of others. This has to be avoided at all cost.
Opinions matter, but only if you do a proper research on it and understand all sides of it. Merely depending on it, as it sounds interesting, is not logical. As far as trading is concerned, taking opinions prove disastrous sometimes. Avoid listening to others’ opinion, if you want to trade with confidence.
I hope that it is now clear that how you can go about eliminating emotions while trading. Try these tips and note the change yourself. Share your experience with us.