Today, we’re Discussing How to deal with emotions that are occurring in Trading. Trading has various emotions, such as fear, greed, and more. so here are some tips for you. Hope this may help you in improving your Trading.
The main emotions are:
1. Fear
2. Greed
3. Anger
4. Excitement
5. Frustration
Let’s talk about these emotions and how to deal with them.
- Fear
Fear is a natural human emotion that we all have. In trading, it’s easy to let fear take over because you can see your profits dwindling before your eyes. The problem with fear is, your mind goes crazy because you are already thinking how bad your trading account will be when you realize all these losses.
Here’s what you should do when fear takes hold:
- Stay away from the computer.
- Shut it down!
- Go out.
- Do something else.
- Take some deep breaths and relax.
Don’t panic, this will hurt you more than anything else!
2. Greed
Greed, in general terms, is defined as an intense and selfish lust for something. Like fear, greed in the investment world can be categorized into two types:
- Greed to have money with you
- Greed to earn more money
Compared to fear, greed is a relatively easy emotion to understand. Moreover, greed in controlled weight is good because it motivates us as a species to do better. It motivates us to aspire more and achieve greater things.
Although the feeling of greed is not as strong as fear, it can still make people act in ways they shouldn’t.
3. Anger
It’s easy to get angry at the markets because they are so unpredictable! You may experience: Huh, I sold it, look what, the market has improved. I could have caught him. If you don’t know how to control it, it will lead to revenge trading, which is worse.
Keep in mind:
- Markets don’t know you exist
- The markets don’t care who you are
- Markets do not know whether you are winning or losing trade.
- Markets don’t care if you get angry.
So, to beat the market, think like the market. how? Reduce emotion, trade your plan, not your predictions.
4. Excitement
When traders are going in your favor, it’s natural for you to get excited. We all like to see “green” in the account, but here’s the problem with it:
When the traders are going in your favor, you can get very excited and take more risks. You gain overconfidence. But don’t forget, “things always work out for the best,” But that’s when the trouble starts. So please be careful when you get excited because it quickly leads to overconfidence, and markets like to show overconfident traders who are boss.
5. Frustration
“Oh, I should have closed the trade with the 1k profit first, now I’m in the red” This happens to many traders, myself included. But some people approach these events with anger, others with frustration. Frustration can lead to impulsive trading, which means you take trades you shouldn’t recover your losses.
The best way to deal with disappointment is to take some time off from the markets until your head clears, this could be hours, even days. To emotionally kill your accounts, understand this. Emotion causes reactions but does it ever lead to a good reaction? It is okay to have feelings and emotions, above all, we are all human. But never react to those feelings. How can you control emotions while trading? Here comes the big question. I read this from “The 7 Habits of Highly Effective People” by Stephen Covey. Focus on what you can control and don’t worry about what you can’t. This gives me a huge lesson. Where I can apply emotions while trading.
This gives me a huge lesson. Where I can apply emotions while trading.
What I can control:
- My thoughts
- My actions
- What I can’t control
- What the markets are doing
So control your thoughts and actions, and have a pre-defined trading plan/strategy.
Don’t do anything outside of your plan.
- trade plan
- feel the excitement
- feel greedy
- feel angry
- fear and depression
But you will NEVER WORK with them.
