Have you ever dropped to your knees in agony when you took a significant loss on a trade?
Have you ever entered a trade without a stop-loss and it immediately went against you?
Have you ever prayed that your losing trade would come back just so you could get your money back, but it just kept on dropping?
All these things have happened to me. I waited two months once believing my trade would come back and it still hasn’t till this day.
Those two months were the darkest days of my life as I stared at the screen like a zombie day and night, not knowing what to do except hope and pray. My life savings disappeared, just like that.
So in this article, I’m going to share ten tips to help you conquer your emotions while trading and remind you that there’s more to life than staring at charts 18 hours a day like I did.
There’s no reason for anyone to be sitting behind a computer all day and night. It’s unnatural and unhealthy.
So why do we do it?
The answer is simple. We don’t know what the hell we are doing. But our ego thinks we do.
Our inexperience gets us in trouble, and our emotions multiply our mistakes. We end up reacting to price swings and getting whipsawed back and forth, not understanding what happened.
Our emotions trigger these reactions, and it’s our fear and greed that make us jump in and out of these trades at the wrong times. So we stare at the screen until our trade is in the green, which can take hours, days, weeks or sometimes never.
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So how do we conquer our emotions?
Unfortunately there are no quick and easy answers. Just like any career, it takes years to master trading. Here are 10 insights that can help you speed up the process.
1. Realize you are not as good as you think you are at trading.
At first, you thought trading was going to be easy. But in reality, you are trading against institutional money and professional traders who have been in this industry way before you even knew what trading was. You are just a minnow against an ocean of sharks and whales. Easily eaten.
2. Lose a lot of money
Say what? Learn to embrace rejection. Pro traders lose all the time, and they understand this. Over time, they have acquired the skills to lose less and win more. Just like a boxer learns how to get hit but also gains the experience and expertise to punch harder and faster.
3. Have a longer-term perspective.
You have heard this before, but your impatience makes you ignore this huge lesson. Charting longer time-frames like the monthly, weekly and daily are more reliable. Intraday trading and scalping short time frames will take you on an emotional roller coaster ride.
4. Create your trading plan and stick to it.
Backtest some strategies you feel comfortable with and use it. Most strategies are geared to work if you stick with it. Keep it simple and don’t keep changing your strategy just because you lose a few trades. It’s possible to lose five-ten trades in a row even with a good strategy.
5. Stop looking for the “perfect” trade.
This is just one trade of your next 100 trades. Follow your strategy and seek only high probability trades. The “perfect” trade does exist, but you will lose a lot of money finding it. Instead, preserve the money you have for high probability trades.
6. Trade smaller positions.
The larger your position, the higher your emotions will run. Losing $10 won’t hurt you much, but losing $100 or $1000 can impact your emotions and make you enter or exit your trade prematurely or too late.
7. Don’t use red/green candlesticks and volume bars.
Subconsciously, green and red are emotional colours. Green is the colour of money, or it could mean go, and red could mean stop or do-not. Try using black and white instead of red and green. Or use one neutral colour like grey for all your candlesticks. It can help you focus on the price action.
8. Trade only when the market is trending.
Knowing when and when not to trade is crucial. It’s more volatile trading reversals and ranging markets as there is no clear direction. Trading a volatile market can lead you to buy high and sell low (whipsawed), which is the worst feeling.
Know your take profit and stop loss levels before you enter a trade. This forces you to know what your risk to reward ratio and exit strategy is. All decisions are already made — so your emotions are left out of the picture. Just let the trade play out. Stop loss, stop loss, stop loss! Stop the loss!
10. Leave your desk after your trades are entered.
If you are following the above rules, you won’t need to stare at your screen all day. Many professional traders trade early in the morning for a few hours and take the rest of the day off to do other things — life stuff.
There’s more to life than staring at the screen all day. And to overcome this, we need to learn how to trade without emotions.
I never said it would be easy. It will be one of the toughest things you do, but if you are persistent and become good at your craft, then trading without emotion will come naturally in time. And after that, life will be much, much sweeter.
Hey, I’m Joeal. I write articles sharing my insights and commentary in this exciting world of cryptocurrency. I use the Signal software for my bracket orders on Binance. It has been a great tool that helps me trade without emotion.