Hey, it’s Grinch here. Some people told me that my last post on this blog about trading tips was a little emotional. I tend to get too wrapped up in the process and can’t control myself – the same happens in my trading. But I have done some research and came up with a few helpful tips on how to manage emotions while trading. Psychology can have a big effect on the trading results, so take a look at my findings and see if any of them might be useful for you.
Adjust Your Focus
Many traders are so concentrated on making a profit that they lose their cool and become reckless. For instance, if one of their trades is losing, they may decide to put even more money in. This is often an emotional response: the fear of loss can make traders risk even more of their capital on a losing deal.
Consider shifting your focus from making a profit to testing different strategies. This way it may be easier to step back and see the bigger picture. And make decisions based on facts and numbers instead of the fear of missing out on earnings.
Make a Plan and Stick to It
The ability to control emotions during trading often comes from having a solid plan. Having a set of trading rules that tell you how to act in different situations can significantly reduce emotional trading. A good trading plan can provide answers to the following questions:
- When do you open or close a deal?
- Which assets do you trade at different times during the day?
- How much money can you invest in one trade?
- Which instruments can you apply for technical analysis?
Once you have a trading plan, try to follow it most of the time: it can help you be more rational and avoid emotional trading.
Look For The Facts
Traders often make decisions based on intuition or random ideas they heard from others. While it can sometimes be important to listen to your gut, thorough analysis and facts tend to be more reliable. Do the research: by applying both fundamental and technical analysis in your trading, you can make decisions based on actual data and get more accurate results.
Analyze the Past and Draw Conclusions
Finally, what many great traders have in common is their ability to learn from past mistakes. By analyzing your performance, you can catch some patterns of behavior and detect signs of emotional trading. To make sure you have enough information for analysis, consider keeping a trading journal. Get a habit of writing down details about every trade. They can include the following information:
- What were the trading conditions for this asset?
- How much money did you invest in this trade?
- How long did you keep this position open?
- Why did you decide to close this deal?
- What was the result of this trade?
You can also record ideas for future deals or remarks about your actions. They may be very helpful for analyzing your trading psychology. You can later use these conclusions to avoid similar mistakes, especially those that were committed due to emotional trading.
Do you have any more tips on how to control your emotions during trading? Feel free to share them in the comments, we would love to hear your ideas.
