Control your Emotions: Key to Trading Success

Trading psychology

Control your emotions when trading
  • They are various kind of emotions.
  • In market trading, emotions can switch from really high feeling to a low feeling in matter of seconds.
  • When emotions are too high, they can take over and traders can stop trading at their best.
  • Understanding and mastering your emotions are the key to successful trading.

What are emotions?

Emotions are biological states related to the nervous system as a result of neurophysiological changes tied to thoughts, feelings, behavioural responses, and a level of happiness and unhappiness. It is a conscious mental reaction such as agitation, joy, fear, hate, anger, love, etc.

How to manage your emotions when trading?

As far as trading is concerned, you are your worst enemy. Most often than not, your failure would be as a result of your own wrong decisions. The market is not the one treating you wrongly and you can’t put the blame on imaginary concepts such as luck. And to be candid, you will never be a successful trader if you tie your achievement and success to luck.

There is this feeling when your emotions are rising, the adrenalin is pumping so fast and you may or may not be making the right decision in your career. The result can be different if only you can find more time to think it through but in some cases, time is of essence and hence, one would need to make a prompt decision.

In market trading, emotions can switch from really high feeling to a low feeling in matter of seconds. This makes it impossible for a number of traders to be able to last the pressure existing in the trading market. The degree of emotion and the weight of the consequence is just so high for one to handle when things gets out of hand. For traders who are able to manage their emotions well enough, they end up thriving.

Prevention is better than cure

Try to avoid all possible ways in which emotions can take to damage your performance. Below are some tips which would be of great benefit.

  • Have a very good trading plan
  • Just place the trade and walk away
  • Always use well-proven strategies
  • It is better to take a break after about three consecutive win

Taking charge of your emotions

Controlling of emotions is easier for some than others. There are various means for controlling emotions, ways that will enable you to benefit from the highs and the adrenalin. And also avoiding jeopardizing with your long-term mental state.

It is important to note that feeling pressure is not necessarily always a bad thing. Although, sometimes it can prompt certain decision which can change whatever is leading to stress. But to a large extent, stress is not needed.

The difference between stress and pressure

If we believe that traders do not benefit from stress both in the short and long-term, then how can we try to manage these feelings in our daily life?

With pressure, there are two types: internal and external.

The external pressure can mean your workload, the goals you are expected to accomplish, and the high competition existing among your colleagues at the work place. External pressures are real, tangible and defines our day-to-day feelings.

As for the internal pressures, they are less tangible. They include feelings of inefficiency, frustration and concern that you are not leveling up with the standards others have of you.

They are both valid and can lead to intense emotions inside and outside of work. These emotions can affect your decision making capability.

Making the right corrections

The key to effectively managing your reactions both internally and externally is preparation. Some will support this while others will oppose it. However, for you to be able to make an effective change, you will need to make the right decision and commitment.

With the help of proper planning and some mapped out responses, it should come very easily to react in suitable and healthy ways.

It helps to look for some certain relaxation techniques that will assist you to think more clearly when stressed up. An example include deep breathing exercises. This will definitely require you to set aside some time but it sure would be worth the while in the end.

You will also need to listen and be sensitive to your body type. If your body is not up for the game, don’t try to push it. Just sit back and take your time to re-organize yourself before attacking the work again. Pushing things makes you run a risk of feeling really bad if things should go out of plan.

Something else to consider is to keep the size of your trade in check. Minimizing the size will translate to less profit but it would in turn minimize the risk of you getting affected so emotionally. The reduction does not have to be so drastic. It can just be enough to enable you feel fully in control when the need arises. Also, try not to take risks outside your comfort zones.

Pressure is not equal to stress

Do not make the mistake of thinking pressure and stress are one of the same. A small amount of pressure, for instance a lingering deadline, can be a positive thing and may energizes us to get the work done. Take into consideration the Inverted U theory developed by Psychologists Robert Yerkes and John Dodson.

This theory illustrates an upside-down U-shaped graph with boredom and low pressure at one end of the U and high stress and anxiety at the other end. The axis below denotes pressure while the vertical axis denotes performance. The top arc of the U is the one that denotes the best performance of a person, somewhere in between minimal and maximal pressure.

Stress occurs as a result of too much pressure which fails to lead to a boost in output and performance. To a certain degree you have little control over the external pressure applied on you but you can help to determine your reaction. When you are feeling stressed up, apply these techniques:

  • Accept the fact that you do not have power over some aspects of your work life and that is fine
  • Be firm, without showing aggression while expressing your views and needs.
  • Look out for your body. When it comes to both physical and mental health, exercise are really great
  • Go into mindfulness and meditations.
  • Set boundaries, if you are not up for a particular task, don’t push or force it.
  • Sleep is imperative. Do not undermine the effect sleep can have on your emotional well-being.
  • Avoid much intake of alcohol and stay clear of using drugs.
  • Create some sort of life outside work environment. It could be spending with time with family or friends.

According to Victor Sperandeo famously regarded as “Trader Vic” says

The key to trading success is emotional discipline.
If intelligence were to be the key, then there would be a lot more people making money from trading.

This statement is completely true and it is an integral concept in Forex trading psychology. There are numerous people who are intelligent but still run at a loss in Forex. This is because emotions like fear, greed and happiness affects their decision making right after they had just made a profit trade.

Should you ever wonder why about 90% of Forex traders lose money and quit trading forever, it is as a result of lack of ability to handle emotions and not having the full knowledge of trading psychology. If you have been able to properly manage and keep in check your emotions, then you can successfully regard yourself as a well-seasoned and professional trader.

Want to know which markets just printed a pattern?

MarketTimeframePrinted on

Get the roadmap to trading success + the 55 best curated resources for FREE 🗺️

🏃‍♂️👔 Skip the rat race!

🏃‍♂️👔 Skip the rat race!

Get the ultimate roadmap to successful trading.
It's built as a step-by-step visual guide of all the skills you should master to reach profitable trading.
BONUS: The 55 best curated resources for each step! 

Awesome move! You'll soon be redirected to the roadmap and resources. Take care and start to earn 📈