Most traders know that their emotions can change how they trade. Professionals use well-known ways to stay calm and make decisions based on facts, not their guts, so they can stay in control during the trading day.
Here are 10 tips from professionals on how to keep your emotions in check when trading:
1.Don't act when you're angry.
No trade is worse than a "revenge trade," in which a trader tries to compensate for a loss by jumping right back in.
When you're angry, don't say anything until you calm down.To get back on track, look at your trading journal.
2.Don't get married to your jobs.
A trader can easily become stubborn and hold on to a trade just because they "hopes" it will work out. If a trade goes wrong, get out of it as soon as possible, take your loss, and move on.
Keeping a trading journal will help you decide what to do next.
3.After every trade, take a break.
Don't get caught up in the fast-paced action of trading. Take a moment to think about something else, and then come back and decide.
Now, look at your trading journal to determine what you should do next.
4.Set a point where you will stop.
Stop and take a long break after three, four, five, or any number you choose. Most mistakes happen when one trade comes right after another. Check your trading journal and think about your plan.
5.Don't track your profits and losses.
Adding up how much money you make will only make you feel bad. Focus on your trading strategy and read through your trading journal to improve it.
Then, when the trading day is over, you can see how well or badly you did.
6.Stay focused on the plan.
Don't let a few bad trades change your overall plan and strategy.
Use your trading journal to determine what to do next based on what you've learned and planned.
7.Don't mistake caution for fear.
You should trade carefully and use logic and reason. This could make you wait before making a trade. But make sure your choice is based on wisdom and not fear.
Fear can ruin your trading by making you not want to make a trade.
Use your trading journal to see if the trade makes sense, follows previous wins, or doesn't make sense.
8.Don't get too greedy.
Greed can make you stay in a trade even though you had planned to get out in hopes of making a little more money.
Things could go wrong when you think you're making money on such trades.
Use your trading journal to determine when to get out of a trade based on how it did in the past.
9.Carefully plan your stops.
You won't have to make quick decisions if you are careful about stops and limits.
Stopping out of a trade hurts, but you will save money on losses in the long run.
Your trading journal can help you find good levels for stops by letting you compare them.
10.Don't stop trying.
Every trader gets to a point where it just doesn't seem worth it anymore.
Don't let your fear control you. Trading is hard, but it is possible to win.
The trading journal is our best friend in all of the situations. Every trader should have one. The trading journal will remind you of all the good things you've done, especially when that bad feeling takes over.