Emotions And Trading

What Image Flash in front of your eye when you think about “PERFECT TRADER”

 

PERFECT TRADER would carefully formulate a detailed trading strategy,trading plan working on his emotions before/during and after the trade.

Traders are humans,  and they don’t always behave rationally. Indeed, they tend to be driven by fear, hope, and greed, and thus, forecasting market behavior has proven much more difficult than space travel.

In the real world, humans are emotional. Emotions rule everything in the markets. The decision you must make if you want to be a PERFECT TRADER, is whether you are going to control your emotions during trade  or let your emotions rule you.

 

The successful trader is realistic as well as logical.

It doesn’t do you any good to become overly disappointed when have a loss or overly euphoric when you have a big gain.

Extreme pleasant and unpleasant emotions can be very distracting.

If you are angry, frustrated, or worried, you won’t be able to focus on sticking to the trading strategy. Your attention will be elsewhere, and those negative emotions can cause you to make incorrect, and usually costly, trading decisions.

Extremely pleasant emotions are usually the flip side of extremely unpleasant emotions.

At moderate levels, pleasant emotions are motivating, but at the extreme, they may be associated with impulsive decisions, such as exiting a position for no good reason or abandoning risk control strategies.

That said, it is almost impossible to be emotionless, if you do that you will be a machine. Humans are emotional by nature. It is difficult to experience absolutely no emotion.

So what is the best way to cultivate an optimal emotional state? We know that negative emotions, such as fear, anger, and disappointment can be harmful. And we know that euphoria often leads to over confidence and trading errors.

One possibility is to cultivate emotions that are only moderately positive, emotions that aren’t euphoric and prone toward over confidence.

Rather than react to setbacks with frustration or fear, one can approach the setback with a sense of realistic optimism. Losses are part of the game. There is no way around them. Market traders should focus on the goal of generating successful gains over the long term, not the daily or even weekly ups and downs of the markets.

Never underestimate the power of emotions. Extreme optimism or pessimism can interfere with your goals, but by approaching problems with a realistic sense of optimism, you will stay the course, stick to the trading strategy, and generate excellent trading  profits over the years.