Trading without Emotions: Myth or Reality?

By | April 27, 2024 11:47 am

Yesterday I gave my analysis on DIXON , Sell call got stopped out and Buy achieved the target but few traders called me yesterday, “Bramesh Sir, I am still Holding Long in DIXON as per your analysis, I was bit taken back because we got stopped out in morning trade only and trade was moved to shorts which achieved the target. I asked why you do not keep SL, He said Sir I do not believe IN Stop loss”. I did explain him the importance of SL but I know they are falling in deaf years and till the person is not motivated and committed towards learning he/she will always end up as loser.

Emotions have no place in trading, especially for day traders as their holding period is for few hours only. Most of traders are searching for Magic Indicator or Holy Grail which will lead the desired results and will never cause any loss to them. But in Reality No matter what technical indicator or stock trading system that trader used, results is always the  losses.So where is the real problem It lies in Psyche of trader.

How to fight with Trading Emotions

If you want to conquer your trading emotions, Suppose you made a vow you will always put stoploss in all trades you will take from tomorrow onwards. As soon as you place a Stop loss after you took a trade you will face strong resistance internally “What if the Stop loss gets triggered and Stock Bounces back again”. Now to fight this emotion requires a leap of faith, and trust on your abilities and trading system you are following. I have seen many trader’s who psyche themselves up and temporarily follow their stock trading vision. The problem arises when trader’s experience the emotions of losing; many tend to lower their expectations and go back into their shell, going back to what they are used to. They start reverting back to old habits and going back to square one again.

Any time you make changes, you will face internal resistance from within, fear, fatigue, insecurity, but do remember Change does not happen overnight and you have to stick with your convictions in the face of self-doubt; be patient and allow yourself time to achieve the goals that you set out to reach. To manage your trading emotions, you have to accept the negative feelings that you internally attempt to suppress.

It requires lots of mentoring and self realization but a person who is determined can do this and chart the path of successful trader who has control over his emotions.

Don’t allow yourself to become a victim of these negative thoughts. They will only serve to distract you from concentrating on what needs to be done. Again, we want to attack the root of the problem which is how you interpret these feelings. You will not necessarily be able to rid yourself of them; however, you can stop focusing on them. Focus on the future and on what you want out of it. It is key that you change your thought process when it comes to negativity.

Remember, the more you can disassociate yourself from your emotions, the better at stock trading you will become.

Greed is one of the main contributors to trading loss. Greed mangles the mind by distracting the trader from what matters most in the trade, which is quite frankly to protect your capital by prudent planning and following rules. Once a trader starts doing profitable trades, overconfidence creeps in and trader wants more and more profits. Go back in past and try to remember how many times have you lost a big chunk of your profits because you got greedy and did not slicked to your trading plan.

Greed can arguably be thought of as a fear of not having “enough.”

Fear is again a major contributor of reducing your profits. Again try to remember trades where you have exited early thinking its cannot go up more and stock just kept on going up.

Now, the question is what do you do about those bouts with fear/greed emotions that takes your trading effectiveness and lead to major losses?  The important thing of course, is to manage your fear/greed emotions during trading.

I have interacted with many traders and most of them want to take emotions out of their trading , But is it really possible to take emotions out of trading?  Emotions are an inextricable part of being human and cannot be totally taken out of the trading equation. Not all emotions are bad for traders, and there are positive emotions also which can increase your trading effectiveness many folds.   However, you wouldn’t “want” to take emotions out of your trading even if you could. Yes, negative emotions throw a monkey wrench into your process; for instance, anxiety, fear, greed, guilt, self-doubt, impatience, apathy, to name a few are what mangle your thinking.

But what is also true is that positive emotions support effective decision making and follow-through. Emotions like inspiration, determination, patience, confidence, curiosity, and the satisfaction of viewing your trade run its course successfully are highly supportive to effective follow-through.  So, if you became actually emotionless, you would be divesting yourself of the power of positive emotions and further making your trading journey difficult.

So the next questions comes is  “How can I maintain more of my positive emotions?”  

Well, the first thing that you want to do is to monitor your thinking.  What and how you think is where emotions begin.  Look at it this way.  If, during a trade, you tell yourself things like “I don’t trade very well” or “This type of trade really turns against me” or “I’ll probably make a mistake on this trade.”  Then, emotions of anxiety, trepidation, fear, and self-doubt, among others, is what follows.  Emotions are connected to thoughts. If you think positive thoughts, then you will respond with an increase in positive emotions. Thoughts like “I would stick to my trading plan”, ” I want to be a successful trader”.

On the other hand, if you think negative, power sucking thoughts,  you will begin to feel in ways that are consistent with those negative thoughts.  So, you must not only monitor your thoughts, you must change them when you become aware that they are negative.  Changing negative thoughts can be challenging and difficult when you first begin the process; but if you remain diligent, you will begin to consistently reverse negative thinking.

So, the next time that you are feeling “greedy” or “fearful” it is very important to take an active role in finding out what you are thinking in order to change negative, unsupportive thoughts to positive powerful thoughts.  Remember, effective trading is not solely connected to profit and loss, but to trade right as per trading plan. Making money is always a by product of trading right.

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