Why Emotions Mess With Your Trading | Tradeciety |PDF
Trading psychology and why traders screw up
Just take a look at your last 50 trades and think how your performance would look like if you hadn’t done all those emotionally caused trading mistakes. My guess is that you would be a much better trader if you could control the psychological side of trading a bit better.
In this eBook we compiled the most problematic emotionally caused trading problems, how they manifest in your daily life as a trader and what you can do about it to counter the impacts of bad trading behavior and impulsive trading mistakes.
Trading is a mental game
Become a Profitable trader
As a trader, you don’t have to be super smart, although you need to be educated to some degree, you don’t have to necessarily understand all macroeconomic factors, although it helps to form an opinion, and it’s not compulsory to be an avid accountant and being able to read through company balance sheets
“Instead of hoping he must fear; instead of fearing he must hope.” - Livermore
Trading in financial markets involves many challenges, and one of the most difficult challenges that traders face is controlling their emotions. The emotions that traders experience while trading are natural, but they become detrimental when they start interfering with trading decisions. Emotions are among the few things that traders cannot control, and therefore, learning how to manage them is the key to success in trading.
Trading is a high-pressure job, and it requires traders to stay in the peak mental state to make the right decisions. When traders become emotional, they lose their objectivity and focus, making it difficult for them to think critically and apply the right strategies. Emotions usually lead traders to make wrong decisions that can result in significant losses. For example, a trader who is anxious may overreact to news or market movements, leading them to close positions prematurely or open positions without proper analysis. Moreover, emotions can lead to cognitive biases, which can be harmful to trading.
Cognitive biases are mental flaws that make traders perceive information, situations, and risks differently than they should, leading to irrational decision-making. For instance, if a trader is experiencing FOMO (Fear Of Missing Out), they may buy into the market at the wrong price, leading to a loss. Another way in which emotions can interfere with trading is by leading traders to break their trading rules. Trading rules are essential to keep traders disciplined and make informed decisions. However, traders who let their emotions take over are likely to disregard these rules, leading to poor trading outcomes. For instance, a trader who is greedy may overtrade, leading to poor performance and losses. In conclusion, emotions can mess with your trading by interfering with objectivity, inducing cognitive biases, and leading to rule-breaking.
The ability to manage emotions is the bedrock of any successful trading career, and traders must learn to keep their emotions under control while trading. Emotional discipline is something that can be developed over time, and traders can use various techniques, such as meditation or exercise, to help mitigate the effects of emotions on their trading decisions. Ultimately, by keeping their emotions in check, traders can stay objective, focused, and more profitable.
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