Often traders are affected by certain emotion that dictates their decisions: anger, anxiety, fear, doubt...The goal is to let go these emotions but this is a long term process. Sometimes we think that we already got rid of these emotions but reality shows different.
Its true that we are all different and have different personalities and react strongly on some emotions. This doesnt mean that we cant change how we feel while trading. We should not talk ourselfs into feeling better, this doesnt work. A method for making progress in trading is writing a journal. When we write trading journal our thoughts and feelings are written and we can see them in different way. We can see from this diaries that we have been too hard on ourselfs and negative emotion is quicly gone, and we can focus back on the markets.
If we dont acknowledge emotions we loose this state of mind and dont learn from out mistakes, we are just left with all that negative emotion and continue trading and usually making more mistakes. We dont want to surpress this feelings, we want to experience them and learn from them.
You should know every second what is your emotional state. If you are not neutral you should not trade.
Showing posts with label trading. Show all posts
Showing posts with label trading. Show all posts
Monday, September 6, 2010
Monday, August 23, 2010
Remove emotion from trading
The key to success is a trading plan and sticking to it in all times. So why it is so hard for traders to stick to the plan? Answer can be complex, but to put matters in simple way is it the emotion that get over the traders. Emotions are number one distraction in terms of sticking to trading plan, so dont underestimate them.
Can you take emotions out of trading? You cant. As long the action is lasting your heart is pumping and emotions are taking over. Emotional highs of trading is one of the reasons people are attracted to trading in the first place. You put the trade and you make money, you can imagine the rush flowing through you.
Focus on the price - focus on the price and what should you be doing with your trade around that price, not so much on how much you earned or lost.
Its not right vs wrong - market doesnt care if you were right or wrong, so dont get caught up in "i was right" and you still lost money. Dont take it personal if your trade was wrong, you are going to make mistakes. At the end its all about dollars.
Learn how to loose - you are going to lose, everybody loses. People who say they are right all the time are lying. Its about cutting the loses and letting profits run.Its all in money management.
Can you take emotions out of trading? You cant. As long the action is lasting your heart is pumping and emotions are taking over. Emotional highs of trading is one of the reasons people are attracted to trading in the first place. You put the trade and you make money, you can imagine the rush flowing through you.
Focus on the price - focus on the price and what should you be doing with your trade around that price, not so much on how much you earned or lost.
Its not right vs wrong - market doesnt care if you were right or wrong, so dont get caught up in "i was right" and you still lost money. Dont take it personal if your trade was wrong, you are going to make mistakes. At the end its all about dollars.
Learn how to loose - you are going to lose, everybody loses. People who say they are right all the time are lying. Its about cutting the loses and letting profits run.Its all in money management.
Thursday, August 19, 2010
Trading plan
No matter which trading style fits you best you should have trading plan or you will mostly likely start losing money immediatly. Trading plan is a set of rules you have set for specified trade based on the analysis you have made. Its is important to follow rules of your trading plan if you wish to succedd.
Components of a trading plan:
Position size - You must determine your position size. Each position should be too big to enable you to comeback if your prediciton of market direction is wrong. If you put all your money in one position consequences of wrong predicition are substantial.
Profit exit plan - technical analysis is the best way to determine exit point or profit taking. Usually profit taking occurs at resistance zones, where sellers rush in to take their profits.
Stop loss - Where to exit a losing position must be set before you enter trade and you should change your stop loss in almost no case. When you have a losing position emotions kick in and you are not thinking clearly and you will almost certainly make mistake. Depending on your trading style stop losses are set differently.
Those are the simple rules that you must follow if you want to stay solvent in markets. It is amazing how many traders dont use rules. Rules help you eliminate emotions which forces you to do irrational moves and hurt capital. Developing a trading plan and sticking are two mains ingredients of trading discipline.
Components of a trading plan:
Position size - You must determine your position size. Each position should be too big to enable you to comeback if your prediciton of market direction is wrong. If you put all your money in one position consequences of wrong predicition are substantial.
Profit exit plan - technical analysis is the best way to determine exit point or profit taking. Usually profit taking occurs at resistance zones, where sellers rush in to take their profits.
Stop loss - Where to exit a losing position must be set before you enter trade and you should change your stop loss in almost no case. When you have a losing position emotions kick in and you are not thinking clearly and you will almost certainly make mistake. Depending on your trading style stop losses are set differently.
Those are the simple rules that you must follow if you want to stay solvent in markets. It is amazing how many traders dont use rules. Rules help you eliminate emotions which forces you to do irrational moves and hurt capital. Developing a trading plan and sticking are two mains ingredients of trading discipline.
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