October 23, 2017
Keep Your Emotions Under Control | Trading Psychology
“What’s the best way to keep my emotions under control when I’m trading?”
Well… this is a two-part answer.
First of all, I think it’s almost impossible to keep our emotions out of our trading day.
I know, most trading psychology books talk about the important of “removing emotions”, but let’s be honest, trying to hold back our emotions is like trying to hold back high tide… it’s not going to happen.
Our emotions were developed by our grandparents as a way of keeping us away from pain, and drawing us closer to pleasure… and just like everything else we get from our ancestors, it’s going to be hard to break that cycle.
So the bottom line is… I wouldn’t even attempt to remove emotions from you trading, the better option would be to USE your emotions in the most effective way.
I would say the most important emotion is fear because fear is the master motivator, and everyone responds to fear, whereas only a small percentage of the people on this planet are motivated by greed.
One thing that worked for me when I was learning… was to start my trading day with a visualization exercise where I would imagine what it would feel like to take trades outside of my plan.
I know this goes against conventional wisdom… we’re supposed to focus on what we WANT to happen… and I would also recommend that, but I would start your visualization each morning by thinking about the horrible feeling you have in your stomach when you DON’T follow your rules.
Think about the money you’re going to lose, think about telling your spouse (accountability partner), think about having to wire more money into your account when you DON’T follow your rules… that’s going to incentivize yourself into following your plan. Use FEAR as the motivator.
Then, once you’ve scared yourself stiff… then switch it up, and visualize what it feels like and LOOKS like when you do follow your rules.
In all honesty, on a 10-scale, losing money for me is a 12, whereas making money is like an 8… which makes sense because we know that human beings are “loss averse” which means we place more value on keeping the stuff we have already, then getting new stuff.
So, just to recap, start your day with visualization of what happens if you don’t follow your plan, then visualize what happens if you do follow your plan.
The second part of this answer is… you need to know what you’re looking for. You need to know your “money trade” like the back of your hand.
This isn’t easy, it takes an investment of time for you to be able to close your eyes and actually SEE that perfect trade set-up in your mind.
If you know your “money trade”, and you know exactly what it looks like, then it will be a whole lot easier to follow your plan.
I remember when I was first learning to trade… I tried to learn too many trade set-ups at the same time, and I never really knew what an awesome trade looked like, and it really makes the job of following your plan much harder.
On top of that, join a trade room, with someone who has a LOT of experience because (for example) in my trade room, I’m going to make damn sure you’re following your plan. As the moderator of the trade room at SchoolofTrade.com im the person that’s going to show you where those “money trades” are going to be, and im going to make sure you stick to your rules every step of the way.
So, I know that was a long-winded answer to the question… but I would recommend you use visualization (focused on FEAR), and make sure you know exactly what you’re looking for in your “money trade” and join a trade room like mine so you have someone to hold you accountable.
Great question on the topic of trader psychology… and I would encourage you, if you have any other topics you want me to cover, drop me a comment in the youtube video, and let me know what you’re struggling with so I can answer that question in my next video.
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