Three steps to win the emotions

Emotions in trading, fear, greed, psychology in trading

Emotions in trading, fear, greed, psychology in tradingDo you know that emotions can influence decisions on how you do trading? If that were not the case, you probably missed oftentimes great opportunities of gaining on the market or you are risking big losses. If, however, you have noticed or read it on books and articles, then you are on the right path! You just have to learn to win the emotions and finally be free to trade with the right approach!

Many traders naturally tend to be active, try to handle different situations with a winning attitude, others, who are, in a pessimist way, approaching the different conditions in a negative way; their self-destructive attitude leads them to see their trading ambitions blurred and why not? Even the dream of changing the life.

We can work together to develop a winning attitude. It is not easy to be a successful trader if you have a negative view that influences your decisions. Psychology serves to keep emotions out of trading sessions and to learn how to use logic, following the strategy exactly as it needs to be followed without the excitement of emotions.


Emotions to which pay attention

There are basically two emotions that afflict the trader, all the traders without exception, and they are greed and fear. When the market is particularly volatile, these factors have a profound impact on the result of our efforts. Leverage also plays a very important role: if you trade without, the influence of emotions is zero, if you use it, the emotions come to the gallop at the beginning of each session.

I trade vanno scelti in base alle strategie che decidete di seguire, non in base all’emozione del momento. Se siete consapevoli di essere trader piuttosto nervosi, allora potreste pensare di fare scalping, invece di piazzare posizioni lunghe e agitarvi per tutto il tempo. È difficile per uno scalper operare sul lungo periodo, infatti, un trader nervoso preferisce, di gran lunga, fare qualche pips sul mercato e chiudere in fretta la posizione.

The market is entirely dominated by psychology. When the market is bullish, buyers are greedy, while sellers are overwhelmed by fear. When the market comes down we find the opposite situation, in fact, the buyers tremble and it is the turn of the sellers to be greedy. A successful trader takes the decisions logically.

Market performance is determined by buyers, sellers, and market makers. Sellers and buyers are human beings, they are subject to emotion. Sometimes, we try to deceive us, thinking of being able to enter in the markets as a robot, but the truth is that we are human and therefore not infallible. Many traders think that it is enough to apply automated techniques like EAs (EA = Expert Advisor) or other computerized tools to make the right decision without being influenced by emotions. That is not the case. If you think about it, the robots need to be programmed and who can do it? Human beings, because only they know how to write the codes, then the system will have a strong human component that, by nature, is influenced by greed and fear.

Any decision you make, whether small or large, will certainly have an emotional baggage. Emotions are indispensable to our being and are intrinsic in our trading tools. Do not try to deny their existence, it is not an effective solution and above all, it does not correspond to truth and you know it well. However, do not get beaten down because you can get rid of the emotions that hinder your work.

The real success in trading, even before profit, is to learn how to control and manage emotional states, from the time you sit at the desk till the moment you get up for dinner or seeing a movie.


How to control emotions and psychology?

Most likely you know that liquidity is one of the determining factors of financial markets; allows the normal conduct of negotiation and generates value. There are, however, times when liquidity can be scary when it reaches high values and the market is experiencing a high volatility. Here, in this situation our enemies are moving forward, one or both, fear and greed end up in our mood.


Step 1

The first step to understanding how to deal with emotions is to define your personality. What kind of person are you?

  • Positive or negative?
  • Calm or nervous?
  • Introvert or extrovert?
  • Sociable or not?

If you want to work to become a successful trader, you need to become positive, calm, sociable and extroverted. These combinations outline the ideal trader's personality. It should also be said that what has been written above does not mean that successful traders are only those that show these characteristics, there are also very good traders that are negative and calm.

The key to controlling emotions is to own or learn to acquire one of the characteristics listed above, and remember that calm is the key to success.


Being excited is a problem!

Many traders are excited and agitated when they go on the market to trade. This "disturbance" can damage a lot and you have to succeed in replacing it with the calm and the concentration that the market requires.

The solution to reducing, and then completely eliminate, the emotional problem is to plan the strategy, taking into account all the potentialities, both positive and negative. Errors can cost you dearly in trading and remember that the market is not clement.

If you have not reasoned on the future and let you lead from the feelings, the price of this error will be high and you would risk losing your investment.


How does planning help professional traders?

Trading planning must be in line with your operational strategy; you need to develop a plan that clearly defines your forecasts. Planning must include everything, entry, control, and exit position; In addition, it must define the type of market where you want to operate and all possible eventualities!

Below, you find a checklist of the items that a proper planning must contain:

  • Define the technical strategies you will use for the operation.
  • Enter a paragraph to briefly describe the news that may affect the market trend and then your operation.
  • List the possible eventualities that may occur as well.
  • Plan daily or weekly (it is better daily).

The planning of the operation helps to focus on all the details of the trade and to take decisions in a more logical and effective way. The very fact of creating a plan is to divert attention from emotions and to control and manage anxiety.

Try to watch the moments when emotions are being felt more when you are in the market to buy or sell a currency pair or shares. You have to be able to figure out if this happens:

  • When do you open the operation?
  • When do you check the operation?
  • When do you close the operation?

To better control the emotion you have to understand when it comes into the picture.


Step 2

The second step is to try to draw up a graph of emotions. Bio-feedback therapy helps to calm you down. You can do it alone or by helping a specialist.

Many traders also turn to yoga to keep stress under control and remain calm. Quantifying emotions is not easy, but you cannot let that fear and avarice take control of your trades every single day of trading.

At the end of trading sessions, you should write in which moments you've heard emerging the emotions and what they were pushing you to do. You will see that the results will be amazing because, many times, you do not realize how much you are really dominated by emotions!


Step 3

This passage is used to manage emotion for both profit and loss. When you get a profit you have the desire to get even more. When, however, you have to deal with a loss, you will feel very stressed. 

Excitement and Stress influence your decisions. And the risk of taking the wrong decision is very, very high!

Working on a demo account is completely different from doing real trading. Many traders who have started trying a demo, they have managed to increase tenfold the account in just one month of trading!

Or even triple the real account in just one week, but sooner or later they begin to lose and many of them, in a short time, burn everything they have earned. The causes are to be found in the lack of a risk management strategy of the influence of emotions that has affected a good 90% of the decisions.


Trading as a profession

Do not let emotions prevent you from working daily on the markets. If you are a beginner and have less than a year of market experience, you should consider trading as a hobby until you can get profitable profits for at least two years. After this period, you might also think about devoting the day to trading, starting the professional trader's career with good market experience.

Many people have abandoned their activity too soon and have failed, after only a few months you cannot take such a decision so important, especially because the impact of stress becomes unmanageable. Do not let that the losses get you down, even the most experienced traders have had to deal with dark times but are part of the trading, you cannot always make the right decision.

The first thing to do, if you happen to lose, is to close the positions, turn off the computer and take a break. Then, calmly think about why the operation went wrong, what mistakes you did. If you can, take a break to put ideas in order.

Many people use a special strategy to deal with large losses called "retreat and return". If the loss has been considerable, it takes at least thirty days far away from everything and everyone. At home or in a quiet place, avoiding too many social contacts and practising something relaxing like yoga or meditation. When you start trading again, you will be amazed at the results.

If the loss was mild, it takes just a couple of days far away from the platform to rearrange ideas and curb emotions. Once you return, you calmly analyze causes and effects related to the loss and prepare a new plan on how to react if should happen again the same situation. Learning from mistakes enriches the experience.



As you can see, knowing how to handle emotions is a necessity. Greed and fear are the first enemies you will encounter on stock, commodity and currency markets. 

Keep track of your operations, study them and check them out when emotions begin to besiege you. Note your trading plan every day for every market you want to work on, this method will help you understand and address the pitfalls of the markets.

Do not be afraid of losses and profits, learn from your mistakes and go ahead with the intention of not repeating them; learn to know yourself and you will be able to keep your emotions on a leash.

These tips are very good, obviously, each of you will have to find the best way to put them into practice, according to your own attitude, psychological background, and the feelings that will emerge from time to time.


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