Day traders must control their emotions. The slightest lapse in controlling your emotions will ruin your accumulated hard-earned profits overnight.
For instance, after having several losses in a trading session, you are afraid of having a losing day. This fear spurs you to over-leverage and blow up your trading account with a single trade.
How many times have you blown up your trading account because you lost control of your emotions?
Furthermore, having your emotions on a roller coaster everyday is not sustainable.
Most day traders understand that trading is a game of probabilities. We know that we should control our emotions and stay detached from the results of each trade. We have also read dozens of trading maxims that sound like these.
- Don’t marry your positions.
- Don’t be affected by fear and greed.
- Be in the zone.
While these straightforward statements are great reminders, they are of little practical value. This is because they do not show you the exact action to take when you are actually trading.
Day trading requires focus. Day trading setups are fleeting. Hence, it is crucial for day traders to know exactly what to do to control their emotions while trading. They do not have time to ponder on vague statements.
What can you do exactly to control your emotions?
Follow these five day trader’s tricks if you have problems controlling your emotions.
1. Take a walk after each trade.
Even if it’s just for a minute.
Given the fast and furious nature of day trading, it is too easy to get trapped in the sea of emotions.
Walking away from your trading screen is a deliberate break in your trading tempo. It is a physical action that you take to control your trading tempo. This simple act clears your mind and reminds you that you are in control.
Listening to music also helps to detach you from the market.
The market does not drag you into a trade. Quite the opposite. You can walk away from the market any time you want. You are in control.
2. Find out the least volatile hour of the trading session.
Read a book during that hour.
Most day trading strategies work best when price action is volatile. Trying to trade when a congested market leads to frustration. Anger follows. Then, your emotional dam is pretty much broken.
The easiest solution is take a break when the markets are going nowhere.
Plus, you get to read the latest novel from your favourite author.
However, do not read anything to do with trading. Trading books give you trading ideas. You might be tempted to try those ideas immediately. Trading ideas, before becoming part of a consistent trading plan, are losing propositions.
(For forex traders, you can use the Forex Volatility Calculator mentioned here to find out when not to trade.)
3. Stop trading after three consecutive wins or losses.
Three consecutive wins make you feel like a super trader. You think that you cannot lose. You are invincible. You over-leverage and over-trade.
Three consecutive losses make you feel like a loser. You don’t want to lose. Your emotions explode. You revenge trade.
When a certain event happens for three times in a row, it is tough not to get affected by it. Let’s evade this problem altogether and stop trading after three consecutive wins or losses.
4. Don’t look at your profit and loss while you are trading.
I can hardly think of a figure that causes a greater surge of emotions than your profit and loss figure. To many traders, the profit and loss figure is an expression of their self-worth. (Nope. You are greater than just your profit and loss.)
If you follow the most important trading rule and have a daily loss limit in place, you are already protected from severe losses. Hence, you do not need to check your profit and loss figure constantly.
Whenever you feel like peeping at your profit and loss for the session, read your trading rules.
5. Ask yourself: “Am I scared?”
Fear is an intense and destructive emotion that traders often encounter.
- When you are watching your trades unfold, keep asking yourself: “Am I scared?”
- At any point, if you answer “Yes”. Exit immediately.
- Review your trading rules.
- Reduce your trading size.
- Repeat.
Master Your Emotions for Long-Term Day Trading Success
Control over your emotions does not give you a trading edge. This is because your trading edge depends on your trading method. However, you need to master your emotions for long-term trading success.
With the five tricks above, your nerves will get a slow boat cruise instead of a roller coaster ride.
Learning to control your emotions requires persistence. Over time, you will start to perceive the benefits of keeping your emotions under control. These benefits serve as positive reinforcement to your brain to continue good emotional habits and responses.
It takes time. But if you persist, it does get easier.
Nice article
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Good advice man, i really need to absorb this and prove to myself i can trade.
Glad you like them! Internalizing these ideas is the key to trading consistently. All the best!
Thanks you so much
Happy to hear that! All the best to you.
thanks for helping us Can u give any exercise?
Hi Mangesh, I’m not sure what you mean by exercise here. Can you elaborate?
Thank you I try to follow these rules
Try to integrate them into your trading routine one item at a time. I find that this approach is more sustainable.
The best way to control your emotions: “Stick to Your Plan”
It sounds incredibly simple, but nearly every time I get myself into an emotional situation, it’s because I did not stick to my own rules! This opens the door for a tidal wave of emotions — frustration, fear, anger, greed, disappointment, etc.. If you stick to your plan, you blame the written plan for any mistakes instead of internalizing your emotions.
No trader hits every high and low on every trade. The goal is simply to have more winners than losers, AND to have your wins be bigger than your losses. Develop a reliable system with ABSOLUTELY CLEAR, BLACK AND WHITE buy/sell/hold signals and STICK TO IT! Make it so clear that a third-grader could follow your plan in your absence. A good plan leaves no room for “gut feelings” or “hope”.
Trading is nothing but a probability game. If, over time, you see a better way to enter, hold, and exit, then by all means tweak your plan. But, If you can’t follow your own plan to the letter, you don’t really have one at all.
BE A MACHINE!
Thank you very much for your sharing. You’re right. Having a plan and sticking to it is the way to go. Having a solid plan you can trust is the first step to following them. But easier said than done. Some traders see automated trading as a way to “be a machine”, but the automated trading system can still be stopped and altered because it runs its course.
Thanks so much for adding valuable points for trading.
100% true what your expressed, last punch line “BE MACHINE” is what we have to.
See you again thanks for everything.
This article is really cool. I enjoyed all the writes up. And it’s really helping me out, because that’s what I need to succeed. I was thinking that forex is all about analying but as time goes on. I found out that forex trading is 90% psychology and 10% Analysis. Thanks for your help sir. I really appreciate!!!
Glad to hear that! Realizing that your state of mind is a critical part of your trading is a great step forward. All the best to you!
Usefull article and i start to use it
Hi Armistic, thank you for your kind comment. All the best for your trading!
Thank you for the write up this piece has taught me alot i have finally found the missing piece that was missing i will work on it and strictly stick to my trading plan
Really glad to hear that, Evans. All the best to you!
Emotions ain’t really easy to control while trading, I made a couple of loss because I keep look at a chart which later brings about fear. #stop view charts while a trade is running
Very true. Your comment reminded me of a quote from Jack Schwager – “Dangers of watching every tick are twofold: overtrading and increased chances of prematurely liquidating good positions”
Its difficult to control mind, but the above discussion is very helpful. i hope i stick to above points. Thank you Mr Woods .
Hi Kumar, glad to hear that you find it helpful. I wish you all the best!
Thank you for the post it’s been very helpful
Completely changing the subject but I’m wondering if anyone can help I’ve been using the practice account on T212 for some time and been very successful
I have a plan and set stop losses however when I go into the real trading account I buy much less for the same money and I need it too go up so much more for the same profit hence I’m stopped out
Example when I buy us Tech 100 on practice I can buy 70 for around £1500 and I only need it to go up 4 points to take profit at £250
But when I go on the real money account I can only buy 2.4 for around £1500 and I need it to go by many many more points than 4 even 20 or 30 points more
Could anyone enlighten me?
Many thanks
Hi Tracey, glad to hear that you find this article helpful. Ideally, you should stick to the profit-taking and stop-loss of your planned strategy and they should not change according to your trade size. These two articles might be helpful: Logical Stop-loss and Tips for Paper Trading.