How To Control Emotions In Trading?

It is difficult to emphasise just how important it is not to trade on emotion. This can be the downfall of a huge amount of beginner traders. It can also be the reason why more experienced traders begin to make mistakes. It is easier said than done to remove emotions in trading.

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Introduction

It is difficult to emphasise just how important it is not to trade on emotion. This can be the downfall of a huge amount of beginner traders. It can also be the reason why more experienced traders begin to make mistakes. It is easier said than done to remove emotions in trading. Emotions and trading psychology have a far closer relationship than many people realise. 

The great battle for many people when it comes to trading successfully is having the ability to differentiate between trading with emotions and trading with your head. That isn’t to say there’s some element of emotion that is good in trading. Suppose you are fearful of executing a trade. In that case, this is healthy and shows you are balancing rational decision-making with sensible monetary management. However, if you allow it to consume you and become the main driving force behind your trading psychology, this will likely have a detrimental effect on your profit margins. 

A highly effective method traders use is automated trading software to buy and sell their assets at the chosen price without constantly checking market prices and charts. This is also known as algorithmic trading, and we have a complete guide on the topic.

Trading emotions then becomes a lot more manageable when you use risk management tools like stop loss and take profit limits.

Index share prices

The emotions of trading can vary wildly from fear to pure joy to apprehension. Today we will learn how to take emotions out of trading when it isn’t providing you with any benefits. We will break down the 7 emotions of trading in our article today. We will try to give you some tips and pointers on controlling your trading emotions. This is so you can hopefully improve your trading strategy and psychology moving forward.

The 7 Emotions of Trading

So the goal isn’t learning how to remove emotions from trading, but it is more about how to control your emotions while trading. We will look at some trading emotions quotes and the range of trading emotions you will go through as a beginner trader looking to get established in the market.

This covers all types of markets, including cryptocurrency trading, forex trading and stock market trading. If you are looking at stock trading emotions, they may differ slightly from cryptocurrency trading emotions. However, the main emotion that underpins it all is fear. This is the first one that we will explore today. 

Fear

Fear can be a great motivator in trading emotions and can also be detrimental. Learning to control this powerful emotion is the first asset to keeping a level head in trading. Not only is fear the main emotion you need to learn to control, but it can also be used to your advantage if you know how to harness it correctly. 

Apprehension

Apprehension is the second emotion we will explore today. Fear and apprehension are in the same ballpark and can work in similar ways. Apprehension is generally before the trend and can focus on you second-guessing yourself. Allow this emotion to creep in when you haven’t executed your position, and you may not even enter the trade. Apprehension turns into doubt very quickly, and before you know it, you have missed your entry point and your emotions trading is working against you.

That isn’t to say you won’t execute it correctly on some scale. Still, it may result in you being unable to pull the trigger on a trade that could return some serious profits for you. Learning how to control emotions in trading is essential when it comes to having the ability to enter the market at the correct opportunity. Apprehension is okay in small doses, as you don’t just want to enter any trade blindly. However, use too much of any emotion, and it will work negatively against you.

Excitement

The third emotion we will explore today is excitement. It can be hard to control yourself when caught up in the excitement of a trade that is in the middle of making you an excellent profit. Many of us get involved in trading to make a profit. When it begins to look like that might materialise, you can get yourself swept up in the event’s excitement. 

Excitement is all well and good as long as it doesn’t allow you to get into a position where you end up married to the asset or the trade pairing. It is easy to get pulled into a situation where you believe the asset will continue to rise, and green candles are always on the horizon. 

If the market has taught us anything, it is an unforgiving beast. Market corrections are some of the fiercest and sobering moments a trader can taste.

This doesn’t just apply to traders who have only just started out. Moreover, it can also apply to traders who have been around the markets for decades.

Dejection

Dejection is the fourth of the seventh emotions we will discuss today. Suppose you’re feeling downbeat or upset about the market’s direction. You could also be discouraged about a trade you made that didn’t quite come off. In that case, this can discourage you from making any further movements in the market. This emotion is in the same ballpark as apprehension and fear. However, it can pin you down and make you feel like you have failed in your venture into the space.

You would have to search far and wide to locate somebody who has immediately succeeded in trading. Most traders start with a slow, steady and serious learning curve. Once you lose, you can experience what several other traders do. You can be more risk-averse against strategies that will lose you money once you have more experience in how the markets operate. This may sound like something that is quite trite and is designed to get you to continue putting your money into the market, but it is correct. 

You’ll be hard-pressed to find an experienced professional trader who disagrees with this sentiment. It is included in many lists from good traders on how to have a rounded and well-thought-out strategy. 

Curiosity

This is the second to last emotion we will look at today. Curiosity is another emotion that could make or break both your psychology and your future strategy. It is all good studying chart movements, listening to experts and exploring diagrams. However, getting into old habits can happen subconsciously.

It is good to explore the market to find out where there could be other opportunities. As creatures of habit, it can be easy for us to revert to type and return to our own bubble of emotions. Bubble emotions day trading can be a tricky road to navigate properly. Day trading can be a profitable venture. It can be highly lucrative for a trader who knows what to look for in the market. 

Curiosity is the added emotion that could take you beyond being rational and venturing into the realms of the unknown. The thing is, unless you take that leap of faith, you do not know whether or not the strategy will work. The spine of successful trading psychology is the ability to learn how to control emotions in trading. There are also a few other factors that can result are good indicators for forex trading in 2023.

Wall street sign and full view looking down the street during the day

Happiness

The penultimate emotion we will look into today is happiness. Happiness is the one emotion we all strive for in life. Usually, when it comes to trading, having a successful strategy can go on to result in happiness. Having the ability to make money stock trading emotions is a skill that not many traders possess. When you enter the trading market, the goal is to obtain a passive income stream and some joy from the financial freedom it will hopefully provide for you.

It might seem rather basic for us to say happiness is one of the seven emotions you should look out for. This emotion works the same way as excitement. It isn’t detrimental to your strategy if you know how to control it. However, you could be on thin ice if you drive your psychology by getting too happy and carried away with one asset or trade. Only because this is where complacency may start to creep in. In particular, when it comes to future trades. Using too much positivity or a happy-go-lucky attitude can work against you. As you may fail to weigh the risks correctly, which can spell danger. 

Greed

The final emotion we will explore today is one we have left last for good reason, greed. This encompasses a lot of the emotions we have already touched on. However, essentially, greed can be the downfall of a large number of successful traders. If you look to set yourself a price to buy and a price to sell, then the best course of action is to stick with the barometers you have set yourself.

By allowing yourself to change the target mid-trade due to a higher-than-expected price, you could end up with less profit. If you allow greed to take over and your blind faith tells you the price will go back to what it was, you could find yourself in a position where you lose your initial investment. 

Quotes About Trading Emotions

So the next couple of quotes from legendary trader Warren Buffet show how important it is to keep emotionally stable when you trade. 

Successful investing takes time, discipline, and patience. No matter how great the talent or effort is, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”

The crux of this quote is that you need to have patience, arguably the most important asset to your trading psychology. It would help if you also had the discipline to time your trade. Discipline allows the emotions we have discussed today to start running the show too much. 

“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”

Another quote from the most successful trader of all time rings true. Keeping it simple and doing the basics, such as not trading on emotions, means that you can look to build an effective strategy that will work for you. This isn’t just in the short term, either. This could be over a year or even 4 to 5 years. 

Conclusion

Controlling emotions when trading stocks is one of a few vital attributes that will see you succeed in the volatile trading world. This applies to trading stocks and any other market, whether cryptocurrency or forex. Suppose you want to ensure that you are entering the market at the right time and can exit the market at the optimum point. In that case, you must be able to weigh up the emotions that are in play during the time of the trade. 

Ultimately, emotions trading is a rollercoaster. You will find that time and time again, the traders who operate on the higher end of the scale will have their psychology and emotions under control. They will be consistent in their approach and can also tell when the market is experiencing a boom or a crash.

They will study the data to allow themselves to make the most accurate and reasonable decision possible. Suppose they get drawn into the chart’s volatility, negative market sentiment and panic stories in the news. This can increase the possibility that they will lose money on their trade. 

As a beginner trader, if you can control your emotions, you will be trading emotions but using them to your advantage. It is up to you whether or not you give yourself the time and experience needed to master your trading emotions and come out on top. 

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