How do you control your emotion high and low during trading.

bizmanny

bizmanny

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To all traders who trade for living and those who trade in a big way.

1. How do you control your emotions. If your win big or lose big. How do you control your emotion.

2.If you had say 5 consecutive losing days. Does it affect your confidence at all so that next trade you lower your stakes than normal or you keep it the same. Also when you had 5 consecutive winning days, Does your confidence increase and your play with a little more stakes than normal or your keep it same.

Your contribution is much appreciated.
 
Hi Bizmanny

How do you control emotions? Good question unfortunately there is no easy answer because an explanation does not correct the issue.
I remember taking my first trade and thinking nothing of it, won a few times felt great then the next day took a trade as I did the day before and some news made the market spike against me I was down quite a bit but that was not the issue the issue was I did not know what to do I froze I kept looking at the screen hoping it would reverse but it didn't kept going against me and I held and held and eventually I could not take it anymore and I clicked to cover and I felt relief but angry that I did not react and sad that I lost and kind of in shock;
and then just as I got out, the market reversed and I kept looking in horror as the market went past my entry and would have put me in profit so now I was angry, mad as hell (not the words I would use)gutted my confidence at a low and all in the space of 30 Min. The next trade I tried to take I hesitated my hand were trembling I could not take the trade.
Sounds familiar???

Every trader has experienced this in one way or another

So you are not alone unfortunately emotions don’t go away but as you progress you find it easier to control it.
what will help you a lot until you gain confidence is to have some very strict rules like trade only very specific set ups be strict on your criteria initially
Paper trade more exotic set ups and see if after while it pays to trade them.
When you initiate a trade you must place a stop, keep a log of your trades what time you entered, why did you enter? Then at the end of the day go back and look after the fact what you did and see how well you read the market.
All these things will help and in time you will find emotions easier to control

As for question 2
make a very strict rule either set a monetary value to how much you can lose on the day or set a number of trades you are allowed to lose before you call it a day say max of 3 trades.
but if you were to lose 5 consecutive days I would stop trading and re look at what im doing and paper trade for a week and see if its my emotions interfering with my trading or its how im reading the market that’s wrong.
If you win 5 consecutive days then try not to get excited the point of trading is to keep it boring (emotionally speaking)
As for increasing or decreasing your stake you should review at the end of the week/month how it is all going. normally most traders will risk 1% - 5% of their account per trade, if you take the conservative stance of say 2% of your account and after a while you double your money then it is fair to say that you should be looking to increase your stake but equally if you account is down then you should adjust accordingly.
Most importantly trading is not a quick rich scheme it’s a job or a business and you want to be in it for the long haul, so take your time allow yourself to make mistakes.
This is a profession you would not expect to be a lawyer in a few month or a brain surgeon after a year.
Confidence comes by following a plan over time it becomes simpler and eventually second nature

Good luck
 
andycan said:
Hi Bizmanny

How do you control emotions? Good question unfortunately there is no easy answer because an explanation does not correct the issue.
I remember taking my first trade and thinking nothing of it, won a few times felt great then the next day took a trade as I did the day before and some news made the market spike against me I was down quite a bit but that was not the issue the issue was I did not know what to do I froze I kept looking at the screen hoping it would reverse but it didn't kept going against me and I held and held and eventually I could not take it anymore and I clicked to cover and I felt relief but angry that I did not react and sad that I lost and kind of in shock;
and then just as I got out, the market reversed and I kept looking in horror as the market went past my entry and would have put me in profit so now I was angry, mad as hell (not the words I would use)gutted my confidence at a low and all in the space of 30 Min. The next trade I tried to take I hesitated my hand were trembling I could not take the trade.
Sounds familiar???

Every trader has experienced this in one way or another

So you are not alone unfortunately emotions don’t go away but as you progress you find it easier to control it.
what will help you a lot until you gain confidence is to have some very strict rules like trade only very specific set ups be strict on your criteria initially
Paper trade more exotic set ups and see if after while it pays to trade them.
When you initiate a trade you must place a stop, keep a log of your trades what time you entered, why did you enter? Then at the end of the day go back and look after the fact what you did and see how well you read the market.
All these things will help and in time you will find emotions easier to control

As for question 2
make a very strict rule either set a monetary value to how much you can lose on the day or set a number of trades you are allowed to lose before you call it a day say max of 3 trades.
but if you were to lose 5 consecutive days I would stop trading and re look at what im doing and paper trade for a week and see if its my emotions interfering with my trading or its how im reading the market that’s wrong.
If you win 5 consecutive days then try not to get excited the point of trading is to keep it boring (emotionally speaking)
As for increasing or decreasing your stake you should review at the end of the week/month how it is all going. normally most traders will risk 1% - 5% of their account per trade, if you take the conservative stance of say 2% of your account and after a while you double your money then it is fair to say that you should be looking to increase your stake but equally if you account is down then you should adjust accordingly.
Most importantly trading is not a quick rich scheme it’s a job or a business and you want to be in it for the long haul, so take your time allow yourself to make mistakes.
This is a profession you would not expect to be a lawyer in a few month or a brain surgeon after a year.
Confidence comes by following a plan over time it becomes simpler and eventually second nature

Good luck
Click to expand...

Very good reply have taken the word right out of my mouth..... :LOL:
 
andycan said:
I remember taking my first trade and thinking nothing of it, won a few times felt great then the next day took a trade as I did the day before and some news made the market spike against me I was down quite a bit but that was not the issue the issue was I did not know what to do I froze I kept looking at the screen hoping it would reverse but it didn't kept going against me and I held and held and eventually I could not take it anymore and I clicked to cover and I felt relief but angry that I did not react and sad that I lost and kind of in shock;
and then just as I got out, the market reversed and I kept looking in horror as the market went past my entry and would have put me in profit so now I was angry, mad as hell (not the words I would use)gutted my confidence at a low and all in the space of 30 Min. The next trade I tried to take I hesitated my hand were trembling I could not take the trade.

Sounds familiar???
Click to expand...

It most certainly does, andycan!
One solution - to answer bizmanny's question - is a cocktail of tranquilisers and booze.
:cheesy:
The other solution is to have a detailed plan which should, if adhered to strictly, prevent any big losses. The emotions following a string of (big) winners is what lead to my downfall, at a time when I thought - rather foolishly - that I had this trading game all sewn up. Again, a trading plan will help to ensure that you don't get over confident and make rash decisions with inevitable consequences. The other 'technique' that is often recommended is to focus only on points/pips - never on the money. The only time traders who employ this method think about money is when they complete their brokerage withdrawal slips and tax returns. Take money out of the equation and in one fell swoop you eliminate many of the emotions that accompany it!
Tim.
 
I can only agree with all the above, all great information.

I don't think you can nor need to surpress emotion, just make it irrelevant.

Personally the clincher for me was proof. Even after the years of backtests and then demo trading, I was still messing up constantly. I would take my profits earlier than my plan suggested and not cut my losses till the last second and hesitate taking trades or over leveraging.

As said before, trading is a business and after some serious weekend debate with myself and Mr Artois I settled on 2 options. Give it up or just do it. Correctly, properly and like the business it is.

Once I started my journal and traded the plan; to a tee, no questions asked, no second thoughts, no care nor attention paid to anything but the plan, it all came through. Another problem I always had was thinking too much! Despite all that happened and despite what the backtests showed I didn't have control before. As soon as I finished that month I had proof, in black and white and in my bank account that 1) I could do it, and more importantly 2) the plan I had devised, worked.

Since that point I have not had a problem. Nowadays to me, every trade now is akin to pulling a pint in a pub or answering the phone in a call centre because I know it works, and that proof was all I needed. I know the plan works in real time and backtests show my maximum drawdown expected so now I really don't care. Some lose, some win, sometimes I'll have a good run and sometimes a bad one but I know it always works out in the end. Now I just turn on, press the buttons when applicable and then turn off again, that simple. Only If I doubled my max consecutive loss run would I even slightly consider looking at my trading plan in more detail again.

I strongly agree with what timsk said; devise a plan, test the plan and then, IMHO all you need is to prove the plan. Once you can do all that, as long as its proven succesful, there is no need for emotion, you just get up and go to work and spend your days surfing the net in boredom like any other job..... :rolleyes:

Just my 2 cents
 
Clear and excellent advice

wasp said:
I can only agree with all the above, all great information.

I don't think you can nor need to surpress emotion, just make it irrelevant.

Personally the clincher for me was proof. Even after the years of backtests and then demo trading, I was still messing up constantly. I would take my profits earlier than my plan suggested and not cut my losses till the last second and hesitate taking trades or over leveraging.

As said before, trading is a business and after some serious weekend debate with myself and Mr Artois I settled on 2 options. Give it up or just do it. Correctly, properly and like the business it is.

Once I started my journal and traded the plan; to a tee, no questions asked, no second thoughts, no care nor attention paid to anything but the plan, it all came through. Another problem I always had was thinking too much! Despite all that happened and despite what the backtests showed I didn't have control before. As soon as I finished that month I had proof, in black and white and in my bank account that 1) I could do it, and more importantly 2) the plan I had devised, worked.

Since that point I have not had a problem. Nowadays to me, every trade now is akin to pulling a pint in a pub or answering the phone in a call centre because I know it works, and that proof was all I needed. I know the plan works in real time and backtests show my maximum drawdown expected so now I really don't care. Some lose, some win, sometimes I'll have a good run and sometimes a bad one but I know it always works out in the end. Now I just turn on, press the buttons when applicable and then turn off again, that simple. Only If I doubled my max consecutive loss run would I even slightly consider looking at my trading plan in more detail again.

I strongly agree with what timsk said; devise a plan, test the plan and then, IMHO all you need is to prove the plan. Once you can do all that, as long as its proven succesful, there is no need for emotion, you just get up and go to work and spend your days surfing the net in boredom like any other job..... :rolleyes:

Just my 2 cents
Click to expand...
Wasp

I think this is one of the clearest posts I have seen on this site on how to deal with emotions in trading. I could physically feel the pressure lifting as you recounted how proof was the key to letting go of emotion and trading your plan as a business.

It really highlights the importance of the psychological element as adjunct to the more mechanical process of analysis and backtesting

Charlton
 
bizmanny said:
To all traders who trade for living and those who trade in a big way.

1. How do you control your emotions. If your win big or lose big. How do you control your emotion.

2.If you had say 5 consecutive losing days. Does it affect your confidence at all so that next trade you lower your stakes than normal or you keep it the same. Also when you had 5 consecutive winning days, Does your confidence increase and your play with a little more stakes than normal or your keep it same.

Your contribution is much appreciated.
Click to expand...


Hi bizmanny,

I have to say that you have had some superb replies on this thread, and I would read and re-read all of them.

I don't think I could add anything that hasn't already been covered.


Thanks

Damian
 
bizmanny said:
To all traders who trade for living and those who trade in a big way.

1. How do you control your emotions. If your win big or lose big. How do you control your emotion.
Click to expand...

Pretty much the same as you control your emotions in any other aspect of your life. Life is a continual series of successes and failures based on correct and incorrect decisions. Yet most of us don't suffer a roller-coaster of emotion everyday. Why? Because we don't exaggerate the importance of each of these situations.

Example, I'm sure we've all experienced the situation where we walk into the bank and there are 2 queues, we pick one and observe someone else join the other, and then of course our queue has some muppet at the front with 101 questions for the teller, we're static whilst we can see the bloke who joined the other one progressing steadily. So do we hurl that half finished can of coke we're holding at the muppet up front? Hopefully not (though it does have it's appeal) Draw a sidearm and plug that smug git in the other queue? No?
Usually not, though you read about it from time to time. Simple fact is we don't sabotage ourselves by exaggerating the importance of the event so it's not that big a disaster.

So apply the same logic to trading, don't sabotage yourself. Lose the cliches, 'win big' 'lose big' they elevate the competitive sense and focus emotion on the activity. Besides if you are 'winning big' or 'losing big' you are probably trading far too much size for your account and have exaggerated the importance of your trade in real terms. No trade should be so big as to illicit a dramatic emotional response regardless of how it goes.
Stop watching P&L figures during trading, they are of no importance, watching the amount of money you have made or lost rise and fall exaggerates the emotional response, money is a very emotive thing to most.

Trading like many other aspects of life is about making correct and incorrect decisions (hopefully more of the former, and less of the latter) there will always be an element of emotion involved since we are emotional creatures, but how much and what effect it has is within our control.
 
Charlton said:
Wasp

I think this is one of the clearest posts I have seen on this site on how to deal with emotions in trading. I could physically feel the pressure lifting as you recounted how proof was the key to letting go of emotion and trading your plan as a business.

It really highlights the importance of the psychological element as adjunct to the more mechanical process of analysis and backtesting

Charlton
Click to expand...


Cheers Charlton,

It reminds me of the ever popular analogy using 'the turtles'. I have to admit I am ignorant to the story behind them but believe the premise was sitting X traders in a room with a (cunning hopefully) plan and telling them to get on with it. Some then went through the varying options open (ie. trade the plan, try improve the plan, sod the plan) and 6 months later, those who traded the plan prevailed whilst the others walked off sheepishly.

This is all very well and good but paramount IMO to convincing the world god existed and you should therefore follow his bestseller implicitely. Some will say ok no problem, some will say, maybe but... and others will say ******** to it all. If god came down and walked up to the bar, bought a round of drinks and we started discussing passport stamps and cringing at our photos, I'd go out and buy his book, but until then I couldn't do it without proof.

Its all very well and good saying here is a plan, trade it and you'll be rich or, at least, the bank manager will be happy, but without that proof it works, I couldn't imagine trading without that emotional crutch.
 
Strangely enough I am reading a great book at the moment called "Inside the house of money" it is like a Market Wizards of Macro Hedge Fund Managers.
In the first section Jim Leitner sums up as follows:

"I came to realise that I was absolutely unemotional about numbers. Losses did not have an effect on me because I viewed them as pure proability-driven, which meant sometimes you came up with a loss. Bad days, bad weeks, bad months never impacted the way I approached the markets the next day. To this day my wife never knows if i've had a bad day or a good day in the markets"
 
i must say some great posts.
i guess in the quest for controlling ones emotions the reality is not so much to attempt to dissolve emotions but rather to elevate from one form of emotion to another
confidence the gran prize, achieved by knowing, proving to oneself 'IT CAN BE DONE'is in itself the ultimate emotion
 
Great thread and suggestions here guys. This subject so important!

There are so many suggestions out there for controlling emotions. Some of the points I like are:-

1. Your mind stores emotions in the body. When emotionally tense you'll often find shoulders clenched, muscles locked. As you notice this you could get up and have a stretch, relax shoulders or exercise and help your body release some of the tension - your mind should as well

A couple of weeks ago I had shorted the stock mkts only to see them go higher and was very tense and defensive about my trading. I happened to have a session with a rolfer (similar to physio/ osteo) and after an hour of treatment had totally changed from defensive/ closed to a relaxed human being able to view things in persective again.

2. I'm reading the Brett Steenbarger psychology book at the mo and he, IMHO, makes a great suggestion based around a concept of an internal observer, though not sure that this is easy. I.e. train yourself to observe your emotions so you are aware of when you are euphoric or too tense. This awareness can help you step back from and analyse a little. Thus you can start to use your emotions as a guide to how others are feeling

My personal experience of when a trade's gone my way and I've felt euphoric over how quickly/ well it's worked is that this is a great indicator to exit the trade!

Great points people have made about sticking to the plan and writing a journal so that you can look back over a bad streak and see if you did/ felt anything different or whether it was just a run of losses expected within your system. I would add to this to make and keep a printout of trade entries with entry/ exits/ notes jotted on.

Last suggestion is to practice in your head what you will do/ feel when things go awry, i.e. imagine that the trade has moved against you and make your mind/ body feel it but force self to observe and do right thing and exit, and similarly when the trade moves towards your target. These visualisations should help you take the actions that you want to take

Hope above may be useful and look forward to reading some more suggestions
cheers
P
 
Another great way of controlling emotions is to expect them and allow for them in your trading plan. What do I mean by this?

1./ When in a long trade - expect greed to surface somewhere along the line. This may be in the form of not closing out your position and waiting for that extra pip. Allow for this to happen and when it does just become aware of it and execute your exit strategy without fail.

2./ When the market is plunging expect fear to be present before taking on a long, know beforehand that this emotion here could prevent you from entering the trade and be on the lookout for signals that the market is about to turn.


Similarly in all other situations where you are likely to experience any emotion, a well thought out plan of how to deal with a situation and what may arise will help you tremendously.

Also remember to follow this rule for successful trades. It is during your moments of elation that complacency will set because your mind has temporarily gone into relax mode. I would think that it is here that the most control is required as this will invoke ego, which will be like the pied piper bringing all others that follow.

These are just comments from my own experience and hope they help someone.

MW
 
Thank you all for taking your time to reply.

Special thanks for brilliant and positive advice goes to andycan,timsk, JoulesMM1, wasp, Charlton, roguetrader, damianoakley, rav700 and Twalker paddington and Market wizard.

All of your guys are valuable asset to T2W.

Please if there is any more idea how to deal with this emotion things. Keep them coming.

From these replies i have found out my problems are lack of ultimate discipline (that is not to strictly follow my plan to a letter) which in turn cause emotion roller coaster and i find it very difficult to accept the losses. But then again if i follow my plan religiously this would not be the problem i guess. I knew these are my problems but you guys you have make it abundant clear to my mind. It all boil down to discipline.
 
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........and i find it very difficult to accept the losses. ......how long did it takes you guys to reach this level
Click to expand...

Regarding accepting a loss I found I could do this after one almighty thumping great loss where I didn't accept it. I did eventually take the loss and it really hurt (financially and emotionally). After that I had no problems in impliementing stop losses (and luckily I was still solvent and could continue to trade).

Therefore in my exerience stop losses can only be taught by the market after a devastating episode. Hope it's not the same for everyone else!!

NB: I did read somewhere that trading is an emotionally net negative experience i.e. the hurt of loosing is a far stronger feeling than the joy of winning the same amount.


NB: Editied by removing the word 'easily' after reading the post below. Accepting a loss isn't easy but it can be a relief.
 
Last edited:
I think that it never actually gets any easier to accept a loss.

It's just that you develop the discipline to not let that loss affect your next trade.


Thanks

Damian
 
You are welcome Bizmany!



Taking a loss does not make anyone happy but when you have your first its painful after hundreds or even thousands you tend to not let it bother you too much

Trading is a journey not a destination
Corny but true,

One or several losses does not define you as a trader what defines you is how you make trading not trading make you.



Maybe we need to explore a little deeper for example:-

What instruments are you trading? Stocks, futures, options? And why?
How are you trading via Futures, SB or CFD's? Is it meeting your expectations?
Are they right for you at this stage in your trading development? Can you make sense of what you are doing? (Are you finding it hard to establish a trend or a trading pattern?)
Are you experiencing emotional issues outside of trading? Family issues, bereavement, separation, monetary problems?
Are you trading full time or part time? Are you depending on trading to bring in an income?
What time frame are you trading? Scalping, Swing, Long term?
Are you trading with scared money? Can you afford to loss you trading capital? (Refers to learners as opposed to professional traders)


Some or all these scenarios could have a huge influence on your current trading.

Naturally these are very personal questions and im not saying your need to answer any or all here. But these are questions you need to answer yourself, once you have a steady foundation then you can start building a rock solid plan
 
NB: I did read somewhere that trading is an emotionally net negative experience i.e. the hurt of loosing is a far stronger feeling than the joy of winning the same amount.

Tuffty

thats why markets tend to go down harder when there is a panic than when it goes up due to greed.
 
Poker players have a great term for the "emotional state" when losing. They call it being "on tilt". Players "on tilt" start playing out of control, playing loose and wild and deviating from their game plan. Similar to traders going through a losing streak. Read "Zen & the art of poker" which has a lot of parallels to Mark Douglas "Trading in the Zone".
 
timsk said:
It most certainly does, andycan!
One solution - to answer bizmanny's question - is a cocktail of tranquilisers and booze.
:cheesy:
Tim.
Click to expand...
That was good one :LOL:
 
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