Emotions are without a doubt one of the biggest influencing factors in your daily trading. Emotions and emotionally influenced trading are responsible for revenge-trading, chasing losses, missing good trades, letting losses get out of hand and many more trading decisions that cost traders money. If you want to know more take a look at our emotions cheat sheet.
Just think about your performance, how would your trading account look like if you hadn’t taken all those trades that were against your rules? (Hint, if you have no idea, maybe it’s time to join Edgewonk and find out how much your emotions are really costing you)
In order for you to avoid the most common emotionally caused trading mistakes, there are 4 things that can instantly help you to step up your game and minimize the impacts emotions have:
1. Separate charting from execution
This tip alone can, and will, make a big impact on your trading game. To avoid kneejerk reactions, close your trading platform after you have entered your trade; don’t just minimize it, but close it for good. Then open another platform for charting where you observe your trades without having the possibility to move around orders, add to the trade or close it prematurely. Of course, you could just open your trading platform and mess around with your trade, but this approach adds a barrier and makes you aware of your trading decisions.
You don’t need to open another brokerage account. Free charting sites like Tradingview.com are ideal as a charting platform.
2. Walk away from your desk
To make this point work, make sure you have your stop loss and take profit orders in place so that not much can happen when you walk away. Often, when we sit in front of our screens too long, we get too attached to the trades we take. Watching every tick of your trades usually always leads to decisions that should have been avoided.
Walking away from your desk and doing something completely different for only a few minutes is a technique used by many performance coaches. It takes your mind off the subject and when you come back, you have a completely different perspective.
3. Man up and control yourself
To develop discipline, you just have to do the thing you want. You want to know more about business, then you have to study and start your own business; you want to get in shape, you have to start exercising and eat better; you want to become a more disciplined trader, then you have to exercise discipline.
For the next month, make a commitment to not touch your trades after opening them. And regardless of what you think would be the best thing to do with your trade, you don’t do it. You just sit back and let price do what it is going to do. For that month, write down exactly what you would have done, why and how it would have impacted your performance.
You will see that in 99% of the time, what you think would have been the best thing to do in a certain situation, usually always leads to bad trading.
4. Take your eyes off the charts and journal
The last tip is also a very effective one because it takes your mind immediately off your trades and greatly helps you refocus.
After you have entered your trade, open your Edgewonk trading journal and enter your trading data into your journal. This will not only help you use your trading time more effectively, but it will also help you get a different view on your trades.
Entering the trades into your journal reminds you of what your trade goal and thought process was. When you then get back to your charts, you are more certain and aware of what your trade plan is and you are more likely to follow through.
Now the ball is in your court
Although you will never be able to eliminate emotions completely from your trading, you can significantly change how they impact your trading. By following the described tips, you can instantly reduce the influencing power of emotions.
If you have any other tips that you use in your trading, please leave a comment and we will add them to this article.
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