No single trade should ever take a trader out of the game – not even several trades, ever. 

When taking any trade – whether a day trade, a swing trade, or a long-term investment – traders need to ask themselves one simple question: “How much am I totally OK with losing?” Losing sucks, but every trader loses. Trading markets (especially crypto) is about the “risk business”, not the reward business. 

Readers have probably heard this several times, and many of them blow over it saying, “Yeah OK, I get it… yada yada.” But anyone who hasn’t implemented discipline into their risk-reward system while taking the best trades that appear is going to fail… or at least struggle, big time. 

The emotions of losing can be very stressful. That stress can lead to bad decisions and losing more than a trader wants or plans to. Money also triggers strong emotions and impacts everyone’s well being. Traders are also commonly highly competitive people with a desire to succeed and be financially free. So, managing all these emotions is essential. 

How is it done? That’s what this article is all about. 

The Magic Coin Flip

Before explaining tops for emotion management, consider this scenario of flipping a magic coin. 

If someone had a magic coin that, when flipped, would give $500 for heads or lose $250 for tails, should they continue to flip that coin? Of course they would! If they had $10,000, risking $250 on a bad flip for a reward of $500 for a good flip means they can have a win rate of less than 50% and still be profitable! 

The key is discipline. Anyone who trades for a living will only be successful from disciplined execution. Don’t move stops further away when the market moves. Don’t chase the price. Don’t panic. Plan, see, and execute. 

With that in mind, here are some easy ways to manage emotions while trading. 

Focus on Physical Health

Jocko Willink says, “It is much better to go through life attacking mornings than being attacked by mornings.” Regardless of a trader’s unique system, if they do not practice discipline in their daily life, they are likely to struggle with discipline in trading. A lack of discipline bleeds into all areas of life: finances, friends, family, relationships, etc. 

The number one way to start practicing discipline is with a healthy diet and regular exercise plan. Please, do not brush over this part! Partying every weekend, eating like crap, and other “fun” things will ultimately be a detriment to either a trader. 

Especially on Crypto Twitter, people constantly post about things like this and generally promote unhealthy lifestyles. Regardless of the success they may enjoy from their trading, mastering the markets will be easier with healthy habits in all areas of life. 

Wake up early. 

Got to the gym.

Eat well afterward.  

Make physical health a top priority all the time because it directly affects mental health. And trading is nothing if not a mental battle. Also, sleeping, eating and exercising well help regulate and optimize hormones and endorphins, which make it much easier to navigate life (and the markets) easily and with less stress. 

So what if a trade ends up as a loss? The level of peace, clarity and confidence that comes from making health a habit cannot be emphasized enough. 

Don’t Overtrade or Feel FOMO

Social media is an endless source of FOMO. (I’ve experienced this too, and ended with a pie in my face.) Don’t chase someone else’s trades. Remember: plan, see, and execute. If a chart takes off before a trader takes a position, so be it. They will always have another trade – the market isn’t going anywhere. 

From personal experience, I started to become a profitable trader the moment I stopped giving a crap about what was going on around me and instead chose to follow my plan. Instead of taking trades just to take them (and getting chopped up), I chose to be patient and disciplined. The alternative means roundtripping gains or worse. 

When a trade is missed, traders should simply do something else. Go outside; play with dogs; call family; there is more to life than charts and computer screens. 

Watch Different Timeframes

Some traders may disagree with this section, but I am a big believer in observing the market in multiple timeframes. During my years as a trader, it has helped tremendously as I manage my own emotions. In my personal trading system, I refer to this as “diversifying timeframes.”

What does that mean exactly?

Diversify timeframes by having a risk-reward system and a plan for each type of trade: day trading, swing trading, and investing.

Here’s a quick overview of how I think about this. 

Investing

Investments are ultimately trades, and investors will eventually take profits. Take the long view on those assets, and buy at heavy discounts or deviations, then sell at big premiums or deviations. As a personal example, when Bitcoin traded below $20,000, I started to accumulate in a cold wallet with a long-term perspective. Now that investment is up quite a bit, and my portfolio will be okay if the market drops… even down to $12,000. My plan tells me to buy more and wait – even if it takes years.

Swing Trading

When Bitcoin seemed to be starting a new uptrend, I added some leverage to my positions with a clear stop loss. This allowed me to capture some swing trading alpha on top of my spot investment. What if the swing trade is a loss? That’s okay because the long-term portfolio is already capturing gains.

What if the investment and swing trade plans both go wrong? So what, things will turn around, and a clear risk-reward plan is implemented. All financial stress is avoided, period.

Day Trading

The same principles apply to day trades, but they are used much more frequently on an active, day-to-day basis. Day trading is not suited for everyone, but personally, I love daily price action and the opportunities it offers. (Also, I’m a big believer in day trading as the best way to replace income streams when a trader masters the basics and becomes profitable.)

Yes, over 95% of day traders fail. The success stories come from extreme discipline in all aspects of life – not just trading, but also especially in trading (obeying a risk-reward system). 

Profit Comes from Discipline

Effectively managing emotions while trading can be summarized in one word: discipline. A lack of discipline brings stress, panic, and losses. Traders cannot only try to be disciplined when they open a chart though. It must be a habit in all areas of daily life. 

A disciplined life leads to easier trading, less stressful decision making, and a more successful trading journey. That is a Discount Gosling promise.