How To Trade With No Emotions — Even If You Are Emotional
By David - March 15, 2021
It’s completely normal to have emotions—every human does.
Yes, emotions get in the way of your trading but at the same time, you can’t just keep blocking them as resisting it will only make it stronger.
Instead of resisting emotions, aim to understand them and respond effectively.
This is because the more you resist emotions, the harder it is to think of good solutions while trading.
So, as a trader, practicing emotional management is key to achieving the results you want.
Now, here are 5 ways to effectively manage your emotions while trading:
#1. Find Out What’s Making You More Emotional
Before you can employ tactics to manage your emotions, you must first know the factors causing them.
- A previous loss
- Over leveraging
- Huge position size
- Price movements
- Crypto News
- Crypto Twitter
- Unrealized PnL
- Time in a trade
- Other people’s opinions
- Other people’s results
Each of these factors can trigger you to think in a way that goes against your trading plan.
So, the goal is to control the internal factors while limiting your exposure to external factors.
This might mean, trading with a position size you’re comfortable losing, not watching the charts while trading, and being mindful of how crypto Twitter gets you to FOMO.
#2. Find a New Perspective on Trading
If you’ve taken control of internal factors and you’ve made yourself less exposed to external factors, your perception may be the issue.
To help you define a new perspective on trading, consider these facts:
Nobody knows what the market will do next
Every profitable trader goes through losses
Long-term profits come from finding a statistical edge
Some of the best performing strategies have more losses than wins
Losing streaks are part of the game
You can only know if a strategy is successful after it’s been through many trades
Are you approaching trading with a long-term mindset or a short one?
Thinking long-term can instantly make you less emotional as it puts less emphasis on your current trade.
Instead of hoping to grow your account with 1 big win, you’ll have trust in your strategy to do the job after X amount of trades.
#3. Take Time To Prepare Yourself For Trading
Trading is a high-performance activity that has the power to make you go through emotional highs and lows.
Therefore, you must approach it respectfully and not mistake it for a casual activity where you can make a lot of money quickly.
You should prepare yourself by getting into a state that makes you ready for whatever the market will do.
Failing to prepare automatically prepares you to be a victim.
So, if you’re having a bad day, chances are that trading will make it much worse.
Here are some things worth doing before trading:
Listen to Trading Audiobooks: In your free time, go onto YouTube or Audible, and listen to advice on trading psychology, strategies, and motivation.
Do this every day, and it’ll feel like you’re in a mastermind group of profitable traders.
Assess Yourself Mentally: If you’re in a bad state, you’ll find a way to let the market reflect it to you. So, it’s best not to trade until you can confirm you’re in the right mindset.
It’s better to be unhappy than be really unhappy while losing money.
Forgive Yourself For Your Losses: According to Steve Ward (author of Bulletproof Trader), self-forgiveness is a habit of top traders.
Top athletes, for example, forgive themselves for their mistakes and quickly move on. This way, their mistakes won’t affect their future performance.
#4. Journal Your Trades, Thoughts, and Emotions
This accountability habit will help you become aware of the times you were emotional and what it resulted in.
You can easily do this in CMM by importing trades, and adding your thoughts and emotions in the notes section (Here):
You can also add your setup confidence score to trades and later on, filter through them to find out anything significant. You may end up discovering a correlation between your confidence score and trades that went against your trading plan.
As you journal trades along with the thinking behind it, you start to understand yourself more and see exactly when things are going right or wrong for you.
Also, another thing to consider when analyzing your stats is finding out what days you are consistently losing on.
Why: Factors outside of trading could be affecting your decision making process on that day. It could be stress from work, family, friends, distractions, etc.
#5. Find Ways To Trust Your Strategies More
To be detached from trades and the emotions it brings, you need to believe in your strategies.
The source of your trust must be data — otherwise, you’re setting yourself up for a disaster.
The trust in your strategies should come from its:
- Win-rate over 100+ games
- Backtesting/forward testing results
- Average return
Without knowing the stats of your strategies, you should approach the market pessimistically, and trade with small position sizes until you have confidence in your strategy.
A consistently profitable trader is a confident one.
Find the hidden sources causing you to act emotionally while trading
Rebuild your perception of trading by understanding it more realistically
Take the time prepare for trading so your mood is in order
Use CMM to journal your trades, emotions, and thoughts.
Use data to trust in your strategies more and become more confident
By not practicing emotional management, you’re training to be an expert in inconsistent trading.
Trading is a game where the market is the only entity allowed to be volatile.
By using the 5 emotional hacks above, you can better practice consistent trading and over time, turn it into a habit.
Once you get good trading habits, you win.
And the emotions will disappear...