Emotions and Trading

Would the fictional character Rambo have made the ultimate trader? A man totally focused on his mission; a man who acted almost entirely without emotion?

What about the fictional character called Mr. Spock of the movie "Star Trek?" Mr. Spock looked at events logically and objectively, and followed a rational plan when approaching the solution to a problem.

In many ways, either of those fictional characters would appear to have had what it takes to become the ideal trader. The ideal trader would carefully formulate a comprehensive trading plan. He would have found the market and time frame under which the market conditions were ideal for the way he wanted to trade; conditions that would suggest his plan would produce a profit, and then, and only then, would he execute it.

The problem is that none of us is a fictional character. We are human, with all of our human weaknesses. Although at times I wonder, I realize that traders are also human. Yes, those of us who decide to be market participants are human, and we don't always behave rationally. Indeed, we tend to be driven by fear, hope, and greed, and because of that, forecasting market behavior is a lot more difficult than we might ever have imagined. In the real world, humans are emotional. Emotions rule everything in the markets. The decision you must make, however, is whether you are going to control your emotions in order to trade decisively, or let your emotions rule you.

The wise trader is realistic as well as logical. It doesn't do you any good to become overly disappointed when your strategy produces a loss, or overly euphoric when you hit upon a winning streak. Extreme pleasant and unpleasant emotions can be very distracting. If you are angry, frustrated, or worried, you won't be able to focus on trading consistently. Your attention will be elsewhere, and those negative emotions will drain you of the limited psychological energy you have to devote to trading. It is vital to keep negative or unpleasant emotions at arms length. At the other extreme, it isn't wise to feel too happy or too euphoric. Extreme pleasant emotions are usually the flip side of extreme unpleasant emotions. That is, it is usually those same traders who experience extreme unpleasant emotions when faced with setbacks who also experience extreme positive, euphoric emotions when suddenly faced with a string of wins. At moderate levels, pleasant emotions are motivating, but at the extreme they may be associated with impulsive decisions, such as increasing your position size, overtrading for no good reason, or abandoning your control of risk.

It is almost impossible to be emotionless. Humans are emotional by nature. It is difficult to experience absolutely no emotion. In all likelihood, the closest we could get to an emotionally neutral state is indifference or boredom. Some experienced traders say that it may be useful to feel indifference or boredom if that is what it takes to stick with a trading plan and trade with discipline. But there is an obvious disadvantage: when you are bored, you don't want to keep going. You will get tired easily and just want to quit. So what is the best way to cultivate an optimal emotional state? We know that negative emotions, such as fear, anger, and disappointment can be distracting. And we know that euphoria often leads to overconfidence and trading mistakes. We also know that indifference and boredom can often have drawbacks. One possibility is to cultivate emotions that are only moderately positive, emotions that aren't euphoric and prone toward overconfidence.

Never underestimate the power of emotions. Extreme optimism or pessimism can interfere with your goals, but by approaching problems strategically with a realistic sense of optimism, you'll be a more consistent and profitable trader.

I truly agree with you, it's quite impossible to be emotionless when you're trading. Trading is truly a test of your patience, you have to deal with different people dealing with different currencies. If you stay patient, maintain discipline, and have a regulated online trading company, you'll increase your success as a forex trader.

Emotions are directly related to the trading as it is hard and fast game where everything happens quickly. You need to keep two things in mind and practice including patience and stick to the decision. Many trader lose their money only due to bad manners. Thank you!

Trading also needs the psychology from which you trade. Everyone has it's own psychology level. From this psychology level you have to trade with so keep your psychology level strong and think well before trading. Thanks

When I just started trading on my own I lost a little over $10,000 the second week. I had made the full-time jump and therefore was desperately emotional to make it work. Looking back now, I probably did things I would never do today. I pushed trades into the market when it wasn't a good time to trade, I let trades run up huge losses without stops, and took any profit I got quickly.

The good thing, and also dangerous, that this type of operation has, is that in many of the programs and entities that allow to operate with divistas allow to work with leverage, in such a way that it is never necessary to have the money that you put at stake but a portion of this money. This allows you to be able to operate with large amounts even if you have little money in the account. You have to keep in mind that this also means that if you lose money you also "go down" much faster because depending on the leverage you have (it can be 200%, 400% ...) the money will rise or fall in the same proportion depending of if you win or lose.
 

Emotions are directly related to the trading as it is hard and fast game where everything happens quickly.

How Can we manage our emotions? It's really challenging to do so

Emotions and quality profitable trading are incompatible.

An increased emotional state during trading, especially when there is a critical situation, will not be of any benefit.

emotions too strongly influence the decisions you make, and as a result, making a profit, therefore, aspects such as emotions and psychology must always be controlled

Originally posted by Angelpandas1

Originally posted by cashisking86

I think the difference is logically reactive to situations rather than emotionally. Most of us can't become emotionless but we can learn to recognise behaviours in ourselves that should act as warning shots to perhaps change things or leave the charts for a while.

Recognize those warning shots as your personal compass, guiding you to recalibrate or take a well-deserved break. Remember, the key is not to become emotionless, but to master the dance between reason and passion!

that's impossible to eliminate all emotion you just want to not let them cloud your judgement