9 proven tips for the trader to trade without emotion. Part 1
Trading isFirst of all, it's a business. But if in any other business emotional decisions are simply harmful, in trading they can lead to disaster. If you look closely at the people who have achieved considerable success in this business, you will notice some common mental traits that unite them all. A trader needs to develop certain personal qualities and thinking styles which will allow him or her to remain calm and confident in his or her actions while trading. It is these personal qualities that we call the "psychology of a successful trader".
The biggest obstacle to your success in your chosen business is not the market or the broker, but yourself. And in the list of character traits that hinder effective action, excessive emotionality is not at the bottom of the list.
A trading system alone is not enough, no matter how profitable it is from the beginning. It is you who apply it, which means that working on your personality and psychological state while trading is very important.
If you really want to get a consistently profitable result in the long term, then consider the following factors in trading, which can greatly facilitate you in solving this problem.
1. Know what you want in the end
You have to be prepared for all kinds of situations and emotions. Such preparedness gives you control. No one has ever been able to suppress their emotions or get rid of them completely. This is characteristic only of people suffering from alexithymia, but it is considered a psychological problem, not a positive quality. Internal readiness for stressful situations allows you to monitor your emotions and manage them.
I hope that you have already got rid of the illusion of getting rich quick by means of trading and realized that losses are a painful, but unavoidable part of business. There are both lucky streaks, and periods when the results of your trading will be much worse than your initial expectations. It is inevitable and you have to learn to accept it. There is no need to be afraid of losses, they are not evidence of "bad" trading. It is much more important to understand that "good" trading is not a break-even trading, but a systematic observance of trading settings, strict adherence to the trading plan and system.
It's important to take a long-term view. Most traders evaluate their trading results every month, while it's much more effective to do it at least once a quarter. If you sum up the results on a daily basis, you can simply go crazy with stress.
That's why I suggest you set weekly goals (this is the shortest, but not the most desirable of acceptable time intervals), and get rid of the idea that one single day can determine your trading.
Of course, no one likes losses, but when you trade, they are inevitable. The key is how you deal with them. Successful traders understand that there are no one hundred percent trades and the market does not tolerate fuss. You don't have to rush to get back what you've lost, it's much more helpful to recover psychologically first and only then go back to trading.
Too many traders focus on short-term trading results and lose perspective. A short series of failures leads to a change of strategy, and this entails even more psychological stress, reducing the effectiveness of the decisions made. The result - new losses. And so on in a circle. Systematic and methodical work is the key to success. Intraday trading requires concentration and thoughtfulness, the ability to make correct and accurate choices. It is important to focus on quality, not quantity of deals, to set long term goals and move systematically towards them. This will ultimately lead to the desired stable positive result.
2. Develop your own (!) trading system and stick to it rigidly
Successful traders have a system. It's an axiom. They continue to follow it fanatically, even when it doesn't seem to be working.
Before you change anything, you need to understand in detail what isn't working, why it isn't working, and whether it really isn't working. If you make changes after every unsuccessful transaction, there will be much more harm than hypothetical benefit. A profitable system and strategy It's not easy to create, and when it finally happens, you don't have to break anything.
In reality, success is a systematic repetition of simple actions, literally three or four tricks. But it is in the consistency of their use, and this consistency brings the greatest result. As a result, a successful trader is not the one who made several transactions with a big profit, this person was just lucky, but a trader who earns a little, but steadily.
And it is very closely intertwined with the trader's self-esteem and self-perception. If his self-esteem depends on the number of profitable trades, this is a direct path to a nervous breakdown and depression. Even a short series of losing trades can lead to disastrous results. The possibility to avoid this lies in separating oneself from trading results, first of all, and, secondly, in evaluating the correctness of one's actions by the accuracy and consistency of trading system signals, adherence to a trading plan and money management rules, rather than by the state of one's account.
If you integrate these attitudes into your own psychological mindset, you can gain a significant advantage in the marketplace. I can't help but say it again: the right mentality and psychological mindset is one of the main keys to success in this profession, and very often it is overlooked.
3. Know when to trade and when not to trade
Remember the popular phrase that there is a time to gather stones and a time to scatter them? The same thing can be said about the market: there is a time to trade and a time to pause.
No matter how obvious it may seem, so many people forget about it and do the opposite. This can be helped by a strict adherence to one's own trading habits, as mentioned above, and a focus on setting the right long-term goals.
It is most difficult to maintain this approach to trading in times of failure, and at the same time, it is in times of loss that it is crucial to refrain from impulsive, ill-considered actions. Losses can cause you to do one of the most destructive things a trader can do: chase the market.
Do not rush to open the next trade after a losing trade. If your inner state doesn't allow you to fully concentrate on trading, you feel stressed, depressed or tired, then close the terminal and stop trading for the day. The market will not go anywhere. Tomorrow will be a new day, which will give great new opportunities for trading. You will have plenty of time to make money.
Continued Advice to the Trader read in the next issues of Fortrader magazine.