Controlling Emotions that Cloud your Judgement 

Some types of emotion can affect the clarity of your thinking, and so impact any trading decisions you make.

Losing Streak

A losing trade can make you furious – often simply with yourself, for making a bad decision.

But we all make mistakes – it’s an important way to learn. If it happens to you, as it inevitably will one day, put it down to experience and make a mental note about what to do differently next time. Turn the negative into a positive.

One common impulse in moments of anger is to try and ‘get back at the market’ by placing another trade and chasing your losses to try and win it back – this is nearly always a bad idea. Alternatively, you might just start buying anything and everything indiscriminately. This is known as ‘shotgun trading’.

Take a moment to sit back and breathe deeply, then consider objectively whether your proposed trade really makes sense and is in line with your overall trading strategy. I would say if you experience a heavy loss, take some time off to reevaluate the situation and clear your mind.

Regret

Another common source of annoyance is missing an opportunity – something that’s easy to do in the fast-moving world of financial markets.

When this happens, it’s easy to give yourself a hard time about it, repeating things like ‘I should have bought there’ or ‘I knew that was going to happen’. But this sort of mentality can lure you into traps capable of undoing all your hard work at a stroke.

It is almost impossible to exit a trade at the right time or take advantage of every trade you see.

You might, for example, be tempted to place a belated trade anyway, or to risk placing a number of trades in quick succession – known as overtrading – to set things right. You might even ‘go on tilt’, a particular state of mind which means you make irrational decisions, rather than those based on the merit of what’s right in front of you.

That’s why, if the moment has passed, you need a few tricks to remain clear-headed until the next signal comes along.

Fortunately, those tricks are as simple as taking a break, casting an eye over your original trading plan and exercising a positive mentality – remember, missing a move is not the end of the world as there are always plenty of opportunities that will arise. Being patient in this position can make all the difference!

Overconfidence

When being extremely successful, this can also be when your at your most vulnerable, it is very important to proceed with extra caution. Overconfidence can lead to over leveraging, over trading and suddenly not sticking to the procedures that made you successful in the first place. Just as quickly as you made your money you could lose it and more. So it is important to remain level headed and be in control your emotions, i’ve learnt from my own experiences that this is very important. Even withdraw some of your profits and have a week off to reflect and enjoy what you have achieved.