Emotional Trading

Emotional trading means that when traders face market fluctuations, they do not execute according to their own trading plans or systems, but are driven by emotions such as fear, greed, frustration, and self-confidence to over-trade, chase the rise and kill the fall, Wrong behaviors such as not setting a stop loss and not taking a profit in a timely manner.

What are the dangers of emotional trading?

Emotional trading will bring the following harms to traders:

Impair trading discipline. Emotional trading will cause traders to ignore their own trading rules and principles and change their entry points, exit points, position sizes, etc. at will, thereby destroying their own trading discipline.

Increase transaction risk. Emotional trading will cause traders to lose their minds when the market fluctuates and blindly follow market emotions, thus increasing their trading risks. For example, greedily adding positions when the market is rising, or fearfully cutting positions when the market is falling.

Reduce transaction efficiency. Emotional trading will make traders fluctuate in the market and prevent them from stably executing their trading strategies, thereby reducing their trading efficiency. For example, opening and closing positions frequently when the market is volatile, or missing good opportunities when the market trend is clear.

Affects mental health. Emotional trading will cause traders to experience too many negative emotions in the market, such as anxiety, depression, anger, guilt, etc., thus affecting their mental health. For example, being unable to let go after a loss, or being too proud after a profit.

How to avoid and overcome emotional trading?

To avoid and overcome emotional trading, you need to start from the following aspects:

Establish a reasonable trading plan. A reasonable trading plan should include clear goals, strategies, risk management, fund management and other elements, as well as specific execution steps and evaluation standards. A reasonable trading plan can help traders have a clear direction and basis in the market, reducing their own subjective judgment and random operations.

Stick to your trading plan. After you have a reasonable trading plan, you still need to stick to your trading plan and do not change your decision due to market fluctuations. Adhering to the implementation of one's own trading plan can help traders develop good trading habits and improve their trading discipline and confidence.

Learn to manage your emotions. In trading, it is impossible to completely avoid the emergence of emotions, but you can learn to manage your emotions and prevent them from affecting your behavior. Learning to manage their emotions can help traders stay rational and calm and avoid making impulsive and wrong decisions.

Constantly summarize and reflect on your own trading process. In trading, whether you are making a profit or losing money, you need to carefully summarize and reflect on your trading process, learn from experience and lessons, find out your own strengths and weaknesses, and constantly improve and improve your trading level. Constantly summarizing and reflecting on one's own trading process can help traders increase their knowledge and skills and avoid making the same mistakes repeatedly.

In short, emotional trading is a common psychological trap in trading, which can bring many harms to traders. To avoid and overcome emotional trading, you need to establish a reasonable trading plan, insist on executing your own trading plan, learn to manage your emotions, and constantly summarize and reflect on your trading process. Only in this way can we remain rational and calm in the market, make correct and effective decisions, and achieve our trading goals.