Trading can be a very emotional occupation and unfortunately, emotions are the cause of more lost money than the unpredicability of the markets. It’s easy to see in action too. Whenever you hesitate to get in on a winner, that costs. Whenever you hang on to a trade too long and don’t take your profits when they are in hand, you’re just giving that money back to the markets. Staying in a winner until it turns into a loser is one of the most costly mistakes caused by emotion. Every time you get out of a winner too early and cut your profits short is just more evidence of emotions costing you money.
“Once bitten, twice shy.” At the root of most of the problems in trading is fear. Fear that because you’ve felt the sting of an avoidable loss before, that it will happen again right now. That fear is what causes the hesitation, the hanging on too long, the getting out too early.
There are other feelings that come into play for sure, like greed, hope, despair, guilt, shame, anxiety, confusion, anger, pride, and a host of others. One of the biggies is revenge. When you’ve been hurt with a painful loss that has you licking your financial wounds, there is a part of you that wants revenge. You want to get back and the markets and get your money back. It’s a natural human response.
One of the problems is that trading is an activity that in many respects runs counter to our nature and everything that we’ve learned growing up. Our emotions are part of a survival mechanism that in trading, tend to work against you. It’s not natural for you to step into a potentially dangerous situation, get hurt (take losses) a fair percentage of the time, be okay with it, and then step right back in. The natural reaction is to protect yourself, in trading, you’re dealing with the unknown behavior of the markets, plus trying to absorb a large body of knowledge along the way..
Now, getting your emotions under control, or at least to the point that they no longer interfere with your ability to make good decisions and act without hesitation when the time calls for it takes more than just will. You can’t just ‘force’ the discipline to stick to your system, at least not for long.
Fear diminishes as you replace it with confidence, and as your confidence builds, you’ll find that the discipline to do the right thing at the right time becomes easy. But again, you can’t force it. You have to develop a specific skill set, including a critical one called Emotional Intelligence – as a trader.
That’s quite a challenge, as most people that get into trading have never done anything like it before. It is a totally new experience, and like all occupations, it requires a specific skill set to be good at it, to be confident and keep your cool under pressure. Most of the time when you move into a new occupation, you get trained for the job. Your employer knows the importance of helping you establish yourself and making sure that you have the skills to be good at what you do. For most traders though, they never get that chance. It’s ‘train-yourself” on-the-job training, which in any occupation would be seriously short-changing you if you want to be successful.
In the past, about the best you could do was to buy a book on ‘Trading Psychology’, which is a conceptual approach to trading, and many books on the subject were written by psychologists, not traders. The problem with this is that Emotional Intelligence is a skill – a specific ability. You don’t develop skill from reading, you get it from specific actions. Your skill grows and your paradigms shift from experience, not from simply acquiring new knowledge.
Until now, there has been little in the way of specific training on how to BE a successful trader. Most training that is available focuses 90% on the system, not on you as the trader, and certainly not on developing Emotional Intelligence as a trader. There is such training now available through the Trading P.I.T. Club by Inside Out Trading. The training consists of 26 weekly lessons specifically designed to eliminate your fears and give you the confidence you need to trade well, without the emotional influences that can be so costly in trading.
You can transform your trading experience from one of emotional losses to confident consistency by going here,
