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Emotion and Trading

  
  Education
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While trading I watch my emotional state of mind more than the price action. This has helped me trade better

Here are some of the emotions I feel from time to time and what they mean to me in context of trading

1) hesitation to pull the tigger – something is not right – don’t take the bet

2) anger – start of revenge trading – stop ASAP

3) uncomfortable while watching or not watching the price – non aligned with the market, trading with too much size – reduce size or quit

4) ignoring the little voice and gut feeling – trust the inner voice and take action

5) trading on hope – quit asap

6) thinking after hours or during market hours of money you can make = greed, impatience to make money – focus on how much you can lose

7) stress = wrong side of the market

8) feeling joy = right side of the market

Don't

  
  Education
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dontsign“Don’t think that trading is fun. The trading game should be boring the vast majority of the time, just like the real-life job you have right now.”

Don’t try to get even. This isn’t a game of catch-up. Every action you make has to stand on its own merits. Take your losses with detachment and make your next trade with absolute discipline.

Don’t ignore the warning signs. Big losses rarely come without warning. Don’t wait for a lifeboat before you abandon a sinking ship.

Don’t ignore your intuition. Listen to that calm little voice that tells you what to do and what to avoid. That’s the voice of the winner trying to get into your thick head.

Don’t project your personal life onto your trading. Trading gives you the perfect opportunity to find out just how messed up your life really is. Get your own house in order before you play the financial markets.

Trading Mistakes

  
  Education
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If you’re not making mistakes, then you’re not doing anything. I’m positive that a doer makes mistakes.
–John Wooden

We had our first losing day in quite awhile last Wednesday. And that’s not to say that we are loss free intraday everyday…quite the contrary in fact. We take intraday risk management losses almost daily. However, we do not often suffer overall losses for the day. Wednesday was an exception.

The loss was related to trying to force the market to give us our Daily Goal when it was not being offered. The loss was within our risk parameters, so it was not a big deal…except it was a big deal. We were annoyed. We were angry. We wanted revenge. Worse, we were up on the day only to gave it all back and then some. Worse still, the loss was due solely to a trading mistake we made as we approached the end of the day. A MENTAL mistake. Worst of all? We KNEW it was not prudent when we were doing it. (more…)

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