Controlling emotions that cloud your judgment Individuals4 months ago - Services - Egypt Lake-Leto - 129 views
Controlling emotions that cloud your judgment
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Some types of emotion can affectthe clarity of your thinking, and so impact any trading decisions you make.
A losing trade can make youfurious - often simply with yourself, for making a bad decision.
But we all make mistakes - it's animportant 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 differentlynext time.
One common impulse in moments ofanger is to try and 'get back at the market' by placing another trade. Thissort of knee-jerk reaction - or 'hair-trigger trade' - is nearly always a badidea. Alternatively, you might just start buying anything and everythingindiscriminately. This is known as 'shotgun trading'.
Take a moment to sit back andbreathe deeply, then consider objectively whether your proposed trade reallymakes sense and is in line with your overall trading strategy.
Another common source of annoyanceis missing an opportunity - something that's easy to do in the fast-movingworld of financial markets.
When this happens, it's easy togive yourself a hard time about it, repeating things like 'I should have boughtthere' or 'I knew that was going to happen'. But this sort of mentality canlure you into traps capable of undoing all your hard work at a stroke.
You might, for example, be temptedto place a belated trade anyway, or to risk placing a number of trades in quicksuccession - known as overtrading - to set things right. You might even 'go ontilt', 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 haspassed, you need a few tricks to remain clear-headed until the next signal comesalong.
Fortunately, those tricks are assimple as taking a break, casting an eye over your original trading plan andexercising a positive mentality - remember, missing a move is not the end ofthe world.
Suppose you've traded gold severaltimes, and each time you've made a healthy profit. It might be tempting tostart believing (perhaps subconsciously) that 'gold is your friend', and thatit will reward you in the same way every time.
Once this conviction grows,there's a danger that you'll open further positions in gold without properlyconsidering the current situation.
Unfortunately, the fact that aparticular instrument has been profitable in the past is no guarantee that itwill continue to perform for you. But likewise, if you've had a bad experiencewith a certain asset that's no reason to shy away from any future opportunitiesit offers.
There are times in all of ourlives when events beyond our control affect our ability to think clearly.
It could be divorce, familyillness, bereavement, or just moving house or changing jobs. All of thesethings will distract you from trading and could cloud your judgment.
The world of financial trading canbe hectic, demanding your undivided attention. So when you're going throughstressful periods, it's often safest to put your trading on hold until you cancommit the necessary time and energy to it again.
Don't beat yourself up about poordecisions or missed opportunities. Learn from your mistakes and look forward togetting it right next time
To avoid going on tilt when thingsgo wrong, take a break, remind yourself of your trading plan, and wait untilyou're back in a positive state of mind
Remember that sentimentality andsuperstition have no place in trading. No market is your friend or enemy, andevery opportunity should be assessed on its merits
When you're suffering from stressin other areas of your life, it may be wise to put your trading on hold