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Trading Psychology: What Does It Mean To Be Mature And Understanding Of Your Emotions Part 1

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  • Trading Psychology: What Does It Mean To Be Mature And Understanding Of Your Emotions Part 1

Whether you are an experienced trader or a beginner, you will experience different emotions throughout the day while trading. Now since one’s emotions play such a large roll in a person’s trading abilities, it is paramount to have a solid understanding of how emotions work in human beings in general as well as understanding how your specific emotions effect you personally, and how you can overcome any shortfalls of these emotions. However, before we can relate emotions to trading, we first need to understand the emotions.

 

Experiencing emotions is a normal part of who we are, regardless of the situations we are in. Emotions are a response to a stimulus and do not just happen for any reason at all. Good emotions have a positive effect on us, and bad emotions have a negative effect on us.

 

These good and bad emotions turn up in trading as well, so it’s important to understand them and the type of impact they have on us (your trading behaviours determine your trading results).

 

Here are three simple steps to identify and understand your emotions:

 

  1. Identify the specific emotion that gave you the positive emotion
  2. Give the specific emotion a name E.g., if you decide the emotion is happiness then name it that.
  3. Once you have identified and labelled the emotion you will better understand the reaction it has caused since you know the original stimulus.

 

You can learn to manage and control your emotions in a way to see them as a solution and not a problem. Create a trading plan and have a trading strategy is a great way to ensure that your emotions don’t get involved in your trades.

 

There is no proven way to success. There are many trading strategies that can work and help you to reach your goals. Clearly define your goals and having a systematic approach will help you achieve your trading goals.

 

“Failing to plan is planning to fail”

 

Next week we will look at the most common types of emotions experienced by traders and how to effectively deal with them.

 

  • Ryan Mowatt, The Performance Coach

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