Taming Your Day Trading Emotions

Taming Your Day Trading Emotions


It has taken me years to develop techniques for dealing with both winning and losing trades. Greed, fear, and arrogance can all lead to destruction without a strategy.

Take Your Profits and Set Realistic Profit Targets

Traders must set ambitious yet achievable goals and celebrate any gains that are appropriate for their level of experience and risk comfort. Don’t miss out on potential earnings, as there will always be other trades and chances to make money. Instead of riding losses until the market moves against you and your profits vanish, take what you’ve earned. You won’t make a fortune with each trade; look at this example: you placed $10,000 in a margin account to invest in futures indices. Usually earning an average of $50 daily, sometimes more and sometimes less; including days when losses occur but they are managed such that the overall gain is still around $50 per day. If this trading activity takes place 235 days each year – more than $12,000 would have been accrued before taking expenses into account – indicating that you have doubled your original investment! Such a job can rarely provide such lucrative returns!

Investing is a business. Don’t let greed rob you of your profits. No one wants to work hard all day and go home empty-handed. If the market goes up after you liquidate your position, that’s fine. Because at the end of the day, you have made some money and you have benefited from your skills.

Protect your trades with a protective stop

Don’t trade without a protective stop. This is very, very important. Everyone makes mistakes. Whenever you make a mistake, you must protect your capital and limit your risk. Determine the point at which you are certain that you are wrong before you enter a trade. How much will you lose if the market goes there?

No Crying in Trading

Would you be willing to take that risk? If you are willing and able to take the risk associated with the trade, place your protective stop at the right point. If the market hits your stop and takes you out, that’s fine. The market is telling you so. Trading without stops exposes you to unidentified and limitless risks. That’s something you can’t afford.

On the morning of September 11, 2001, I was in the market and thanks to my protective stop, I was safe. The trade seemed promising, making me profitable in the short term. Suddenly, the market shifted and wiped out my stop. Unaware of what had happened, I asked around for any news that might have caused it. Tragically, news of the devastating events soon spread throughout the market. My point is that I would not have been saved if it wasn’t for my protective stop – in other words, never trade without one!

It is essential not to trust mental stops, which are often neglected and result in unnecessary losses. Trading is full of intensity and can quickly capture one’s attention. Place hard stops into the market so that you don’t lose more than a set amount. Do not move your protective stop further away from the market, instead adjust it closer in response to any changes in conditions. If there is a significant shift, consider exiting the trade altogether. Aim to keep losses as minimal as possible.

Two-minute rule

I often employ the two-minute rule when a trade isn’t going my way. This way, if it’s a solid trade I should be able to discern that within the two minutes as I’m cashing in. When the indicators waver or shift but I’m not getting any compensation, I monitor the clock. Fortunately, there’s a built-in clock on my RoadMap™ software so I can just click it and keep track of time. If you’re not utilizing software, grab an egg timer, an hourglass or a traditional clock instead.

After two minutes, if I have a negative outlook on the trade, it’s time to get out. Not worth taking the risk in case it works out; it’s best to stay safe. There will be other trades and plenty of chances for me to capitalize on them. Don’t rush into taking any losses – every single trade is one of the next ten thousand, so preserving your capital is paramount. Doing so will ensure you’re ready when the winners come along.

Establish points of entry, exit, and protection

I come up with a strategy when I enter a trade. I have a profit target set and once I hit that, the money goes to my bank account. I also know where I should place my protective stop. If it hits that mark, I can accept that the market told me my prediction was wrong. Not every trade will feel victorious, but if you learn from your losses and limit mistakes within your control, you can become a long-term winner in this game.