Knowing how to control emotions while trading can prove to be the difference between success and failure. Your mental state has a significant impact on the decisions you make, particularly if you are new to trading, and keeping a calm demeanor is important for consistent trading. In this piece, we explore the importance of day trading psychology, for both beginner and more experienced traders, and give some pointers on how to trade without emotions.
The Importance of Controlling Emotions While Trading
The importance of day trading emotional control cannot be overstated.
Imagine you’ve just taken a trade ahead of Non-Farm Payrolls (NFP)[1] with the expectation that if the reported number is higher than forecasts, you will see the price of EUR/USD[2] increase quickly, enabling you to make a hefty short-term profit.
NFP[3] comes, and just as you had hoped, the number beats forecasts. But for some reason, price goes down!
You think back to all the analysis you had done, all the reasons that EUR/USD[4] should be going up – and the more you think, the further price falls.
As you see the red stacking up on your losing position, emotions begin to take over – this is the ‘Fight or Flight’ instinct.This impulse can often prevent us from accomplishing our goals and, for traders, this issue can be very problematic, leading to knee-jerk reactions.
Professional traders don’t want to take the chance that a rash decision will damage their account – they want to make sure that one knee-jerk reaction doesn’t ruin their entire career. It can take a lot of practice, and many trades, to learn how to minimize emotional trading.
The 3 Most Common Emotions Traders Experience
Some of
