Basic Prerequisites To Maintaining Emotional Control During The Trading Day

When you enter the trading day, you have at the very least a sketchy outline of expectation for how the day will go. You are either feeling like you are on a hot streak or you believe that your previous day set you up for an awesome day today, or you are questioning why you got out of bed this morning since your last three days have been pretty hard to stomach. Expectation is a very difficult aspect of life to give up, especially when you enter the world of trading. However, expectation often leads to a significant increase in emotion.

Whether we are day traders, dog walkers, or corporate executives, expectation is a very natural occurrence when we start our day. While we are almost never disappointed when we have no expectations, very few people can walk into their day without at least a little bit.

High expectations, expectations that find themselves in direct conflict with reality, or expectations that are not reasonable to begin with are often a great springboard into finding ourselves heavy with emotional reactions. Whether we expect certain behaviors from others, outcomes from situations, or responses from ourselves and our expectations are not met, we tend to feel immediately disappointed. This can lead to emotions such as anger, shock, disbelief in oneself, or some sort of feeling of violation. By reducing our level of expectation for the day (not to be confused with reducing our level of hope and our expectation that we will have an emotionally healthy day) we can minimize the reactive emotions that crop up when our general expectations are not met.

Does this mean we walk into our trading day with a totally cavalier attitude? Of course not. We want to walk into our day meaning business. And really, we want to walk into our trading day like we are going to do well, even if it's not today. Mistakes will be made, awesome trades will be executed, and before you know it, you will be entering each and every trading day with air of confidence that will carry you over some of the rough spots.

The absolute surefire way to losing control over your emotional well being is to start trading with money that will land you and your family on the street should you lose it. There is nothing more stressful and nerve racking than knowing that you have just hocked your family's financial well being. If you are going to become a fantastic trader, then you need to know how to set limits for yourself as well as your emotions.

If you put too much money into just one or two baskets, there is no way that you are going to remain objective as you watch the house payment, the car payment, the utility bill payments and the savings account dwindle away in front of your eyes. When you start gambling, you start sweating everything, and the end result is poor decision making.

Aside from refusing to put yourself in the position of needing a trade to bail you out, you also need to manage your risk. Since we aren't expecting anything, we can't just throw money around like we know that it is coming back to us ten fold. That would take is into the land of needing a trade to work out. Risk management is really just a catch phrase for knowing what your tolerance level for loss is this week and sticking to a contingency plan should things not work out as well as one would have thought. Risk management is the number one reason why individual investors hire brokers. They simply don't know how manage risk. When you can master the art of risk management

While it is vital to practice good emotional control in the trading environment, remember that there is more to you than just a trader. Trading can be stressful. It can be a day filled with many moments of high and low reactions from everyone you know. You need to have a form of off hours stress management, preferably one that is healthy, legal, and safe. Recreational drugs are not a good stress management tool. But sports, writing, videos games, hobbies, and of course time with people you love are all stress relief tools that you can equip yourself with during your off hours so that your on hours will be more enjoyable and productive.

When you learn to deal with daily stress, trading day stress, and family and life stress in more effective ways, you also learn how to develop a keener sense of personal responsibility that will help to carry you through a few rough trading moments. Trading is not a cake walk, and you will not be perfect at trading nor will you be perfect at keeping your emotional responses completely in check. But the better you are at it, the better you will be at what you do. That of course, leads to better profits which is why you are in this game to begin with.