The reality of the situation is that only 10% of traders can make a living at it, and only 5% of traders make a lot money. Sure, everyone makes a winning trade occasionally, but in the long term, their portfolios and their accounts remain about the same or even dwindle down to nothing. There are all sorts of reasons for this, such as bad timing, poor risk and money management, lack of trading discipline, unrealistic expectations, such as the expectation to get-rich-quick, and a lack of knowledge.

I’m sure we’ve all been here before - you make a trade and end up in a winning one. Before you realize it, you are in a winning streak. At this point, you feel like you have mastered trading and you could overcome any market condition. Therefore, continuing your winning streak.

This is completely understandable, as it is a natural human emotion to express a positive reaction after a win. But we’ve all been on the other side as well. When you enter into a trade that doesn’t work out the way you wanted, and eventually after the market bottomed for a few times and you have remained in the trade with a hope that it will turn in your favor but it didn’t, and you close the trade in a huge loss.

At this point, you become angry and frustrated and you want your money back. Thus, we come back to the cycle of market emotions, which explains the relationship between our feelings and our judgments. Figure 1 is a visual representation of the 11 stages of the cycle of market emotions.

How To, Eliminate, Emotions from Trading, Trading Psychology, fx trader, forex ThecycleofemotionsJFDFigure 1: The Cycle of Market Emotions          Source JFD Brokers

Trading Is Not a Hobby

Since trading is a business, we should treat it as a serious business venture, not a hobby. Therefore, we must separate it from our personal lives. The world of trading has very little room for emotions. There is only room for calculated, well-planned decisions. Our emotions have a tendency to skew the decision-making process, and far too often, they generate poor decisions that lead to losses. Success or failure in the business world can bring out the best and worst emotions. Clear thinking, experience, discipline, instinct, and skill are essential, especially in the trading world. So our emotions must be kept under control.

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