I watched an old Asian TV show on the weekend, which was really interesting. It showed how most people are just too caught up emotionally in their trading. On profitable trading days, they celebrated their wins by taking their entire family friends drinking, and on days that aren’t so successful, they lock themselves in their rooms, refusing to speak to anybody – sometimes even hurting themselves. You might think that such behaviour or overreactions may be a cultural thing, but it got me thinking that when it comes to money, the majority of people are very emotionally invested – and unfortunately, emotionally directed as well.
When it comes to trading and investing, being emotionally detached is your best trading strategy. Staying calm and level-headed keeps your mind clearer and you are less prone to “revenge trading’ where you are chasing trades to make up for your losses – this usually only leads to greater losses!
Profits and risks are very real and the excitement of monitoring where the market is headed can easily stir up strong emotions. I understand it’s difficult, but keeping your emotions in check will deliver far more benefits – in both your trading and your personal life.
The advantage of emotional detachment is that it removes the fears, which will hold you back from effectively moving towards your goals; when it comes to trading, you cannot always play it safe if you want to see bigger returns from your investment. If you’re always too careful about moving forward because the risks keep on getting bigger,remember – staying safe and taking no risks very rarely delivers rewards. If you want guaranteed safety, perhaps trading is not for you.
However, if you get over-excited, it’s more likely that you will make hasty moves – decisions that you don’t completely think through because your excitement (and emotions) takes over. This can result in big losses because trading is not a game of luck. It requires making thoroughly informed decisions. If making sound decisions isn’t something you can consistently do, just head to the casino because trading is not for you.
The big thing about being in control of your emotions, is that you never lose sight of your purpose. You continue to persevere even with all the risks involved and the occasional negative results, and you do it all in a strategic manner. You know when to stop and take a rest, regroup, assess the situation and then create a new plan. You make sure that you’re not only in control of your emotions but you stay on top of the situation instead of just letting events dictate your results.