Don't be Emotional

To trade successfully it is necessary to have the right mental attitude. I have seen many traders suffer from having a bad position. They know what they need to do but are unable to execute the trade.

Self discipline and emotional control are the keys to success in trading and are not necessarily virtues we are all born with. I believe they are skills that we acquire over time, with experience but unfortunately in this game such experience can be costly. I have learned over many years as a professional.

As with any business preparation is important. We need to develop a business plan for each trade and for our portfolio as a whole. We need to know what we are going to do in each eventuality so if that event happens we do not become "caught in the headlights." This trading plan helps us create our own rules and once we have rules as a trader emotions can be pushed aside.

Common Mistakes

  1. Refusing to decide on a stop loss level.
  2. Not executing the stop loss when it reaches your level.
  3. Getting stuck into one view on the market., thinking I'm right the market is wrong.
  4. Focusing on the price and action of a security. Convincing yourself that it is about to turn.
  5. Revenge trading. Trying to get all the money back in one go.
  6. Not turning around your position even though you feel the market is changing.
  7. Not following your rules.
  8. Planning for a trade then not being able to pull the trigger when the time comes.
  9. Establishing a consistent pattern of success and then giving all the money away on one or two silly trades.

Ok, so I have told you what not to do so how do we achieve the right emotional control and self-discipline to be successful.

  1. Accept that the markets are not always rational.
  2. Accept that you are totally responsible for your actions and if you lose money it is totally down to you.
  3. Keep daily, weekly and monthly profit and loss figures.
  4. Keep a trading diary outlining what you traded and why.
  5. If you lose money analyse why. Learn from your mistakes.
  6. Write down what you plan to trade, not just on a daily basis but also weekly and monthly.