Frank Kollar of Fibtimer.com highlights the dangers of trading with emotion, with living in the past, and why traders need to leave those past losses behind them and always remember that the current trade is the only trade. But when it comes to dealing with your money, emotions can be your worst enemy.
Living in the Past
Although there are literally thousands of books written about emotions and trading, the biggest problem market timers face can be easily summarized in four words;
Because we are all emotional about our money, taking a trading loss, or worse yet, taking a big loss, has an effect on every future timing decision we make.
But if you carry the emotional baggage of a losing trade (or several losing trades) around your neck, every decision you make going forward will be affected by it.
You will enter trades too late, to make sure they are not going to become losers. You will exit trades too early, to make sure they do not reverse on you. The end result? Losses and even heavier emotional baggage.
The Current Trade Is the Only Trade
The most effective and successful market timers live only in the present. The current trade is their only trade.
What happened last year, last month, or last week has no emotional bearing on their current trade. The trade is based on a successful strategy and it will take care of itself. So why spend useless time worrying about it, and potentially sabotaging it?
In other words, yesterday's trades are out of sight and out of mind.
Successful market timers look at those selling climaxes on the charts, and the buying frenzies, and see them for what they are.
Successful market timers ignore those emotional responses and instead trade the charts. They ignore the big ups and downs. They ignore the daily news and they especially ignore their know-it-all friend, who says he/she is absolutely right and you are absolutely wrong.
Trade the Plan
Trade the strategy. Trade the plan. Expect the markets to throw tons of darts at you but stick to it anyway.
Remember...at emotional market tops and at emotional market bottoms, everyone is right.
But a month or two later, although they may not admit it, better than 80% of those buyers and sellers will have lost a good deal of money.
Sticking to a trading strategy helps combat those emotional feelings. The strategy says when to buy. The strategy says when to sell.
Trading by emotions however, is doomed to failure from the very first emotional high.
Picture: pixabay.com
Read more:
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.