Speaking about Emotions in Trading
Primarily traders are human beings. Even if it comes to high degree of trading skills and experience on the market, traders remain people and do not turn into robots. It means that emotions remain peculiar to all Forex traders. Iron trader with no feelings are nothing more than just a myth.
It is a well-known fact that emotions affect making decisions, not only speaking about trading. Very often experienced traders say that emotions are the only obstacle for successful results. When emotions overwhelm and overshadow sound mind, when logic and analysis are put aside, a great deal of various mistaking decisions dramatically increases.
An issue of importance of psychological comfort for successful trading is what most experienced traders speak about. The first thing is the size of a trading lot. Every person has its own understanding of what "big money is". For someone a $100 bill is big money, but for someone $100,000 is not treated as a big amount. This inner feeling comes outside when working with financial markets.
For example, if Tom trades with a 0.1 lot making good money, his deposit constantly extends. It has been like that for several months. But then he may come to a conclusion that he should have chosen 0.2 lot to double his profit. A 1 lot trading could have made him 10 times richer. He feels that he is wasting his chance and definitely increases the amount of a lot.
Then he realizes he is incapable to gain more. Even worse, a series of losses takes place. Now he thinks that the decision to transit to larger sizes was wrong. If he had remained his previous trading volumes, he would have gained some money. The amount of positions increased, but profits are even less than previously. What happened?
The answer is "psychology". The more lot the higher possible profit. But possible loss also extended that impacts the mind and extends the degree of fear. The result is mistakes that could have been successfully eliminated if he had not chosen to increase lot size.
Every trader should feel the extent where he is still capable to control emotions and trade with inner comfort. Draw an abstract line of emotion control and try not to overstep it. It is always better to be sure in stable, but low income than to risk and be unsure about possible high profit. It could barely make you rich if you are not sure in final outcome.
Besides, there are some factors influencing emotions including the flow of news, releases, political events, expert commentaries. It is very difficult just to read this news, not even analyze in trading. In this case relying on intuition may help. Relying on intuition but not on emotions is acceptable.
So, what is our advice to Tom? He should eliminate emotions, but not intuition. Trade with ease, concentrate on essentials, feel your intuition!
Speaking about Emotions in Trading
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