The emotion of trading

If you have learned how to trade the stock market, but feel let down by your instructor or you are just struggling to get trading working for you
– Then I know how you feel.

I learned to trade with a large company – I knew nothing, (I think it took me 3 days to understand “shorting”)
Anyway once I had returned home from the seminar, as per instructions, I started to set up my charts and indicators, found an online broker and started doing some paper trading, so far so good!
I then progressed to real trading …how exciting! I won my first 3 trades…I could do no wrong! then ….I started losing my trades, by the end of the month I had lost £2500!

What happened? ..I had become over confident. I thought I knew what I was doing and I had started trading without a clear written strategy, without a clear plan, I had made the fatal error of increasing my stake without proper testing of my strategy
(I find it laughable now, that I could have been so naive!) and losing my money so quickly made me quite dizzy.

Paper trading is great – it gives you the practice of seeing the trades, calculating the risk/reward, working out entry and stop points. But what it doesn’t prepare you for is the emotion that you feel when you trade for live money! The rush of adrenaline when you are winning, the bottomless pit of gloom that you feel when you are losing

So how did I turn my trading account around…I got a coach/mentor
• I wrote my trading plan.
• I got a clear strategy; I had a defined way of trading that I did not deviate from.
Basically I reduced the number of ways that “emotion” namely fear could take hold of me
Fear raises its head all the time.

The fear that I have entered the market too soon or too late
The fear that the market will go the opposite direction
The fear that the profits that I have already made could be wiped away before I have time to bank them.
The fear that the trailing stop is too tight
Fear, fear, fear, fear

BUT; with a strategy that is clear, that includes money management, that I have confidence in, that works 70% of the time ..the fear is greatly reduced. I started to record all of my trades. I reviewed them weekly and made sure that I learned from my mistakes and most importantly..I took action so that I did not do it again.
I stopped over trading – I set weekly targets and disciplined myself to stick to them
– this was difficult as trading can become quite addictive!

I started training, at this time, to be a personal development coach. I learned loads about how my past experiences now affect how I view money and wealth.
When I reviewed how I reacted to losing trades I also realised that I had some issues that were stopping me from trading how I wanted to trade.

I was brought up in a home where gambling was not acceptable, that money was precious and quite scarce. I became conscious that every time I placed a trade I felt like I was betraying the values that I had been taught and that I was gambling with my future. This had been something that I had not even recognised before, I had just locked it away in my mind and now it was getting in the way of my trading.

I wrote down all the issues that I had with “gambling”, how I felt and who I felt I was letting down. I then went through this list and realised that they were ridiculous and I decided to change my beliefs.
I know believe that:
Spread betting is not gambling with my future –for me, it is a calculated action that has sound strategies and principles behind it.

After dealing with these issues (and lots of others!), again my trading account balance began to increase.

My conclusion is : physically taking a trade is just a small part of this business we call stock market trading, the bigger influence is our emotion and more importantly how we and all the other traders in the market respond to it.

Stockmarket Trading – what outcomes do you want?

Many people trade on a day to day basis not really knowing what they are trying to achieve except for making money. I believe it is essential though to have a daily/weekly/monthly outcome.

What I mean by this is a written set of trading goals that spell out quite clearly how many points you wish to make or how much net profit you wish to make. By having a written outcome you are more likely to have better focus and discipline in your trading day.

Is it worth trading past your daily target?

I know that trading can be really addictive, I belong to a live trading chat room where some members are there all day long,
watching their trading platforms and often trading 8 or 9 trades a day..the result….early in the day they can have some excellent profits..I mean 200+points but then they slowly give their profits back to their broker! and end up wondering where all their profits went.

By having a daily or weekly target that you stick to,means that you are stacking the odds more in your favour to be able to hold onto your profits. Trading is a numbers/percentage game, sometimes by trading less means overall you gain more profits

The other part of this equation is to have consistency in your trading. Yes you may have a great week but this does not mean that you now know it all. I would advise all new traders (or anyone trading a new strategy to only trade using the minimum stake. Start low
Do this for at least 2 months, if you are being consistent in your trading (not consistently losing!!) then up your stake incrementally every 2 months, ensuring that you are still being consistent.

Well many traders who lack some experience do find,the excitement and thrill to potentially gain huge profits is too much and up their stake after 2 weeks of successful trading ..oh dear…Not only is this not a long enough time to see if your strategy is working, and you have all the correct criteria in place to be successful but you are also forgetting that emotion plays a huge part of the trading experience.
If you have been trading at £1 a point and things are going well- great ..incrementally start to increase this (£2, £4, £6)
This will get your brains and emotions gearing up in the right direction too. By not doing this what happens?

Well if you jump from £1 to £10 just think how you are going to feel as your trade has a pull back by 10 points which means you are now£100 down! it is a totally different reaction to £10 down.

By ensuring that you have traded consistently -meaning you have been making x amount of points over,say, a 2 month period, you will have more confidence that your strategy is working. That you can make those points, therefore if you are trading at £10 per point you know with confidence that your trade will reverse or if it is a losing trade, that it is just one of those losing trades in the % of trades
that lose. No panic, no sick feeling, no closing the trade early because you can’t bear to watch your money fly away.
Just consistent professional trading

SO Your tasks :-

A) Set a trading goal many points do you want to make
Each day
Each week
Each Month

Write it down ..stick to it ..once you have made your points LOG OFF
You do not have to sit and watch your screen all day ..find a different hobby. If you have to ..then shut down your broker and just watch the chart patterns not be tempted!
Remember why are you trading make a profit or to make the broker even richer??????

B) Write down a plan of how much you are going to trade per point.
What you have to achieve before you increase the stake (ie 20 net points consistently per day)
When you are going to increase the stake and by how much
How Often

I know these steps seem really easy in theory but you will be amazed how effective they will be to your trading discipline and profits.

Remember ..these steps will only work if you take action!

If you know how to trade the stock market but you have been burnt, lost your nerve or just never really got going, then I may be able to help you.
Trading is not difficult but it ain’t easy – I have designed a method that can help you to have structure and strategies in place that helps to take out the emotion

Let me help you get the dicipline and consistancy that you need to get the results that you deserve.