Frustration and regret. Looking back on a trade and wondering “Where did I go wrong?” “Is it too late to make my money back?” “I hope this works out for me…” New or old to trading, there’s a good chance at least a few of these thoughts have come across your mind during or after a trading session. Stress is an inevitable factor in the game, but to play the game properly does not mean your stress goes away. Rather you just improve your ways on handling it. Being aware on whether you are letting your emotions takeover when executing a trade is what differentiates experienced traders from those that consistently lose money. More often, being aware and being in control of your emotions has a larger impact on your P/L than technical analysis does. Controlling your emotions however is not a passive process. It requires consistent practice, discipline and a strong understanding of yourself. The learning curve might be high, but the benefit of practicing emotional discipline can apply to all aspects of your life. To help you reflect on your own trading occurrences, here are 7 ways to tell if panic is interfering with your success as a trader.
The Seven Tells
You make impulse buys
Chances are when you place an impulse buy, you are most definitely giving into FOMO also known as fear of missing out. Impulse buys offer little to no risk management, no security or manageable strategy and feels a lot more than gambling than calculated trading. When it comes to being profitable, having the proper time to strategize, setting up conditions to be executed, reflecting on your reasons and playing devil’s advocate should be the barebones before placing an order. FOMO is real and don’t get me wrong, many have fallen victim to it including myself. But learning to manage FOMO is what experienced traders are able to do. It entails taking a step back, understanding if you are about to buy out of FOMO and taking a second to feel why you might be tempted to buy. At the end of the day, making no money in a day is better than losing money, and not falling victim to FOMO is a win in itself. Be honest about your reasons for the entry, reflect on your strategy and ensure the conditions are appropriate to execute. Don’t be susceptible to impulse buys.
You analyze your strategy after a trade but can’t follow the logic.
If you are writing out a trading strategy just for the sake of writing one out, you’re better off taking a trip to Vegas because either way you’re just gambling. Putting minimal effort into your trading strategy is cheating yourself of gains, a waste of time and an abysmal learning experience. If you find yourself rushing to get your strategy implemented so you can make a trade, it’s likely one of two things are occuring. You either recently checked a chart with a lot of volatility and you’re rushing to jump in, or you view the processes as draining and untimely, so you just want to muddle through it. In the first circumstance, take the time to understand that entering without strategy is cheating yourself and will undoubtedly turn to future losses even if you get lucky a few times. Viewing the process as draining can be appeased by regimenting your trading times and day. Invest in your health, routine and mindset which will expand your opportunity to make more money. Reflecting on a trade, you should be able to see a balanced emotional state, a transparent strategy and a linear process in your logic. If any are missing, you need to find a way to put more time into your strategy and emphasize the value associated in doing so.
You add to losing position after getting stop lossed out
If you continue to ride a falling knife after a stop loss was executed, not only are you acting out of panic and denial, but your decision 9 times out of 10 will be an irrational one. A stop loss should indicate the maximum amount of risk you are willing to assume for an amount of projected profit. Once a stop loss order is executed, this should indicate that you were wrong about the general trend and you need to take time to strategize and understand what went wrong. Not only will you have had no time to strategize after a stop loss is executed, but you will most likely be overwhelmed with emotions. This is the time to reflect and learn, not to add onto a failing position. Unfortunately, this is a very common way beginners turn small losses into a blown-up account, all because they were certain “they could make it all back.” Sound a bit like gambling? At this point it pretty much is. Learn to accept your losses for what they were. A big part of the game is losing and if you can’t handle your losses, properly you’ll never learn to make money in the market.
You sell on impulse
Cutting your gains short can take away from potential long gains and cause you to re-enter in an undesirable position. Setting an exit strategy is just as important as your entry, so it’s best to do both simultaneously. This way you manage your risk and ensure your potential losses can be justified with your potential gains. Measuring an appropriate stop loss in which you are willing to accept the fact that you lost the trade is an essential to prevent astronomical losses and even liquidation. Set your stop losses not based on risk to reward ratio but give it some breathing room based on volatility. The market doesn’t care about your RRR and will act as it feels is appropriate. Still take RRR into consideration, but understand extending your stop loss will help protect you against market movers and can help rid yourself of some anxiety if you can justify your stop loss. Exiting in incremental amounts is also a great way to prevent impulse selling. Set levels in which you want to exit your position at different percentages, that way you are not cheating yourself of potential gains and ensure at least a small amount of profit. Impulse selling will eat away at your gains if you let it, so know why you entered the trade in the first place, be able to justify any exit and don’t cheat yourself of potential profit you’ve rightfully earned.
You can’t justify your losses
Treat every trade like a battle, where each dollar represents a soldier bringing you closer towards your end goal. Now strategizing for every inconceivable circumstance is an impossible task, but you can most definitely set a certain number of potential scenarios and how you will react should they play out. Generals don’t come up with a plan when they’re already on the battlefield in midst of fire and panic. The same should apply to you when getting ready to execute a trade. Have a plan already in mind so you don’t fall susceptible to pressure during the spikes, unexpected drops and pressures that come along during market hours. Even if you lose money after executing a strategized trade, there will be value you can take out of that experience. This is knowledge you can apply to future strategies as you continue to grow and develop as a trader. Understand this is something even experienced traders struggle with so don’t get discouraged. Being a good trader is an active process in which nothing is solidified, and you must be willing to adapt. People are always learning new strategies, reading and improving their habits hoping it can bring more profit. Ensure you are sticking to your strategies so even when you lose on a trade, you can justify it with the knowledge you have acquired.
You feel anxiety after placing a trade
If you don’t feel lucky when entering a trade but rather a rush of anxiety a few minutes after, chances are you’re not adhering to strategy or don’t have one in place. Strategy is important when it comes to trading but having the discipline to stick to it is everything. It ties back into being able to justify your losses and learning from your mistakes. Every time you place an order to buy for example, you should feel confident in your reasons, lucky that you got in at a low price and able to explain at least 3 reasons to a non-trader why now would be a good time to buy. However, the problem is that most people with no control of their emotions often buy out of fear instead of greed. They are not confident in their trade and usually “hope that it goes up” instead using strategy to rationalize why it will. Instead of giving into fear when you’re buying, understand why you are feeling fearful, take any relevant information and see if it can apply to your strategy. Chances are, if you are about to give into fear, a lot of others are feeling the same way. Could it be because of a news announcement? Or maybe an indicator that just hit major resistance. Take time to reflect, breathe and understand your emotions. Let them bring you closer to your goal instead of acting impulsively and hating your decision afterwards. Understand that if you are not confident in a trade, you shouldn’t be placing that trade in the first place. At no point should you feel anxiety after placing a trade, but relief due to a concrete strategy and research that supports your decision. If you have second thoughts after placing a trade, take note of it and assume the appropriate action. Chances are your inner radar is trying to prevent you from making a bad decision and telling you to think things over before committing to potential losses.
You feel resentment towards trading
In an ideal world, trading at its core should be an emotionless endeavor, in which trades are executed based off indicators, support and resistance or even price history. However, convincing yourself to trade trade without emotions is an impossible task and it is imperative you understand that. We live in a world of gray and its more than acceptable to embrace it as such. The bad trades will come where you have done everything right and still lose. A trade will workout for you and bring huge returns and you won’t be able to help but let a slick grin slide across your face. The most important thing however is understanding your emotions and channeling them in a healthy way that will help bring you closer towards your end goal. Continuously getting frustrated with trading will bring you no closer to your end goal so if you feel emotions swelling and about to take over, the best thing you can do is walk away from your computer, take some time to reflect and envision your end goal. Understand why you are feeling a certain way and how you can use these emotions to help you instead of hinder your abilities. Execute your trades responsibly and hold your self accountable for the strategies you’ve implemented. As you continue to learn both professionally and personally, you will notice the ability to manage your emotions and channel them in positive ways will help you in all aspects of life.
Getting into the Mindset with Hypnotherapy
Psychological mindset help for traders is not always readily available. And to be able to trade in the zone is a mindset you need to work towards and have an environment in which to develop it.
Our hypnotherapy coaching can help you work towards the ‘trade in the zone’ mindset. We have dealt with a vast clientele who have been unable to enter the mindset, often being held back by personal anxieties and panic attacks. We can tailor a support plan based on your needs and how these anxieties may manifest and prevent you from getting into the trading zone. By the end of it, we will have broken down those psychological barriers and ensure you are performing at your best having provided the environment in which you can develop the mindset.
Our practice owes much of its success to Ronal Shah, MBA, who spent many years as a trader himself. Ronal is aware of what is required to thrive in a trading career. Using his skills as a master hypnotist, he can help you tap into anxieties previously unknown to you and ensure that when in the middle of a trade, you are always in the zone. His practice also grants you access to panic attack help for traders.
Give us a call and find out how we can help you trade in the zone, leaving you less susceptible to anxiety attacks and more mentally prepared for a long-term trading career, without the risk of burnout looming over you.
So contact us today to fix up your trading mindset