How Well Are You Managing Your Trading Emotions When You Lose

Managing your trading emotions is by far the most important aspect of your trading. It is way more important than your system, because when you manage yourself well the vagaries of market action will have no effect on your self worth as a trader. Being totally unfazed by drawdowns is the real secret of any successful trader. I would go as far as to say that how well you manage your emotions when you have losing trades will have a major impact on your long term trading success.

Why trading brings out our emotions

You place a trade, knowing that your entry is picture book perfect. The technicals lined up, You have done your market profile diligently and yet in spite of all this before you know it you are stopped out of your positions. Welcome to the world of trading. It's not your system and its not you, the trader either. If only traders would understand this.

For most traders this first loser isn't a problem. After all we know that we are not going to hit a home run with every trade, don't we? The second loser might ruffle your emotional feathers somewhat.

The real emotional hit usually is the third loser in a row.

Why? Because even though you know it is  quite possible to lose three times in a row you don't expect it to happen to you, so soon, so often and certainly not when you are doing everything to the book.

If only, my friends, let me tell you from many years of trading, the rules have far less to do with constancy than you were made to believe.

It is a well documented fact that most traders cannot take more than 3 losers in a row. Trading confidence flies out of the window as self doubt sets in and pulling the trigger for the fourth time becomes extremely difficult. Until it happens to you, you simply cannot imagine what it feels like to hit a losing streak and this is the crux of the issue:

Intellectually you understand the concepts of detaching from your trades and from your trading emotions, however living and this means fully embodying this concept is something quite different, as every trader finds out along the path.

When we first learn to trade we are full of hope and expectations. Most traders have been successful in other careers before they enter the world of trading.

Your biggest enemy is your expectation of yourself

Your expectaions of your trading, how fast you will learn, how many mistakes you allow yourself to make along the way, not to mention all the energy you dispense on disciplining yourself into behaving like a good boy or girl in front of your screen.

When you hesitate slightly and get slipped for a couple pips on your entry you are mad with yourself, because you should know better. When you don't hold you trade long enough and it takes off while you are sitting on the sidelines having exited for a mere 10 points you get mad with yourself. When you did not catch that runaway move because you were expecting another pullback, you get angry with yourself.

This is the true mental game of trading for most traders. We strive for perfection, because we have the expectancy of perfection as the only way of making consistent money.

Not only this, life has set you up to function in this way

You know, when you were at school and didn't make the grades, your school masters and probably your parents too got mad at you. Over the years you have built yourself an ever closer net of tight performance parameters which must be met in order for you to feel worthwhile.

This kind of attitude sets you up for an emotional roller coaster which you have learned to successfully suppress. You probably got by for a while. After all said and done, as the Buddhist wisdom goes: "Things work until they stop working."

On your trading path you will come up against a lot of things that simply have stopped working ,and your best course of action is to resign yourself to the fact that in trading a different set of rules applies. If you want to handle your trading emotions better and also feel better about yourself, detach from all expectations. Imagine how you would feel about yourself, if you could let go of all those expectations you have of yourself, your trading results, your work ethic and what is expected of you as a provider, spouse... The list is endless, I leave you to fill in the blanks.

If you can be at peace with yourself first and foremost your trading will begin to improve. After all said and done, it is not about the money, nor what you expect to happen in any given moment, but about enjoying the flow of the trading process. The only way in which you can enjoy the flow is when you are at peace with yourself. When you are at peace with yourself it becomes very difficult to have trading emotions.