How To Keep Your Trading Emotions In Check

In Summary: 

  • Trading free from emotional attachment to the market is difficult but necessary for success 
  • Celebrate your wins, reflect on your losses, and keep a clear mind

Can You Trade Emotion-Free? 

Trading in the financial markets can be gut-wrenching and you certainly need to have the stomach for it. That said, it matters that you approach the markets with the right mindset and for the right reasons if you want to succeed. 

In other words, you have to work on your emotions so you would not let them hijack your logical thinking. Experiencing emotions, for that matter, psychologists say, is a positive trait of any character.  

Letting them take control over your decision-making, however, is not. Simply because there is a risk that some emotions could be harmful to you and stand in the way of your goals. Still, you can use emotions to stay inspired as you strive for success in trading.  

Even more so, getting excited about all you can accomplish in trading can have a profound effect on your trading results. To this end, you need to distinguish between rational emotions and irrational emotions. Let’s talk more about that. 

Can you trade emotion-free

How Trading Can Teach You Discipline 

As mentioned above, psychology in trading has a lot to do with feeling the right emotions; not with not feeling anything at all. In that sense, emotion-free trading must be understood as not letting bad emotions lead you in the trading game.  

Once you understand how emotions can play a core role in your efforts to win in the market, you’ll approach them differently. For starters, expect a certain personal transformation to happen when you set out for a trading career.  

The world of financial markets will teach you about yourself and reveal behavioral traits you didn’t know before. On that note, once you see where you can improve, you have to overcome your shortcomings, adapt, and become a disciplined trader.  

As a trader, you will have plenty of opportunities to grow and work on yourself in order to get where you want in trading. And developing control over your emotions and using them properly is a stepping stone to your success.  

Set Realistic Goals 

Now that you are aware you can’t control or manipulate the market, it’s time to adjust to it. The way you do this is by setting realistic goals that you know you can achieve. In other words, align your expectations to the reality of the market.

There are three main requirements you need to have for your goal in trading: 

          1. It must be realistic 
          2. It must be attainable 
          3. It must be measurable 

In more detail, if your goal is realistic, you should be able to achieve it. While it’s technically possible to make a million dollars in a year, if you start out with $1,000, it wouldn’t be realistic. It has to be attainable, like turning these $1,000 into $2,000.  

If you attain this, you would have returned 100% on your equity. This is attainable mainly due to the volatility of the markets and the use of leverage. 

And this is the third characteristic: your goal needs to be measurable. This means you have to specify a certain amount of money you’d like to make.  Set realistic goals

Design A Clear-Cut Trading Strategy 

Once you have the above steps set in stone, you would know if your trading plan is getting you closer to the goal you’ve specified. More importantly, the more you practice realistic goal-setting, the closer you will be to reaching a state of success in the markets. 

Trading strategies are essentially the pathway to your goals. Design them incorrectly, and you’ll end up losing money; design them correctly, but violate them, you’ll also end up losing money.  All professional traders that win in the market are strictly following a trading strategy that leads them to profit. And it’s the times they stray away from their strategy that outsized losses occur.  

With this in mind, it’s crucial to design a clear-cut trading strategy that has the most probability to lead you to your goals. You could decide to risk $1 to make $5, or to use wide stop-loss orders to have more room to cover a potential downturn. Or you could decide to trade news and economic events, or focus on technical analysis.   

Remain Flexible 

Whatever strategy you choose, you have to be sure it fits your state of mind, personality, and character. In other words, have your psychology and your strategy work together. It’s better to not trade if you don’t see anything at the moment, than to open a trade in vain.  

The opposite is also true: always feel free to let go of a trade, either winning or losing. Money managers have a say about this: “Never marry a trade.” Try not to get emotional about a particular stock, currency, or cryptocurrency, and if you missed the entry point and the stock took off, don’t dwell on it for too long. Instead, focus on the next trade. If you’ve encountered a loss, it’s alright to hurt for a while, but make sure to get back up again and keep moving.  

Remaining flexible in your trades will allow you to stay emotionally detached from them. Moreover, you’d be able to rationally analyze them and decide if they’re winners or losers.  

Learn From Your Trading Failures 

Being flexible leads us to the next important lesson: learn from your failures. If you are inflexible and you run into a losing trade you might miss a learning experience, and unwillingness to admit you’re wrong will do nothing but wipe your account. To stay in the game for as long as possible, be sure to exit bad trades as soon as possible. You might be worried that closing a bad trade will mean to sign off on a loss on your account, but the sooner you cut your losses, the better your account will be. Don’t be afraid to cover a loss and move on. 

You can learn how to take a loss from one of the greatest speculators: George Soros. His partner, Stanley Druckenmiller, said about him: “Soros is the best loss taker I’ve ever seen. He doesn’t care whether he wins or loses on a trade. If a trade doesn’t work, he’s confident enough about his ability to win on other trades that he can easily walk away from the position.” 

How To Continue Growing 

In addition to taking care of losing trades, make sure you protect the winning ones. While it’s greatly important to not lose money, making money is equally important for your growth. Ray Dalio, the founder of the biggest hedge fund in the world, Bridgewater, puts this into perspective: “In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.” 

The way to growth is finding the perfect balance between knowing when to fold, and when to go in. In that context, the proper approach would assume you have your emotions under control, fully centered.   

Find Peace In A Chaotic Market 

It’s true that financial markets, stocks, currencies, and cryptocurrencies, are wild places. Waves of volatility, aggressive price swings, sudden events that cause a market to nosedive: all of this can be intimidating for a newcomer.  

So how can you find peace in a chaotic market? Simply stick to your strategy and be certain you are prepared for any possible outcome. Practical steps towards having a robust all-season trading strategy would be to have stop loss and take profit orders in place. They will either cut your losses to a point you’ve specified, or secure you a profit.  That way, market prices can be all over the place but you will rest assured your trades are well-positioned according to your own terms.  


Having an emotionally balanced approach to financial markets does not mean you don’t get joyful about your wins or sulky about your losses. In terms of your success, your reaction to anything going on in the market matters more than the event itself.  Be sure to celebrate your victories, and also reflect on your losses, because every trader experiences them.

To make the best out of your trading, stick to a trading strategy that will keep any emotional reaction to whatever is happening out there under control. Being consistent in your trading will help you reach your goals. As long as you keep a clear head when you trade, and base your decisions on rational conclusions, positive results will follow. More importantly, you will have learned a ton of insights along the way. Both about you, and about the world of financial markets.  


Can You Trade Emotion-Free?
How Can You Stay Disciplined When Trading?
How Do You Continue Growing?

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