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Emotions In Trading

To trade successfully one must operate at peak performance (peak state – Tony Robbins)

That is, to trade with total concentration and an awareness of everything that is happening around you. (Un) fortunately, traders have a life away from the screens and when something significant occurs in their outside world, novices find it difficult to not let it affect their trading mind-set. Understandably, there are circumstances when problems outside of work are so significant that a trader cannot escape them and should therefore not trade at all. However, in the majority of circumstances the trader must be able to block out these issues and focus on the market.
On any given trading day, the emotional highs and lows experienced by a trader are more extreme than the average person’s over the course of a month. But hey, isn’t that part of the enjoyment? Feeling alive? If you answered yes to this question, you need to take a long hard look at yourself and your motivations for being a trader. You need to realise that we don’t trade to experience this feeling, WE TRADE TO MAKE MONEY.

A master trader does not trade for a buzz; he is robot/algo-like, executing his trades devoid of emotion. He cuts his losses when he is wrong and he feels little anxiety about running trades further than he originally anticipated when it is appropriate to do so. He is a master trader because he can make the hard decisions which most people aren’t willing to make and therefore profits from those situations when the average trader fails

So how does a trader become so cold and calculated?
The answer, like any other performance discipline, is practice. To be the best you have to be willing to go further than anyone else to achieve your goals. You must train yourself emotionally to be able to handle challenging situations so that when the real thing happens, you have already gained the experience of how to deal with it – your response is instinctive:

So, you need to rehearse the situation in your mind; visualise the market changing in front of you and you cutting your position without hesitation having realised your mistake; visualise a move in your favour and actively running the trade further than you originally anticipated; visualise how you will react when being almost stopped out for the day and how to trade when trying to bring yourself back from the brink.

The true champion takes this approach to the extreme. An excellent example of an elite performer who trained their mind in order to win is seven-time Mr. Olympia, Arnold Schwarzenegger;

“To be a champion you cannot have any outside negative forces coming in and affecting you. Let’s say before a contest I get emotionally attached to a girl, that can have a negative effect on my mind and destroy my performance. Therefore, I have to cut my emotions off and be kind of cold before a competition. So that’s what you do with the rest of things. Right now, if someone steals my car from outside my door I don’t care, I can’t be bothered with that, the only thing I would do is call the insurance company and have a laugh about it. I trained myself for that, to be totally cold and not to have anything go into my mind. It was a sad story a few years ago when two months before a competition my mother called me and told me my father had died. She asked if I would come home for the funeral and I said no, it’s too late, he is already dead and there is nothing that can be done. I’m sorry.”

Arnold Schwarzenegger, Pumping Iron