How to control your stock trading emotions

Many stock traders lose money. When you study how they act on stock markets, you often find they don’t control their stock trading emotions. This is one of the biggest mistakes any trader or investor can do.

Why are stock trading emotions bad

The most of emotional stock trades are losing trades. Their results are losses, and in most cases, these are major losses. The main problem is that these trades aren’t planned, and their risk profile is poor. Losses generated by emotional trades often wipe out most of money in the stock trader’s account. You cannot achieve consistency with emotional stock trading.

When emotional trading happens

The first biggest problem is that many stock traders or investors do not have a stock trading plan. They have no rules that will lead their decisions.

Such traders or investors tend to react to some ”hot stock picks” they can see on financial TV. Many losing trades are also based on some a guaranteed stock pick provided by stock broker “cold call.”

The two biggest emotions play their roles—the greed of making money “stock is on the move…” and fear “I miss a huge money making opportunity.” Nobody is immune to these emotions, but if you want to make money by stock trading, you have to manage these emotions in your trading.

How to achieve emotionless stock trading

Emotions are always present in stock trading. Every trader has his own fear and greed. But the profitable stock traders learned how to control them. Here are the main rules that should help you to control your emotions during stock trading.

1. Write a trading plan

Do not trade without rules. You should have a list of rules that describe your complete trading process, the research and stock picking, the trade setup preparation, and finally, also active trading and trade management. Every time you have some negative or positive emotion, you can check these rules and whether you’re acting in accordance with them.

2. Do research before market trading hours

My personal tip is to divide your stock trading tasks into two major groups. One is based on market research,  tasks  like market research, looking for a stock picks, stock screening, market and chart analysis.

The second group is for real trading execution and management. These tasks detail how you should make entries, stop-loss management, profit-taking during stock market trading hours.

You should always concentrate on one group at a time. When you do research, do it in a calm situation, typically before the market opens or after the market closes. Or select a midday time when the stock market isn’t moving too much to spend an hour or so to make an analysis.

Decide what your active trading time is and specify your daily stock trading routine. During your active time, do tasks related to active trade management only.

3. Do not react to social network messages immediately, put tickers into a watchlist for later evaluation

If you see some hot tip on the social networks or if you receive some tip from a source you trust,  put that ticker into your watchlist first and evaluate it later. Do not enter the trade immediately.

Stock trading emotions affect every stock trader. Profitable traders understand them and know how to control them. Only in such cases can you be consistently profitable. Define your rules how to control emotions in stock trading and you will beat 90 percent of traders and investors.