7 Reasons to Avoid Emotional Trading: A Detailed Guide for Prop Traders
Greed for Excessive Profit
Avoid holding on to profitable trades unless there is a significant event or impactful news that could help gain additional ground. Try and gain the maximum from current trade and re-enter if the price levels are correct. This will help immensely in gaining confidence.
Patience is Key
Many traders close their positions based on assumptions or emotions, which often results in losses. If open positions are based on scientific and data-backed research, then have patience and trust the risk management setup.
Being Overly Confident
This is another common trap for traders; a series of winning trades will boost confidence. However, you need to keep in mind that the market is a dynamic place and not every technique will work in a similar manner repeatedly. Hence it is important not to get overconfident with a strategy unless it has been customized based on the current situation. This will also be a key deciding factor in the whole journey of trading.
Avoid Revenge Trading
A lot has been said about this part, and it remains a major bottleneck for traders. It’s how a brain is wired for most of the traders and generally results in loss. So control over indulgence in revenge trading revenge trading in an attempt to prove oneself will not work unless there is profit on table.
Regrets Over Past Mistakes
As part of the learning curve, all traders make mistakes and learn from them. So making mistakes is not inhuman and non-avoidable; it’s part of the journey. Don’t dwell on them-learn from them. No regrets, just move on and remember that there is a lot more out for traders to look forward to rather than just the past. Every day is a new day, filled with learning opportunities.
Non Biased Trading
If the positions placed are with innate biases and not on the basis of strong data backing, then the chances of them going in the wrong direction remain high. The objective is to keep emotions aside and remember that trading is for making profit, and with good data backing and fundamental analysis always supporting the decisions.
Trading Under Higher Stress Levels
Avoid trading when the stress levels are high. This will typically reduce the decision making capabilities and make one prone to high degree of errors & mistakes. Take a break, and if possible, spend time with a mentor or family members. This will help calm you down and allow you to think more clearly.
Conclusion
As a part of prop trading strategies, taking care of mental health and keeping emotions under control is very important. The above-mentioned key points will definitely help in managing trades. Leading a balanced life is very important and will be a key differentiator to being a successful trader. Trading is a serious profession, and placing trades requires a clear mind. Exercise, maintain a healthy diet, spend time with family and friends, and have a mentor or guide while trading. These practices will help you balance both aspects of your life.
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