7 Emotional Trading Mistakes and How to Avoid Them
- Ankit Gupta
- July 29, 2025
Introduction:
You have likely experienced trading on emotion if you’ve ever placed a trade simply because it “felt right” or have closed a winning position too soon out of fear of losing the profits. This happens to almost all traders at some point. Emotions like frustration, fear, and greed can take over quickly and lead traders to make decisions that are not in line with the predetermined plan. In fact, most traders who fail proprietary trading challenges or lose all their personal account balance do not do so because they lack knowledge, but rather their emotional control fails them.
In this blog, we’ll cover the most common emotional trading mistakes, why they happen, and actionable steps you can take to avoid them, so you can trade with a clear mind and a sharper edge. Let’s get started and have a deeper look on how to avoid emotional trading and develop discipline in trading.
What is Emotional Trading?
Emotional trading happens when, instead of logic, strategy or analysis, emotions drive decisions. Let’s say you took three losing trades in a row and decided to adjust and double the position size to “get it all back.” That is an emotional trade. It is not just poor decision making with one trade but a change in your overall behavior: abandoning your strategy, over-leveraging, taking trades you normally wouldn’t, etc.Â
At the moment, it feels right, but when you assess afterwards, you realize you risked money unnecessarily. In professional prop trading firms like Hola Prime, there are limits on drawdowns and achieving consistency. One little emotional slip could be all it takes to fail the prop challenge or lose funding. So to help you with this, here is a list of common emotional trading mistakes and ways to avoid them.
Common Emotional Trading Mistakes:
1. Over Trading:
Overtrading is one of the most common mistakes. It happens when traders take too many trades, often because they want to “make back” a loss or feel like they’ll miss opportunities if they stop. For instance, suppose your daily loss limit is $500, and after hitting -$400 in the morning, you continue trading aggressively. By the end of the day, you might be down $1,000, violating your prop firm’s rules. Overtrading is often a result of restlessness and a lack of patience.
2. FOMO:
We’ve all seen it: Bitcoin is pumping 10% in an hour, and you jump in right at the top, only for the price to retrace. FOMO trades usually happen when you see a big move and feel like you’re being “left behind.” For example, if Ethereum spikes from $1,800 to $1,950 quickly, it might feel like it’s going straight to $2,100. But without analysis or a planned entry, you risk opening a trade at resistance, setting yourself up for a quick loss.
3. Revenge Trading:
Revenge trading is when you try to win back money you just lost. Let’s say you lose $300 because of a bad entry, and then immediately double your position size on the next trade, hoping to make it back quickly. Often, this ends in even bigger losses. Revenge trading is dangerous because one or two bad decisions can easily put you in losses. To avoid this, it is important to consider losses as part of the overall trading experience. Your trading psychology should be strong enough that there is no space for revenge trading and FOMO.
4. Greed:
Greed is why traders sometimes don’t take profits when they should. For example, if you’re up $1,000 on a trade, your plan says to exit at $950, but you hold on because “it might go higher.” Moments later, the price reverses, and you walk away with only $100 profit – or worse, a loss. Greed often convinces traders that the market owes them something, which it doesn’t.
5. Overconfidence:Â
Confidence is good; overconfidence is not. Overconfident traders often abandon risk management after a series of wins. For example, a trader who grows their account by 10% in a week might feel unstoppable and start doubling position sizes. In prop firm trading, where consistency is valued, overconfidence often leads to broken rules and account termination.
6. Setting Unrealistic Targets:Â
Aiming to double your account every week or expecting to win every single trade is unrealistic. For example, expecting a $50K account to generate $10K profit daily is not only unrealistic but will likely push you into risky and unplanned trades. Unrealistic targets create unnecessary pressure, which often triggers other emotional mistakes like overtrading and revenge trading.
7. Failure to Cut Losses:Â
Many traders hold on to losing trades, hoping they will “come back.” In prop trading, this is one of the quickest ways to fail, as violating max drawdowns is non-negotiable. Hence, instead of letting your emotions take over, stick to your plan and adhere to your strategy. It is important to have the ability to absorb losses and a positive mindset for traders.
How to Avoid Emotional Trading:
1. Set Clear Expectations:
Before trading, be realistic about what you want to achieve. For instance, aiming for 1 to 2% daily growth is far more achievable than chasing a 10% gain every day. Break down your monthly goal into daily targets and acceptable drawdowns. This reduces pressure and keeps your emotions in check because you know exactly when to stop for the day, win or lose.
2. Develop a Trading Plan:Â
Your trading plan is your defense against emotions. It should include entry and exit rules, position sizing, risk limits, and a stop for the day. For example, you might write: “If I lose $500 or hit my daily goal of $1,000, I will stop trading.” Stick to it. Print it out, keep it next to your desk, and check off every step as you go.
3. Logic and Analysis over emotions:
Base trades on data, not feelings. For example, before entering a Bitcoin trade, check support/resistance, RSI, and volume, instead of acting because “it looks like it’s going up.” Practice reviewing historical setups so your brain learns to trust facts over gut instincts. Many traders who journal their trades find that their emotional decisions decrease by simply reviewing their logic each day. At any given day, rational trading would beat emotional trading, hence, focus more on logic and analysis than what you feel about a trade.
4. Use Stop-Loss and Take-Profit:
A well-placed stop-loss and take-profit order acts like an emotional seatbelt. For example, if your plan says risk $200 per trade, stick to it. Avoid moving stops further away because “the market might turn.” Automating your stop and target placement helps remove emotional decision-making during the trade.
5. Take Breaks:
Trading can be quite emotional, especially during drawdowns. When you hit your daily loss limit as per your trading plan, you should not continue to trade for the rest of the day. Even when you have winning days, schedule breaks of short duration every 1 to 2 hours to refocus. Whenever you feel fatigued, take a break, like taking a ten-minute walk away from the screen after three trades, so you do not make an emotional decision due to fatigue.Â
6. Cut the Noise:Â
Throw out the noise (unverified news and social media). Too much information, especially inaccurate social media hype, could trigger unnecessary emotional trades. For example, watching Twitter posts about a currency or bitcoin “going to the moon” leads you to reckless decisions. Use trusted news media sources or economic calendars. Check the news only at certain times during the day, not scrolling your social media feed all day long.
Conclusion
Mistakes due to emotional trading are supposed to happen, but they can be prevented. Most mistakes – FOMO, revenge trading, or holding onto losing trades forever – happen as a result of traders acting without planning or thinking ahead. If you set expectations, stick to a plan, have set stops, and take out market noise, you can be disciplined and trade confidently. If you can control yourself emotionally, you have already put yourself ahead of most traders in the market.
FAQs: Emotional Trading Mistakes and How to Avoid Them
1. Why is emotional trading dangerous in prop trading?
In prop trading, strict rules on drawdowns and consistency are in place. Emotional decisions often lead to rule violations, which can result in failing a prop firm challenge or losing funding.
2. How can I stop overtrading?
Set a maximum number of trades per day and a daily loss limit. Stick to them, no matter what. For example, if your daily limit as per your strategy is to not lose more than $500, stop trading as soon as you hit it, even if you feel tempted to win it back.
3. What’s the best way to handle FOMO in trading?
Focus on planned setups only. If you miss a trade, remind yourself there will always be another opportunity. Reviewing historical charts helps you see how chasing moves often results in losses.
4. Can coaching or mentoring help with emotional trading?
Yes, as much as coaching helps in learning new trading skills, it also helps in overcoming psychological challenges. At Hola Prime, you can get free 1-on-1 coaching from top trading coaches. Join our Discord channel to talk to coaches.
5. Is emotional trading only a problem for beginners?
No. Even experienced traders can fall into emotional traps, especially during volatile market conditions or when trading with large positions. Emotional discipline is an ongoing skill to develop.
Disclaimer:Â All information provided on this site is for educational purposes only, related to trading in financial markets. It is not intended as financial advice, business or investment recommendation, or as an opportunity or recommendation to trade any investment instruments. Hola Prime only provides an educational environment to traders, including tools, materials and simulated trading platforms which have data feed provided by Liquidity Providers. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local laws or regulations.