Trading Secret - Emotionally Detached
You must look at trading as a
business, and emotionally detach yourself from the
results of the trades.
Many traders tend to personalize
their trades and
equate their self worth or measure their ego with
the amount of money or number of winning trades they
make. This can happen any time but is especially
prevalent when a trader goes through a heavy winning
or losing period. An individual needs to keep an
even temperament because one of the requirements in
trading is to not get swept up in unbridled
optimism, or blown away in the depths of despair.
Trading
can be a highly emotional experience because profits
and losses can tend to be exaggerated. Unlike many
other businesses where revenues may be more steady,
trading performance can be consistently volatile
with good and bad times highly magnified. These
highs and lows bring out the emotional side in all
of us, which can prove destructive if left
unbridled.
It
is easy to become elated after a great trading
period and live it up to the fullest. After all,
the trader has most likely worked hard for this
and deserves to celebrate and enjoy every minute
of the happiness. Savoring success is part of
living, but in trading you must realize that the
higher highs may be accompanied with lower lows.
If a trader becomes too emotional, losing
periods may lead to depression while winning
periods may produce a dangerous overconfidence.
Whether trading is going badly or well, you must
remember that a series of winning or losing
trades may be just around the corner.
It
serves no purpose to be too optimistic or
pessimistic in trading. Too much optimism leads
to focusing on profits, but not being concerned
with losses. Too much pessimism may make a
person dwell on risk, never believing an
opportunity for reward will arrive.
Trading
is a business. The more emotional you become on
the upside, the easier it is to become emotional
on the downside. You must temper your elation
with the sobering fact that after every new
trading profit or equity high is the possibility
of a new and even greater maximum drawdown, with
a subsequent emotional drawdown.
Trading Secret -
Emotionally Detached
