Traders that are emotionally calm and cool that approach trading as a business, have greater odds of profitability than the thrill seekers and gamblers that come to the market. One third of trading is based on logic, and two thirds is based on emotions.
Here are 10 things that a trader has to overcome to stay calm and be profitable.
- Impulsiveness. The biggest thing that following a trading plan does is trade impulsiveness for proven rules.
- Impatience. Quantified entries and exits make you wait for a signal and avoid the noise.
- Anger. You have to depersonalize the outcome of your trades. Each trade is just an entry and an exit, with no emotions required.
- Uncertainty. We must accept the randomness of our short term results and understand our long term edge.
- Laziness. You have to do enough homework when the market is closed to be ready when the market is open.
- Greed. Following the correct position sizing parameters replaces the need for big wins and helps you focus on risk management.
- Fear. The confidence in your system will relieve the fear of failure.
- Ego. The desire to make money has to override the need to be right about specific trades.
- Hope. A stop loss has to replace the need to hope a losing trade comes back to even.
- Stress. You have to manage your risk exposure to losses in order to reduce your stress level.
The profitable traders are rarely, if ever, emotionally stressed. The egomaniacs and the gamblers are usually the ones that lose it all. The calm traders are the ones that typically keep a level head and maximize opportunities when the market presents them.
Are you a calm trader?
For an in depth look into these keys to trading with calmness check out my newest book: Calm Trader: Win in the Stock Market without Losing Your Mind