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The 14 Emotional Dangers For Traders:
Anger- Leads to revenge trading and trying to get even after a losing trade.
Fear- The inability to take an entry or hold a winner in a trend due to the fear of a loss after entry or a winning trade giving back profits.
Disgust- Can lead to loss of a traders confidence after disgust with your own lack of discipline or the market price action.
Happiness- Surprisingly happiness can lead to trading too big and taking on too many positions. This usually occurs after a big winning trade or a winning streak when euphoria starts interfering with a trading plan or trading system.
Sadness- Can lead to having difficulty taking the next trade entry or cutting a loss. This usually happens after a big loss, a string of losses, or a big drawdown in trading capital.
Surprise- Many times a surprise can lead to making decisions based on emotions and abandoning a trading plan when the unexpected happens.
Neutrality- Trading is a lot of work and only passion and energy can move you toward doing the required homework that leads to eventual success. You need the energy of passion to keep your focus and do the work, apathy is not going to cut in with trading.
Anxiety- Can lead to exhaustion due to excessive stress. Confidence in yourself and your system will help overcome internal anxiety.
Love- If you truly love trading the markets then only time separates you from success. If you love trading for the wrong reasons it can be destructive. Like trying to get rich quick.
Depression- Leads to abandoning your trading. You can come back from a financial loss but you can’t come back from emotional ruin.
Contempt- Having contempt for the markets or other traders will result in bias and bad decision making.
Pride- Leads to trading too big, not cutting losses fast enough, and wanting to be right and prove something more than being a rational trader with a plan.
Shame- Makes it difficult to talk to others about your trading and look at your account capital due to your bad decisions.
Envy- Envy leads to external focus instead of the internal focus needed to trade successfully.
Trading is only successful long term when it is done using our rational mind, emotions are only valuable if they create the energy in us to take us where we truly want to be. Emotions are positive if they protect our psychological boundaries, not so great if they just support an out of control ego. Emotions can not be avoided so we must be mindful of them. We must be aware of our emotions and understand the message they are sending. Emotions must be felt because suppressed emotions will show up in negative ways later. Emotions are great tools at times but terrible masters.