Becoming a consistently profitable trader is the goal of all traders. Let’s assume you a have a methodology with an edge and you apply it consistently. Let me ask you something… Is your emotional state consistent each and every time you place a trade? An automated system run by a computer places all trades under a consistent “emotional state”. The PC is emotionally consistent. How about yourself?
For the purpose of this article, I will assume that you already have a methodology with an edge and confidence on it, which is the first prerequisite for consistency.
Maybe you have that system with an edge and still, despite having it, you are not consistently profitable yet. Why? Do you maybe fail at executing it? And if so… why do you fail at executing it?
Does it happen to you that you place stupid trades, then analyze them after closing, realize that they were invalid and why they were invalid, promise yourself not to do it again, and then you do it over and over again, sabotaging yourself and committing the same mistakes over and over again?
When trying to dissect this problem into pieces myself I came to the concept of “emotional consistency”. I realized that sometimes I would be placing my trades being in a collected and composed state (for instance, outside of regular trading hours). Other times I would be placing my trades under a stressed state of mind. Other times I would be doing so impulsively, or in a rush. Other times I would be desperate, or hoping (e.g. to recover previous losses of the day) or revenge trading. Under these different and extreme emotional states, things get blurry, rational analysis is distorted and execution errors arise.
Suddenly something became very clear to me. Despite the quality of my system, the outcome of my trading would never be consistent if my emotional state was not reasonably consistent along the way. I was working my issues at a technical level (e.g. “why was this trade invalid?”) and not at their root (“why was my emotional state not valid?” -which is what prompted me to take an invalid trade in first place-). This was eye opening for me. I stopped thinking so much about charts (of which I already knew enough) and started to pay more attention to my emotional state, continuously.
Now, why your emotional state is not optimal and how to fix this, is a different chapter. More to come on this in future articles… But for now I want you to understand that the problem is not technical but emotional.
For the time being, I want you to think if your emotional state is consistent when you place your trades. Write it down before or after each trade. Write how you felt. What were your emotions when placing the trade? Fear to miss the move? Craving to trade? Fear to lose in an open position? Greed? Revenge trading? Where you collected? Where you in a rush?.
Bear in mind that the first step to fix these kind of issues is awareness. So this exercise is extremely useful. Pay more attention to your emotional states.