EMOTIONAL TRADES

18 de nov. de 2023

Hello friends, do you have a great desire to press a button and enter the market right here and right now? Most forex traders know this feeling, don't they?

The market is in movement. The price is flying in one direction for hundreds of pips, but there is one catch: you are not in the market! Observing such a situation, you would think that trading is going in a profitable direction, but you do not dare to enter. What to do in such situations? Can the price turn around? Yes, it can. But it doesn't! Now you are beating yourself up and counting how many pips and dollars you could have got if you had entered the market...


Let's stop for a moment and analyze: it goes without saying that this situation is a trigger for your emotions. The more the market moves in the direction you want, the more your emotions come out. Time seems to slow down. Every price movement is a roller coaster. In addition to all the troubles, the market "gets out of control" and the price moves higher and higher. This time, however, your patience bursts under the pressure of your emotions and you jump into the trade right here and right now.

Almost all traders go through it at one time or another. And in most cases trading ends in losses. Why? Because as soon as a trader jumps on a market high or low, it immediately starts to turn around and go against you (at least, it happens in 99% of cases). There comes an emotional tipping point where the trader often opens a position while price continues to move one direction. The trader's urge to press the button becomes almost irresistible. Ironically, the trader will not be in a hurry to exit such a position a few minutes later, even when in most cases the price inevitably shows a reversal. This is the nature of markets.

Pushing the Button 🖱️
The process described above is called "pushing the button", which naturally leads to market entry. In the scenario described above, the trader enters the market late. The opposite is also common: early entry into the market due to anticipation of a potential move. This is called "chasing the market". Both cases actually lead to the same problem of inevitable losses.

Don't get me wrong there is nothing wrong with entering the market. Every trader should enter the market because there is no other way to take advantage of the opportunity the market provides for trading. However, entering the market itself can be right and wrong. The same, by the way, is true for exiting the market.

Wrong way: obviously, the above scenario is a bad entry. Traders chase the market and the opportunity to trade. They push the button because their patience breaks down and they lose discipline. Their emotional capital is drained. Internal pressure from not being in the market, greed (counting how many pips they could have made), mistakes from the past (why didn't I enter the market sooner), and tracking price movement in the market lead to the inevitable mistake of pushing the button.

How Do You Deal with That? 🧠
The right way: a trader uses his trading plan and proven strategy specifically to analyze and evaluate the trading condition of a currency pair at a given time of the session or day. The trader waits for the entry conditions prescribed by his strategy and plans his position opening. The trader trades when these conditions are met and executes the trade management plan accordingly. The trader focuses on implementing his plan and does not get distracted by any internal thoughts that may take his attention away from following his goal. At the end of the day, the trader evaluates whether his trading plan was properly implemented.


It becomes evident that following his strategy correctly allows the trader to focus on his plan rather than on missed opportunities or other distractions that cause emotional imbalance. Ideally, traders should use the right method every time. Needless to say, there are those bad days when even great traders can deviate from their trading plan and find themselves trading the wrong way. How can this be avoided?

1) Look Less At The Chart ✔️
While trading, control your emotions. If you notice that you are looking at charts quite intensively, your emotional state may be losing balance. Take time away from trading and the computer, and as a result you will regain your ability to concentrate.

When the markets generate emotional reactions in you, get up and move away from the screen to restore your physical and emotional state. When the market creates an emotional balance, a strain on your psyche, take a long break by spending time outside your office/home, take a walk, you can take your dog for a walk.


2) Measure Twice, Cut Once ✔️
The moment you are about to trade, double-check that you are strongly following your trading plan. Some traders enter the market only after a correction, even if it is just a small pullback on a 15-minute chart. Their motto is: before entering the market, concentrate.

Another trick that some traders use: the moment they decide to enter the market, they wait for 1 additional candle (on the timeframe they use to enter). This is usually the candle where traders enter on a pullback, getting the best price to enter. And they usually enter if the price continues on its path. Just try entering one candle later will often save you some pips.

3) Aim Not To Make Money, But To Trade Correctly ✔️
Set yourself a goal not to make as much money as possible, but to trade as well as possible. These are not the same thing. Evaluate each trade not in terms of profit/loss, but in terms of how well it was opened and closed according to the rules of your system.

Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment