Stock Market Emotions Control Them or Die!

Stock market emotions can run wild, they can have you happy, sad, frustrated, and running around in circles trying to find the gold all at the same time. Nothing else will hurt you more as a trader then your stock market emotions.

You could know everything there possibly is to know about the market. You can know how to find stocks that will “Beat The Market”. You may be the world’s best Stock Trader, but if you don’t know how to control your emotions you will be just another one of the herd running around crying about your losses.

Think about it why do people sit in front of the TV hanging on every word a financial hot shot when we know that the news has a terrible track record in the market. Why do we buy a stock that we know nothing about just because our brother knows they will go up?

The Answer, Stock market emotions. Luckily you can control them, if you couldn’t there would be, no Warren Buffets of the world, no stock traders would not exist, and no one would even try to beat the market.

So what do we do? We need to not only trade stocks, but also trade emotions. We have emotional capital too, and we need to act like it. Here are some major ways I have found to trade my emotions.

1. Have a plan

2. Position size

3. Walk away from the screen

Having A Plan

If you already have a plan in place for when you are going to buy a stock and when you are going to sell it you are ahead of the game. Most people plan on buying a stock, it goes up, they sell it and become rich. That doesn’t work.

You need to have a strategy. Every time you buy a stock ask yourself

1. Why am I buying it? Was it a hot tip, or did you buy it based off of some technical or fundamental data.

2. When will I sell it? What are my stops? Do I have a target?

Having a plan helps you to avoid using your emotions to make decisions.

Position Size

Ignoring the fact that risking too much one 1 trade will probably lead to a bankrupt account you need to do it in order to help you with your emotions.

If you are risking 50% of your account in 1 trade it is obviously going to put more of a strain on you. You will be sitting there watching every tick closely, why because your human and you have emotions.

If you only risk 2-5% of your account on 1 trade however it is much easier to forget about it and not worry about that trade.

Walking away

The last important part of trading emotions is walking away. Don’t think about what is going on in the markets 24/7. Instead go do something else, it will help clear your mind of the stock market and you will have fun doing it.

Losing Streaks

Every trader has them and there is nothing harder for your emotional capital to deal with. No one wants to go about losing a series of trades in a row, they will make you want to stop trading altogether and just go put all your money into some bank savings account.

The best way to deal with these emotionally is to not to sart revenge trading but to look at them as learning experiences. There is a quote from a famous trader saying that they never lose money in the market, instead they paid for information.

If you look at a losing streak as just paying for information you will be quicker to pick yourself off the ground as well as better equipped to deal with it the next time around.

Stock market emotions can be very tricky, but they can be overcome.