Hi to all,
I have been reading about emotional trading and why it is so nasty, but I am not clear what the symptoms of it are. So what are the feelings you have when you’re under emotional trading?
Cheetu
Emotional trading to me is obviosuly when you let your emotions take over from your analysis. Best example would be holding on to losses to long just incase price moves back in your favour. Also changing profit targets mid trade becasue you are worried price might turn against you. There are loads other examples but these are the 2 obvious ones that spring to mind.
If you just lost a trade and you want to immediately get back in with extra risk.
If you just “feel” and your early in the game, that the market is going to go _ _ _ _…
If you feel that you contradict your analysis
If you just been enraged by someone
If you are just putting an order down contrary to what your analysis says just for the sake of having one
That’s all that I cant think off the top of my head
There is a good article titled “Forex Trading Without Emotion”. It will be helpful for you.
Source: http://ezinearticles.com/?Forex-Trading-Without-Emotion&id=7197457
when you feel like you want to punch straight through your monitor,
when you say, " What the —" to yourself,
When you say, " Are you Serious’, out loud
when you take a big inhale, and slowly exhale with" Ahhhhhhhhhh",
Pressure, stress, confidence, greed…these are the driving factors of emotions in trading. These will ultimately lead traders to make irrational decision with no logic. Those types of trades are the risky ones and which can thus cause losses.
I would agree with MCharles and James Shepard’s examples are which happened with me.
I would honestly get a squeezing feeling in my chest. It was a physical sensation of anxiety. When in that state I would misjudge what I was doing. I would actually “see” signals that I thought they were there but which in fact where only half formed and would go against me as soon as I pulled the trigger…which would make me even more anxious.
I’ve never “revenge” traded or anything though. I’ve always been paranoid that if I trade against my system, things will automatically go bad. It’s one of the few trading superstitions that I still entertain in my mind. The truth is that ANYTHING can happen at any point in time during the course of a trade.
I take trades all the time which immediately go against me and stop me out even though my signal was there. Since that is the case, then I know that taking a trade on a half-formed signal which goes against you isn’t much different (after all…you could have taken the half-formed signal and have price go in your favor just as easily) so thinking things like, “Yup…see…there it goes…you entered early and now look what’s happening!” don’t really make sense.
Regardless, it FEELS to me as if I’m being punished by the market when I take a non-signal and it goes against me. When I take a non-signal and it goes in my favor, my thinking is along the lines of “SEE! I shouldn’t have taken that trade but it’s going in my favor. The market is trying to TRICK me into doing this more often so that I can develop a complete lack of discipline at which point it will take me out in one fell swoop!” So whether I win or loose after an early-entry, I receive negative emotional feedback and it does pretty good job of keeping me away from the evils of emotional trading.
I got heartbreak…
It sounds to me that you are trading a system that probably has multiple indicators, and you justify a trade by lining up all the indicators…
To truly get a hold of your emotions you need to get past this type of trading, dump the indicators, and start learning what actually moves prices… Fundamentals. Once you get a handle on this, learn price action. Combine these two and you get the confidence of knowing where price SHOULD be going based on economic releases… And where to enter, based on price action. You can’t get that confidence from following a system that only works because some indicators that you probably don’t even know the formulas for, are lining up.
I actually don’t use any indicators. I also don’t have this problem anymore. It really was all the psychology of the thing. I followed the advice found in Trading in the Zone. Now that I’m at peace with the reality that anything can happen once I put on a trade regardless of how well I think I’ve done my analysis and that my success is based on how my edge plays out over a series of trades and not any given trade of a particular bad run of trades.
Hi FXassassin,
I felt enlightening with your first post, and this one is really cool 
So essentially you’re saying that accepting the fact that the market is unpredictable is a physiological milestone in successful trading, am I right?
Cheetu
The most certain symptom would be a declining account balance.
Yes that is right and this answers my first question. Would you mind answering my second question too?
it has happened/will happen to most/all of us at some point. 
You are correct on that. I can’t really go into it in-depth as the entire book I mentioned is based around this concept, so it’s pointless to try and squeeze a book’s worth of info into a forum thread.
That being said, trading has become a lot easier for me now. Today, there are just as many times when I put on a trade and the very next candle “betrays” me and goes in the exact opposite direction far enough, fast enough to punch my S/L as there were a month or two ago. I totally shrug it off now. Like water off the duck. I’m still baffled by the whole thing, but my attitude is more like, “Wow…look at that. This trade didn’t work out. Who woulda thunk it? Oh well…on to the next.”
For me, the most important thing to focus on is working the system exactly as planned. Never take trades that are not according to the plan which causes you to fall into the “overtrading” trap. Just as important, though, is not “undertrading”. That’s when you have a series of losses in a row and decide to “take a break” to let the market work out the kinks…or whatever other mental nonsense we use to give in to our fear and not put on another trade. Usually, this is the exact time when you would have broken through and score a win, or a couple of wins in a row, which you would have needed in order to balance out the losses.
If you start skipping signals because you’re afraid that the market is in a “bad patch” then you’re not really working the system. Your money management plan is suppose to protect your account balance, not additional filters, whether they be indicators or putting your whole trading plan on hiatus at your own discretion.
I’m blessed in that I have a system which throws a lot of signals. Sometimes as many as 30 in a 10 hour period. At least 60% of them fail to bring in a profit. The winners more than make up for it though. The nice thing, though, is that the sheer volume of trades has kinda deadened my senses to the losses. I don’t track them as I’m trading.
It’s only at the end of the day that I tally my wins and losses. Usually, I’m always surprised by both the wins AND losses. I’ll be like, “When did I get that winner? I don’t remember that.” If I scroll the chart to the left though, I always see where I would have entered, that it was a valid signal, and why it ended up a winner. More often than not though, I find a series of losses that I forgot about.
I don’t even focus on the account balance anymore. All I care about is if my monthly win/loss ratio is hitting my target of 0.40 or better. Sometimes, I’ll have a bad day or two or three in a row where each day the average is like 0.33, 0.25, and 0.34. It’s really disappointing, but all I have to do is scroll up to the top of the spreadsheet and I’ll see that even though I’ve had a rash of bad days, the overall ratio for the month is 0.39 or so. This is almost right where I need to be, and if there’s a lot of days left in the month, I know that there’s plenty of time to make it up. So I just focus on the taking the trades according to plan, and the money management and the win/loss ratio works out the rest by the end of the month.
It’s all psychology.
most of the dudes here talk about anger and some bad emotions, its not only that, some emotional trading is related to love and passion, so many bad trades just happened because you have an old good expeirince with some sort of setup, pair, period…and so on, so you miss looking to the all picture.
i have seen one trader who only go long with all pairs all the time for one month!!!
when i ask him why he did do that he told me following the trend, but the real trend have nothing to do with his trades, he has a good love expeirince with long positions before(or bad one with short ones), so he miss all the good setups for shorts.
one more thing is that when you fall in love with any kind of job including forex trading you may stay working for along time,
in forex trading that may lead to what we call overtrading which may lead to a huge unnecessary loss.
try to be neutral, when you feel angry or excited try to quit trading for sometime.
best wishes.
I would agree with MoneyNVRSleeps, MCharlesF, FXAssassin
You have to trade by yourself to know what it is.
Hi again FXAssassin,
This is very interesting You have nailed each and every trap of emotional trading; my thumbs-up for you :35:
Thanks for your input
Cheetu
P.S. I have sent you a friend request, please accept it.