Why Do Traders Get Emotional?

Humans are emotional by nature, so as traders. Base on my trading experience, the main reasons to trading emotionally are due to:

1. You are trading beyond your comfort limit.

2. You are looking for a big hit with a bigger position, wishing the market to move accordingly to your desire.

3. You knew if you got this wrong, you are likely finished, or you gonna lose big time.

Simple right, but not so simple.

At times, during my earlier year as a trader, I did like to open bigger positions as well especially if the setup is 90% good.. The nerve ticks every second and the tounge couldn't stop saying, please please... be on my side this time. The bad news is, I was hardly correct everytime I did this and I learned my lessons. Period.

Though it feels good when you hit it, but it feels like suicide if the position went against you. I knew straight away that this is not the way to trade if I were to survive in this field. It is indeed a bad habit.

Hence, the only cures to this emotional tradings are:

1. Do not open big position if you can't take it. Risk only 3% and below of your total equity size.

2. Only dare to open bigger position using the house money, i.e. the daily profit that you secured earlier of the day.

3. Trade small, and increase your position slowly if the market is with you. Play several small positions and close those in profits as insurance. Remember timing is the key here.

4. Plan your trade carefully. I normally trade the London session only.

5. Try not to pick tops or fishing bottoms as those entries are very risky, though you may get it correct at times.

6. Always calculate upfront on how much you are willing to risk, say USD100, USD500 or USD1000. U knew u gonna lose this much if you are wrong.

7. Set Stop Loss. The market force is so immense so if you don't plan to have any SL upfront, prepare to face severe consequences.

8. Read the news and do your own analysis. Comprehend the market sentiments by studying the daily, weekly as well as monthly price actions.

9. Use whatever indicators that are comfortable to you. At the moment, I am using a Kuasa Forex & ProFx indicators bought online, plus some other built in indicators within MetaTrader platform. Simpler is better. Personally, I love having a few indicators as confirmation. My main charts are the 4hr, 1 hr and 15m candlesticks. I discovered that most major movement continuation and/or reversal starts at the 1 hour interval.

10. Stick to your plan. Do not jump in or jump out easily. Market swings between 20 to 30 pips are normal, that is why I always use 50 pips as Stop Loss and 100 pips as my Take Profit (2 to 1 risk reward ratio). At times, I do quit earlier when I am scalping the market.

That's it. All the best to your trading.

p/s: I made over 200 pips today with 34 winning & 1 losing trade ! Of course I was scalping.