By Humans are emotional by nature, but emotions influencing our decisions in trading are often overlooked.
Just like in everyday life, when we decide based on what we feel and believe instead of what we know for sure – for various reasons, such as lack of knowledge or time, we take risks without knowing why.
CFD trading markets can be challenging on someone’s emotions, but doing adequate research and preparing yourself mentally beforehand might become a lot less stressful for you overall.
We all want that – right? So keep these things in mind, detach yourself from the possible emotional rollercoaster, and you just might make some money after all!
Getting started and giving up too soon
So how does one get started with trading? Well, getting started is easy enough: find your platform of choice and set up an account. Next comes the hard part: stick to it!
All too often, we see people starting new accounts daily, making newbie mistakes and just plain doing poorly and then giving up after a few weeks or months of seeing themselves lose money. Let’s explore all the emotional issues that go along with trading.
Let me start by saying that if you are not willing to do some research, I would advise against attempting to trade successfully on your own. If you’re not willing to do even that, trading is certainly not for you.
Are you investing too much emotionally?
Typically, new traders lose money mainly because they invest way too much emotionally.
They emotionally invest too much when they find a strategy they like and visualize themselves as having some sort of edge or edge-giving indicator on their side; this leads them to overlook the risks involved in trading.
Big mistake! Trading is a risky business whether you have an edge (if I could easily find it, there would be no need for me here right now). I cannot stress enough how important it is to detach yourself from your emotions for trading; if you are not detached, you might as well forget about trading.
Trading emotions to look out for
I will give you some examples of trading emotions that are common to see or hear about, and then I will move on to the recommended solutions to these issues.
So let’s start, shall we?
The first emotion is regret, which can occur if you’re not successful early in your trading career, especially when you’ve done a lot of research into the market beforehand. If this happens, don’t fret!
It’s only natural for someone looking for an edge or confirmation bias early on. The solution here is simple: don’t emotionally invest so much! Regret should only set in once your capital starts dwindling after sticking with your strategy – even making no losses – but then you should be able to correct your course and get back on track, realizing that you didn’t have an edge.
The second emotion is greed, which causes people to overtrade and create a lot of unnecessary noise in their trading screen as they frantically look for trades and keep long-term positions open even when there’s no good reason.
The solution here is again simple: don’t emotionally invest so much! While this may require some patience, it will help you control yourself better and save money in the process by cutting down on commissions and capital required brainpower.
The third and final emotion I will mention is fear, which causes traders to take losses too quickly or prematurely. They cut their winnings short.
This is especially the case when they’ve just recently made a trade, and it’s not going as well as expected, or if they’re trading against news (like after an interest rate decision) and without any edge to begin with.
The solution here:
Don’t emotionally invest so much! As emotional creatures, we tend to make decisions too quickly. It would help if you strived towards calmness in your CFD trading actions because this will allow you to look at the situation more rationally.
