After swing trading the stock market for over 15 years I find the most difficult aspect of successful trading is dealing with my emotions.
Just like oil and water, money and emotions do NOT mix. When it comes to dealing with your trading and money, emotions can be your worst enemy.
The same emotions which fill us with elation during times of winning trades, can also cause us to buy at market tops and hold onto losing positions long after its apparent that the trade is not going to work and to give up when filled with despair.
Which is almost always right at market bottoms.
Take a look at this chart of the stock market. It is easy to see the emotional bottom when everyone is panicking and selling at the same time.
It is also easy to see the emotional tops, when everyone is buying at the same time. Huge spikes up on extremely high volume.
Most of those sellers, and most of those buyers, will lose their money.
Living In The Past
Although there are literally thousands of books written about emotions and trading, the biggest problem swing traders face can be summarized in four words:
“Living in the past.”
Because we are all emotional about our money, taking a loss in a trade or worse taking a big loss, can effect every future trade decision we make.
If you carry the emotional baggage of a losing trades around your neck every decision you make going forward will be affected by it.
You will enter trades too late waiting for confirmation so to make sure they are not going to become losers. You will exit winning trades too early to make sure you make money on it.
The result? Losses and even heavier emotional baggage.
The Current Trade Is The Only Trade
Successful swing traders live only in the present. The current trade is the only trade that matters.
The trades from last year, last month, or even last week have no emotional bearing on the current trade. The trade is based on a successful strategy, and it will take care of itself. So why spend useless time worrying about it?
In other words, yesterday’s trades are “out of sight and out of mind.”
Successful swing traders look at those selling climaxes on the charts, and the buying frenzies, and see them for what they are.
They are Emotional responses: fear and greed!
Successful swing traders ignore the emotions and trade the charts. They ignore the big ups and downs. They ignore the daily news and they especially ignore their know-it-all friend.
It’s not about ego… it’s about making money.
Trade The Plan
Trade the strategy. Trade the plan. Expect the markets to throw tons curve balls at you, but stick to it anyway.
Sticking to a swing trading strategy helps combat those emotional feelings. The strategy says when to buy. The strategy says when to sell.
Trading by emotions however, is doomed to failure!
It is not easy. Even after 15 years of trading the markets I feel the same emotions everyone else does. But I follow a plan because experience has taught me it is the only way to make money.
Make it easy on your self and follow a professional trader who has been thru the ups and downs of trading and can help guide you you becoming a profitable trader.
Here are the two I use:
Regardless of which Stock Picking Service you use or if even if you choose to go it alone, please download my free eBook: “The 7 Habits of Millionaire Traders”
You can read all my reviews on stock picking services here:
If you have any questions feel free to contact me.
– Robert Walsh