Learn to Handle Euphoria and Frustration in Trading

Euphoria from winning . . . it’s a glimpse of success, it reinforces that you’re doing the right thing. In this moment you feel like a successful trader and all your hopes and dreams in this moment, in your mind, become close to being a reality.
It’s the feeling that you’re on the verge of making it.  And the more desperate you are to see evidence of success, the more desperate you are to succeed in this profession, and the more euphoric you feel after winning.
Then there’s the flip side, frustration. You’ve had a losing trade, or a few losing trades in a row. You hate the world, you hate the markets, it ruins your day. You start to feel like a failure, like you won’t make it, it’s too hard. Despite all your efforts you’re not making progress. In this moment your hopes and dreams seem like a distant reality. And as euphoria, the more desperate you are for success, or to see evidence of success, the greater the frustration and despair you will feel.

Traders’ Emotions: A Matter of Perception

So what makes us euphoric or frustrated? The actual feelings from the trader’s emotions come from our perceived distance to our ultimate goals, our hopes and dreams.
But what puts us in a position to experience these emotions?  The reason is that deep down, we don’t have confidence in our strategy. We’ve studied it, learned it, and seen evidence from charts that it has worked in the past. But because we’ve suffered through so much failure, deep down there still is some doubt.
Think about it. If you had a strategy that you know worked six or seven times out of 10 on average, would you be excited over a winner? Would you be depressed after a loser? Probably not. You would accept that it’s just another trade with a probable but uncertain outcome.

Some Solutions

Learn your strategy, learn the ins and outs, and spend enough time with it, both looking at past charts as well as in real-time.
Look for times your strategy worked, and spend an equal amount of time looking at when it doesn’t work. But don’t  just consider the batting average, look at the average potential returns, look at the average potential loss. Come to the market with strategies where you have an idea what to expect, accepting that sometimes the market may sometimes outperform or underperform those expectations. Understand that every trade is independent from the one before it, and make sure each trade carries no baggage from any previous losing trade, or losing day.
Give yourself time. Becoming a profitable trader is not a race. The No. 1 question most new traders ask is how long it will take to become profitable. The answer I always give, is this:  the clock always moves slower when you’re looking it. Every person’s journey is different, so allow yourself some time to learn, to improve, and to grow as a trader. Understand that the great things in life don’t come easy.

Don’t Be Needy

Don’t “need” to make money in the markets. Needing to make money trading, to pay rent or bills, can be an almost impossible hurdle to overcome. It’s like swimming with a backpack full of rocks. Nothing will exaggerate feelings of euphoria and frustration more than coming from a place of needing trading profits. How are you going to remain calm after a losing trade, or a series of losers, when you’re looking at each dollar in your account as spending money? How are you going to hold onto a winning trade when you’re seeing the unrealized profits as a bag of groceries?
In order to trade unemotionally, you have to detach yourself from the money, and you have to be trading with money you can afford to lose. Not everyone comes to the markets with a lot of capital, so this is an issue for many new traders.
One of the best ways to help deal with this is to have a second income. Having another income takes the pressure off, so you can focus on executing properly and not the money involved.
Successful traders have learned to control these two emotions, euphoria and frustration. They have developed the ability to monitor their internal state for changes in emotion, and have safeguards to remove themselves from the market temporarily if it persists. Every trader should develop some sort of internal awareness. Next time you’ve had a series of winners, or series of losers, ask yourself how you feel? After winning, are you feel excited and proud of yourself, or are chalking it up as “business as usual”? In the face of losing, are you  upset and doubting yourself, is your mood off? Or are you accepting that losers will happen, that’s it’s just a cost of doing business?

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