How do you manage emotions when trading stocks? The world of trading can be fast-paced and stressful. Here are some ways to keep your emotions in check while trading.
Create a Business Plan
Treat your trading endeavor like a business. If you write up a business plan or a trading strategy and stick to it, then you are much more likely to avoid emotional trades. Keeping a journal of successes and failures is a great way to avoid uneducated emotional decisions.
Making trades based on data or on a predetermined set of criteria will always be better than gut reactions to price changes.
Stick to your plan no matter profit or loss (in the short-term) and no matter the success or failure of a few trades. Your emotions can start running if you have a string of wins or losses. Stick to your overall plan and consult your plan to figure out your next move.
Take a Break
It is a good idea to take a break and review your strategy after making a set number of trades. After you hit your preset number of trades stop and step away from looking at the markets. Mistakes often happen after making a lot of trades in succession. Before jumping back in consult your plan.
Look at Your Positions Objectively
People will often become emotionally invested in a company. They may personally like the product or service that the company offers, which isn’t a problem, but that doesn’t always translate into a successful trade.
You must use logic and reason when evaluating your moves. You may like a company, and you may like a product that they sell, but you must know when to sell and move one.
Manage Your Risk
Smart traders manage their risk by not betting too much on any given trade. As part of their overall trading plan, they may decide to never make a trade that represents more than 5% of their overall portfolio. Smaller trades mean smaller loses which can help minimize emotional responses when your trade doesn’t go your way.
Even More Tips
The proceeding are just a few ways that you can keep your emotions in check while trading. You can click here for even more.
Emotions are a part of trading and life. While you can’t completely eliminate emotions you can minimize and manage them.
How do you manage emotions when trading stocks? Crafting and adhering to a well thought out strategy are one of your best tools to be successful trading stocks.
Writer and Investor. Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.