One of the common themes among traders who come to me for help is a desire to eliminate trading with emotion.
They often believe that their emotions are to blame for some big losing trades that have wiped out weeks or months of trading gains.
Once we dig into their trading process, I have good news and bad news for them.
The bad news is that they’re wrong about their emotions being the main issue.
The good news is the root cause is fixable, but takes some time.
Emotional trading is not the root cause, but a symptom of the underlying issue.
The real problem is the trader having to make decisions during the trading day that they’re not fully prepared for.
The trader is putting themself in a situation where they’re not confident they have an edge.
When there’s money on the line, that situation is very stressful.
When you’re unsure what to do, you’re pretty much gambling and you have to resort to what your gut says or just guess what the most profitable thing to do is.
This usually doesn’t end well and in the rare cases you do get lucky and end up with a profit, it sets a bad precedent for the future.
How do you fix this? It’s pretty simple.
Any time you find yourself having to make ANY decision during the trading day, that should be a big red flag. Take detailed notes about it.
Then, after the trading day when real money isn’t on the line, research all the historical instances of that situation using a backtest or a manual chart review.
The goal here is to do whatever research it takes to be confident that you know where your edge is when it happens again.
The next time it occurs, you’ll decisively follow the script you’ve created for yourself instead of making an uninformed guess.
Repeat this process for any moment of indecision, and you won’t have to worry about taming your untameable trading emotions.
