Your Emotional State is Killing Your Trades
Free yourself from the emotional rollercoaster and take control of your trading mindset.
Why Emotions Are the Silent Portfolio Killers
Trading is inherently emotional. The lure of massive profits and the fear of painful losses can lead even the most seasoned traders to make irrational decisions. But emotions don’t just cloud your judgment; they sabotage your results.
When you’re emotionally attached to a trade, you start to:
Move Stop Losses: Hoping the market will "turn around."
Hold Onto Losers: Refusing to admit you were wrong.
Overtrade: Chasing losses or profits out of frustration or greed.
The Source of Emotional Attachments
Overconfidence in Predictions: Believing you know what the market will do next. Spoiler alert… you don’t.
Personalizing Trades: Seeing a losing trade as a reflection of your worth or intelligence.
Risking More Than You Can Afford to Lose: When too much is on the line, every tick feels like life or death.
How to Detach Emotions from Trades
Focus on the Process, Not the Outcome: Your job as a trader is to execute your plan consistently. Whether a trade wins or loses is irrelevant… it’s the execution that matters.
Use Proper Position Sizing: Risking 1% of your account on a trade hurts a lot less than risking 10%. Smaller positions make it easier to stay level-headed.
Follow Your Plan Religiously: Create a trading plan with clear entry, exit, and risk rules. Then stick to it, no matter what.
Separate Yourself From the Trade: Remember, the market doesn’t know you exist. A losing trade isn’t personal… it’s just probabilities in action.
Practical Example
Imagine a trader named David. David finds a strong breakout setup, but the trade starts moving against him. Instead of sticking to his stop loss, David removes it, thinking, “It’ll come back.” The trade tanks, and David wipes out a week’s worth of profits (this has been me more times than I want to admit).
Now picture the same scenario, but this time David has detached emotionally. He takes the loss at the stop loss level and moves on, knowing his edge will play out over time. He lives to trade another day with more of his capital intact.
Actionable Steps to Apply This Principle
Set Risk Limits: Decide how much of your account you’re willing to risk per trade and stick to it.
Write Down Your Trading Rules: Include specific criteria for entering, exiting, and managing trades.
Log Your Trades: Track not just the numbers but your emotions during the trade. Identify patterns and work on staying objective.
Practice Mindfulness: Before placing a trade, take a deep breath and remind yourself of your plan. Detach from the outcome.
Celebrate Process Wins: Did you follow your rules? Great… celebrate that, even if the trade was a loser. Process over profits.
Wrapping Up
Emotional detachment is one of the hardest skills to master as a trader, but it’s also one of the most rewarding. By focusing on the process, using proper risk management, and remembering that losses are part of the game, you can break free from the emotional chains holding you back. Trading isn’t about being perfect… it’s about being consistent.
Quick Glossary
Stop Loss: A pre-set price level where you exit a trade to limit your losses.
Position Sizing: Determining the size of your trade based on your risk tolerance and account size.
Trading Plan: A written set of rules that outlines your strategy, risk management, and execution process.