Emotional Financial Trading

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Many traders lose their funds in the markets every day because they are unable to control their emotions. Many experts have done a lot of research on the psychology of trading and everyone agrees on one thing, Traders should have a trading method and a systematic strategy that enables them to use only logic and rationality when trading and not let the emotions of its to logically change those based trading activities.

-Fear of losing funds: I had three Forex traders a beginner, a broker and a trading expert for 2 months with the same capital and leverage in a demo account again for 2 months with a direct account (same capital, platform and trade conditions) and the results were shocking. The expert had an additional 2% return on demo account while the other 2 traders had over 88% more return on demo accounts and it was all explained by a fear factor. Fear when trading in financial markets often leads to panic and panic leads to closing positions at the wrong time and at the wrong price resulting in huge unexpected losses. The moment a person decides to enter the financial markets and become a trader, he willingly accepts the risks in exchange for big profits. To live with that risk requires the trader to remain rational and fearless at all times.

– Emotional connection: financial markets are a wild battlefield and what grows today goes down tomorrow. This is why traders need to use logic to decide when to leave a particular instrument. Many traders have suffered huge losses due to emotional feelings associated with certain stocks, currencies or futures because it made them big returns and prosperous profits. A successful trader knows exactly when it is time to move forward, then it is time to move forward, true loyalty in the markets is for profits and not the instruments that made them.

-Hope: we always hear stories of successful traders who opened a losing position but still their hope of raising instruments has obscured their judgment resulting in losses and some may even go so far as to buy more of this instrument to make more returns from it. Greed is good when it works as a motivator for self-improvement, however greed is bad when the logical judgment of the trader is disturbed. A successful financial trader must always be reasonable.

Financial trading is a goldmine filled with all sorts of stressful and emotional consuming traps, so being a trader requires great emotional control to enjoy the returns of trade success.

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