Emotions

Imagine this: You are in a small loosing position. The signals from the market are not clear, but your initial decision is still valid. The loss gets bigger. Will you panic sell? Will you hope? This is where it gets emotional for traders. Here is how you can keep your cool.

There are two emotions dominating the trading: Fear and greed. Both are destructive, since a trader should stay rational. That is really difficult though, when the adrenalin pumps through your body. How can you keep your emotions under control?

Here is an interesting theory by Victor Sperandeo, a successful Wallstreet trader: Emotions are controlled by your values. You can change your values rationally.

Losing money and being wrong the market is bad. This induces fear. Making more money and being right about the market is good. This induces greed.

According to Mr. Sperandeo you must convince yourself that losing money and being is not bad. Making more money and being right about the market is not good. Then what is bad/good?

Good is a working strategy to make money consistently in the long-run. A working strategy will make you lose money sometimes. A working strategy includes stop-loss marks to limit the losses, though.

Bad is to have no plan or a bad plan. Having no plan means you will lose in the long run. That should induce fear. A bad plan will make you lose money even faster.

The initial scenario was not imaginary for me. I bought FLT at 1130 and then sold at 999. It took me an hour to convince myself to exit at a loss. Many people still believe FLT is about to shoot up. Maybe it will. I am watching it closely. Currently, I do not own any, though. With the price at 692 my decision was right.

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