Trading Emotions: How to Stop Sabotaging Your Success and Trade With Discipline

"Stopped out again!" the trader says, slamming his hand down on the desk. "Now it can go right back up to my target."

Sound familiar?

As a trader, you know emotions make or break you. Like an engine burning up in a race, they can turn a good day into a disaster. Or they can stop you from ever leaving the starting line.

If you can't manage your emotions, you won't make it long term. 

But don't worry, you can manage yours and rise above them. How do I know? I've been where you are, and I've worked through it. I'm still here. If I can do it, so can you.

I've gone through times when my emotions have wreaked havoc on my trading. I've gone on tilt and blown a week's profit in a day. I've gotten overconfident and broken my rules. I've let fear and greed get the best of me. 

But I got through it, and so will you. And you'll probably be surprised with how you're going to do it.

The Unemotional Trading Myth

Some people assume they should be able to trade without emotion, or that it's necessary. They've heard trading psychology means ignoring and suppressing emotion.

They chase after this unicorn of unemotional trading, not realizing it's imaginary.

Sure, there are exceptions, but most people's brains don't have the chemistry for it. By most, I mean 99.99%.

Instead, take a stoic approach.

Trading in Control

Rather than trying to trade without emotion, control what you can control. Accept your inability to control the rest. And always be mindful of what you're experiencing and how you're reacting to it.

Here is how you stay in control, trading with emotion.

Monitor Your Trading Emotions & Your Emotional Weight

This starts every morning (or whenever you get ready to trade) and goes through the end of the session.

1. Emotional check-in: Before you even open your trading platform, run this process on yourself. Then keep running it at intervals throughout the day. I recommend hourly or after each trade, whichever comes first.
2. Observe and report: When an unintentional thought or feeling pops up, recognize it and write it down.
3. Weigh in: Measure your emotional trading level

Let's explore these in more depth...

Emotional Check-in

"Dear diary..." Just kidding. Well, sort of. Before you trade, and at a certain interval, you need to check in with your trading journal. If you don't have one yet...get one!

Take stock of how you're feeling and what's on your mind. Make note of anything that happened that caused you to react with emotion.

In the morning, this could include:

• Trades from yesterday
• Good or bad things that happened since the last session.
• Lingering thoughts or emotions from earlier sessions - whether yesterday, last week, or last month.

During the session, it's more about:

• Summing up how you feel compared to earlier in the session
• Recognizing if you've become more emotional
• Measuring your current emotional level (more on this below).

This isn't a chance to bash yourself. Don't get down on yourself at all. Just be aware of what your mind is working with, and how you're feeling about it.

If you want a trading journal that can help you grow as a trader while saving time and money, check out these top trading journals.

Observe and Report

Throughout the trading day, be aware of your thoughts and emotions. When unintentional thoughts pop up, write it down:

• The thought, feeling, or impulse itself
• What triggered it?
• Did you react? How so?
• Did you take an action? If so, what?

Weigh In

Just like a Formula 1 car has to meet weight limits to set tire on the track, you need to weigh in on your emotional trading level. And based on that level, you need to decide whether to race (trade) or take a lap (take the day off, take a break, stop for the day).

Since emotions are subjective, it can be tough at first to measure this. With some practice, you'll get the hang of it in no time.

Measuring Emotional Weight

To start, I recommend using a measurable scale, like 0% to 100%.

• 0% is controlling emotion.
• 100% is controlled by emotion.

Your better trading happens closer to 0%, of course.

For example:

At 0%, I'm at my absolute best. I'm disciplined like Sir Lewis Hamilton before a race. I see the market clearly. My actions are planned and precise.

Here are conditions that get me to assign myself a 0% emotional weight in the morning:

• Got good sleep (I shoot for 7-8 hours)
• Meditated, visualized, and did breathing exercises (more on that below)
• Nothing has come up that caused emotion, or everything has been well-resolved
• All past trading blunders have been accepted and aren't on my mind at all.
• Recent great trades have been accepted as part of my numbers, they didn't happen because I'm "hot" or "on a roll". 
• Recent losses have been accepted as part of my numbers. My strategy allows for losses, and they happen.
• I haven't been rushed, I had time to prepare as usual.
• I haven't made any excuses or rationalizations for anything.
• I am present. Phone is on do not disturb or airplane mode. Email is closed, I'll check it after trading.
• I have no expectations for the day other than to stick to my process.

At 50%, I'm not at the redline, but I'm closer to the redline than to zero. I need to be extra vigilant. I'm more likely to screw up, and I'm not always seeing things clearly.

Here are conditions for which I would assign myself a 50% emotional weight pre-market:

• Got ok sleep, but not good. 5 or 6 hours
• Meditated, visualized, did breathing exercises. Maybe rushed them a bit
• I checked my email after getting up, and got some disappointing news. It's not something I can resolve today. I put it out of mind, but it's still there trying to naw into my consciousness.
  OR
  I got some fantastic news in that email, something I've been trying a long time for has finally happened. It's a big win, and I'm on the moon.
• Yesterday I made a mistake in the afternoon and I kicked myself for it. I thought about it even as I was brushing my teeth last night, and again this morning.
  OR
  I had my best week in months last week, it's Monday morning, and I've been thinking about trading on/off all weekend.
• My dog went out and rolled in something smelly and I had to give him a bath, it threw off my schedule. I still got all my pre-trading prep done, but had to rush through it.
• I found myself making an excuse for why I stayed up too late last night.
• Phone is off but that email from earlier just popped in my head again

Can you tell the difference? Can you tell why it matters?

This is my trading emotion baseline. I am starting the day at a heightened emotional weight. My baseline is elevated.

I included negative and positive emotions to illustrate that it doesn't particularly matter. Both contribute to this elevation.

At 80%, 90%, 100%, well, I shouldn't even be thinking about trading. I'm dangerous to my accounts.

Monitor Your Emotions Again, and Again

Monitoring your emotions throughout the trading day means continually repeating this cycle. It doesn't have to be any more complicated than that.

As you repeat the above process throughout the day, you get a constant update of your emotional level, or "emotional weight" as I call it. But how do you adjust it?

Again, this is a bit subjective, but here's a quick guide on that. The information we're using is our own notes.

1. What comes up in the emotional check in, every hour, or after every trade
2. What did we observe and record since the last check-in.
3. Adding new evidence to adjust our emotional weight.

This also isn't a hard-and-fast schedule. You don't have to wait an hour to recognize that you've become more emotional. You can, and should, do that at any time something comes up.

Some of the indications you're looking for are pretty obvious:

• Taking an unplanned trade
• Chasing an entry or extending a profit target
• Breaking your own rule or a rule set by your firm
• Skipping a trade you had planned, without some material logical reason (not rationalization)
• And so on...

Some are less obvious at first, but make more sense as you observe them:

• Thoughts that pop into your head and cause an emotional spike. Could be about trading, could be about something unrelated. Example: Suddenly remembering a mistake you made yesterday, or a random thought that you need to make money today.
• Self-talk. Example: Following your trade rules and getting stopped out, and cursing to yourself, or saying "should have been looser with that". 
• External stimulus. Example: Reading a news story that makes you furious (shouldn't be doing that during trading, anyway). 
• A heart rate spike, whether you feel it in your chest or see it on your fitness tracker.
• After a loss, thinking "Now I need to [make another trade to] make it back."
• After a win, thinking, "I should have held for more, I'm a chump."
• Finding sub-optimal setups or just pressing buttons out of boredom

The specific triggers and thoughts you experience are important for long-term development. But during a session, think of them as pretty much the same.

Keep it simple. They all have one thing in common -- They're indications that your emotional weight is rising. 

So, where did that weight start, today? And where is it now? How do you even measure that?

This varies from trader to trader, but here's a good rule of thumb:

Each time you have one of these thoughts, self-talk episodes, or physical expressions of emotion, add 10% to your current emotional weight measure. 

For example, let's say you start the day at a self-evaluated 20% emotional weight. Then a couple things happen:

• Price misses your entry for a trade, and you curse your bad luck
• You decide to chase price up to get in.
• You get stopped out, above where your original entry price would have been. You pick your mouse up just slightly to smack it back down on the desk.
• Price hits your target. "F---!"

Where is your emotional weight now?

If you guessed 60% you'd be right. Each one of those is evidence, and indicator of your worsening emotional state. Now, let's say you reacted differently:

• Price missed your trade entry order, but you say to yourself, "it's ok, might still get to me. And if not I'll wait for the next setup."
• You wait, the trade goes to your target. You remember that this is part of trading, and it happens.
• You make a note to crunch stats on it later in your trading journal, just in case it's happening to you a lot.
• You know that this has now invalidated your entry (the trade has already played out), so you cancel your order, and look for the next setup.

The same things happened with price. But you handled it differently. Where is your emotional level now?

Still at 20%. Good job. Now, you may have pulled that off in spite of some less constructive "urges" Let's say you had an impulse to chase but managed to talk yourself out of it. That would be evidence, and you'd be at 30%.

Don't think of this as bad or good. This is knowing where you're at, so you can manage it.

You can keep track of all these observations using the best trading journals.

Managing Your Emotions While Trading

How do you manage your emotions while trading? Especially in a way that allows you to improve every day and trade the way you're supposed to be trading?

How do you stop the bleeding caused by self-sabotaging emotional swings?

Before you can "fix" or "get rid of" your emotional trading issues, long term, you have to you have to focus on today. There are things you can do long-term to work on your emotions and improve your behavior, and you should do that. But that's for another article.

To win the race, you have to stay in the race to begin with. You have to stop your emotions from undermining your trading success, and that starts right now.

This is where everything you read above gets put into practice. Now it's time to think of your observations and your emotional weight as signals. 

Responding properly to those signals is how you start managing your emotions in trading.

But how do you do that?

If you're like most traders, your emotional trading state can be like a different person. That alter ego of yours can make excuses and rationalize like a psycho. It can put you in a trance, where you practically "blackout" and just hit buttons without even thinking. 

In order to defeat that alter ego, you have to have a concreate, non-subjective system. Here is that system. Although nothing is truly easy, it's relatively simple:

1. Accept reality: Accept that managing your emotions properly might mean you miss some trades, and that is 100% OK.
2. Take breaks when you don't need them: If you're completely fine, but unlikely to get a setup in the next 10, 20, 30 minutes (whatever time frame), take a break. 
3. Know your triggers and define actions: Know whether each "event" is enough on its' own to warrant a break to refocus and settle yourself. When that event arises, stick to your pre-defined action.
4. Set your "probation" weight: Set an emotional weight number at which you will get flat and take a break to refocus
5. Set your "walk away" weight: Set an emotional weight number at which you will get flat and stop for the session.

Number 1: Accept Reality: This one seems self-explanatory but bears repeating. Too many traders manage to talk themselves out of good behavior, generally using some other rule as a rationale.

For example, the rule "If a setup comes, take it every time," is a good rule. But that rule, and every rule, takes a back seat to managing your emotions. 

Instead, start by accepting that you're going to miss some trades by doing what is necessary to become a better trader and succeed long-term.

Number 2: Unnecessary breaks are totally necessary. Every human has a finite amount of mental energy in a day. We have a finite number of decisions before we experience decision fatigue.

We have emotions that build and increase our emotional weight. They can build by just watching volatility (or a lack thereof), without even trading it.

Do you really need to sit there and watch? Probably not. Use that time more productively. Take a walk, do body-weight squats or push-ups, do a quick chore in the kitchen. Whatever.

Just spend 10+ minutes away from the computer on something beneficial to your psyche, then come back and refocus. 

Number 3: Know your trigger-responses and define actions: If you don't know ahead of time the signals you should step away, how will you ever recognize them in the heat of the moment.

Go through your notes and your trading journal. Especially notes in which you've been following the process set above. What came before you screwed up, each time? What didn't affect you as much?

Use these patterns to define specific actions that do or don't mean you need to take a break.

Example: For me, if I take any action that wasn't disciplined, I have a planned action to respond.

For instance, if I place an order for an unplanned trade, that's an automatic timeout. Even if I manage to do the right thing and cancel that order, I take a break.

Why? I have shown that in the present, I'm 100% likely (I did it!) to take impulsive action that can harm my account. So I take a step back for a bit.

Number 4: Set your "probation" weight: Chances are, if I'm already screwing up, my emotional weight is at the point where I'll take a break.

But what if it's not? What if I'm still at a low weight and I screw up. Still take a break.

What if I didn't screw up yet, but I've reached a high emotional weight. Take a break.

What if I haven't had any negative events, but I've had three great trades in a row and I'm pumped? Your emotional weight is still high now, isn't it? Take a break.

What emotional weight should you use as your "probation" level? That's subjective for you, but 60% is a good rule of thumb. You're emotional and your potential for behaving correctly is diminished. 

Step away and do something productive like mentioned above. Do a breathing technique, too. My favorite is a twist on the "Physiological Sigh" technique:

1. Quick full breath in through the nose
2. "top-up" breath in at full lung capacity (optional) 
3. Slow breath out through the mouth
4. Repeat 5 times

Only come back if you can calmly focus on your process and frame potential setups without acting impulsively.

Think of returning to the computer today as a privilege, not a requirement.

Number 5: Set your "walk away" weight: Every trader has a threshold at which they're far more likely to harm their account than to help it. When we reach that point, it's not even a choice.

I'm willing to bet that more trading careers have been ruined by failing to do this, than any other mistake.

Know this level, recognize it, and stop when you get to it. It's that simple. 

Spend the rest of your day doing productive things. Avoid negative things, especially ones that can lead to a rougher tomorrow (heavy drinking to numb the pain, etc.).

Shut down all the trading software and don't open it again. Stick with your post-session routine, though. Take notes, do your trading journal, etc.

You might wait until markets are closed to sit back at the trading computer for that routine. Especially if you've had instances where you came back to trade in a day when you shouldn't have.

Use Your Subconscious Toolkit

Like a leg that has been amputated and still causes "phantom pain" your subconscious mind will fight you on this. Your thoughts and emotions will still try to take over your trading.

Overcoming that requires harnessing your subconscious mind to work for you, not against you. There are three particular tools in this kit I'll cover here. Each of these is worthy of their own article, but you can start practicing them today with this basic intro: 

1. Visualization: The greats in every pursuit visualize real-life scenarios to help reach their goals. If it's good enough for pro athletes and billionaire entrepreneurs, it's good enough for you. This will keep you motivated, confident, and steady, even when things get rough.
2. Affirmations: This isn't about "speaking things into existence." Rather, repetition of a few simple precepts that can improve your focus and confidence.
3. Mindfulness: Being present and self-aware will make it easier to observe your emotions as described above.

Number 1: Visualize your trading:  Picture yourself making smart trades, following your process, and making planned entries and exits.

Visualize yourself doing the right thing in a trade that isn't working. Yes, losing sucks, but it's part of trading. Preserve that capital in your head before you have to do it live, and it'll get easier!

Visualize yourself doing things like:

• Keeping a stop in place as a big trade goes against you
• Getting stopped out and regrouping rather than revenge trading
• Immediately correcting mistakes (fat-fingers, wrong orders, etc)
• Holding a winner to the target even though you really just want to "lock it in" early. Imagine sticking to the plan and your take-profit order being hit.
• Watching a dull market, bored and wanting to trade but doing nothing because there's no good setup.
• Watching big moves and waiting patiently for your setups

Visualizing these things is like driving a track before the race. It has so many benefits:

• Gives your brain "practice" in doing the right thing, when the imagined stakes are high, but without any actual risk.
• Lowers the pressure of the real thing - you've already been through this.
• Reduces the friction of taking the appropriate actions in every situation. If you want to "trade like a robot", visualization is key.

Do NOT visualize things like yourself on a yacht with all the money you made in trading. That doesn't help, it only creates unrealistic expectations that rob you of perspective and focus.

Number 2: Affirmations: There's some hokey woo-woo stuff out there regarding affirmations. This isn't that. You're not going to say "I can make a million dollars trading" and poof - it happens!

No.

This is about holding yourself accountable to your rules, processes, and beliefs, and using your subconscious to do it. The best way to do that is to repeat these as affirmations.

How you use these depends on where you're at in your trading pursuit. A few quick tips for choosing yours:

• They might be similar to what you use in your visualization practice
• Focus on positive actions that will get you to the next level
• Keep it simple. You should be able to recite these in 20 seconds or less throughout the day or whenever you need to refocus.

Here are the affirmations I currently use:

• I will trade with discipline, no matter what
• I am a million-dollar trader, I must do what a ten-million-dollar trader does.
• Process over profit = progress

These are broad, not specific, but I've been doing this long enough that my brain automatically recalls what is included in each of these.

At times, mine have been more specific. Here are some from earlier on:

• I don't let losers get big, I can always take a loss, there will be another opportunity. I will miss that opportunity if I'm holding a loser.
• I let winners run while taking profits on extensions of price.
• I correct mistakes immediately.
• I am becoming a million dollar trader, I must do the things a million dollar trader does.

When do you use affirmations? As often as needed. Here are some examples of when I use them:

• Whenever my personal temptation to impluse trade is highest - for example, the first 15 minutes of the RTH session on Mondays.
• During the session when I haven't had a setup for a while and am feeling bored
• Whenever I start to daydream about trading, goals, the money, etc.
• Whenever I find myself thinking about P&L

Number 3: Mindfulness: Most of what you've learned here requires mindfulness. But don't be intimidated by it. You don't have to be a buddhist monk to become mindful.

When we are mindful, we are fully present and aware of our thoughts, feelings, and bodily sensations.

We don't judge them, we just recognize them. We find a sense of peace and calm within, despite the noise and chaos around us. We live in the moment.

What does it look like? For example, imagine you're sitting in your favorite chair at home, enjoying your warm cup of coffee.

Instead of letting your mind wander to the market, your to-do-list, or scrolling Instagram, focus on the present. Focus on the sensation of the warm cup in your hands, the rich aroma of the coffee, the steam rising from the cup, and the taste as you sip.

You are completely present, savoring each experience and sensation. You're mindful.

But mindfulness isn't just for relaxing times, it's for harrowing pursuits, too.

A Formula 1 driver must be incredible mindful on the track. Being fully present, they pay attention to the car's performance, their surroundings, and the other drivers. One lapse in focus could cause a crash or a lost race.

Being mindful allows them to navigate the high-speed, high-stakes racing environment with precision and skill. Sound familiar?

Being mindful while trading, you're focused on your setups, your data, your charts, and any other inputs. As you've learned here, you're also focused on yourself, your state of mind, your thoughts and emotions. Being fully aware helps you avoid mistakes and prevent meltdowns and blowouts before they happen.

How do you become more mindful? Here are five techniques you can try today:

1. Body Scan Meditation: Find a quiet place to sit or lie down. Close your eyes and focus on your breath. Begin at your feet and slowly move your attention up through your body, noting any tension or sensations as you go. This will help you become more aware of your body and the present moment.

2. Mindful eating: Instead of rushing through meals, take the time to really experience each bite. Pay attention to the taste, texture, and aroma of your food. This enhances your enjoyment and helps you be more aware of your hunger and fullness cues. Added bonus: you'll chew your food more properly this way, leading to better digestion.

3. Breath Awareness: Focus your attention to your breath. You can do this during trading, or any other time. Focus on the sensation of the air entering and leaving your body. Try it also while using the breathing technique suggested above.

4. Mindful Walking: Take a stroll and try to be fully present with each step. Feel the ground beneath your feet, your muscles moving, and the air on your skin. Not only can this help you cultivate mindfulness, it's a refreshing break from trading during the day.

5. Journaling: Whether it's your trading journal or a personal journal, writing down your thoughts and emotions will help you become more mindful. Specifically, writing them down by hand will help you the most.

This takes practice, and it doesn't happen overnight. But the more you practice these techniques, the easier it will become to find a sense of calm and presence in your trading, and in your life.

Keep notes, import trades, track and analyze so you can learn from every trade. Do it all with one of the programs ranked in my best trading journals article.

Conclusion

I hope you're relieved to see that you can let your emotions off the hook - It never was possible for you to be completely void of emotions in trading. Now that you know how to monitor and manage emotions using your conscious and subconscious toolkit, you can trade at your highest potential.

Get started today with some breathing exercises and visualization. Feel free to let me know how it goes.

Related Articles