The 6 Emotional Management You Should Avoid in Financial Market

By Siaw Jun Kit

Although there are multiple skills and aspects required to be successful in the financial market, remember this old saying: Trading skills only make up 30% of a good quality trade, while the remaining 70% are credited to emotion and discipline.

And these are the 6 types of awful emotions you should avoid:

1. Greed

Not following money management is the most common and dangerous mistake of all. “If I could make more money by increasing lot size, should I do even more trades?” This is the common mindset that will turn your “profits” into “losses”, as disaster happens when greed blends with leverage. Even the most skillful trader occasionally falls into this awful pit, as greed is not easy to overcome. 

2. Anger

Caught yourself screaming and cursing at the screen? “Why does the market ‘intentionally’ move in the opposite direction that I want it to?” This ultimately erodes beliefs in trading strategies, causing anger and greed to merge and form emotional and impulsive trading, driven by this negative thought – “I need to recover my losses!”

3. Frustration

Why are my trades only making losses? Why do I keep missing out on the good ones? Why do price levels touch my stop loss level before reversing to profits? Why does the spread disallow me to close trades and in turn, hit my stop loss? With frustration and negative thoughts like these, a trader will often result in even worse losses, and miss out on better opportunities. 

4. Fear

This emotion impacts confidence levels heavily, and it is how traders skip or take a perfect entry with reduced stop losses not according to the trading system. Fear will eventually lead traders to enter trades with a smaller lot size and achieve lower-than-average profits. It is important to note that the fear of a bad trade is not the real issue here, but the over-reaction and avoidance to take any risks – which often subsequently compels traders to prematurely liquidate their holdings for quick cash.

5. Disparity

One of the biggest reasons traders give, alongside the four traits above, is disparity – the feeling of not being able to see the light at the end of the tunnel.

6. Pain

Your hard-earned capital being swallowed up by the market hurts the heart and the pocket in times of a margin call. 

Trading skills only make up 30% of a good quality trade, while the remaining 70% are credited to emotion and discipline.

Behind A True Trader:

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