Friday, November 24, 2017

Get Off the Emotional Rollercoaster | Trading Psychology

Today’s Trading Psychology question of the day…

“I’ve been watching your psychology videos and they have really helped me a lot, but I’m still struggling with my emotions and it clearly affects my trading each day.  I feel like when I’m making money I’m the king of the world, but when I’m losing money, life can’t get any worse.  Any tricks on getting off this emotional rollercoaster?”

Great question, and I like how you used the word “rollercoaster” because that’s exactly how it feels, doesn’t it?

Yea, I can definitely help you get off the emotional rollercoaster, I’ve had a lot of success with my clients on this topic over the years, and I would be happy to help.

In my opinion, the “emotional rollercoaster” comes from unrealistic expectations, and here’s why…

What we expect from our trading career will shape our psychology as we’re developing into professional traders...

In other words, …

·        If we expect good things to happen, we will most likely be more optimistic.
·        If we expect bad things to happen, we feel anxiety and depression.

Even more so…

·        If we expect to be perfect in our trading, or…
·        If we expect to be consistently profitable in an unrealistic period of time, we are most likely going to be let down, and our emotions are going to start creep into our trading day.

In other words, our emotions are like a thermometer for where we are on the path to reaching our expectations.

Even more importantly, if our expectations are unrealistic, we tend to really struggle with our emotions because subconsciously we begin to realize that reaching those expectations aren’t going to happen.

Being a successful trader is all about keeping a positive mindset, and if my expectations are too high (or too low for that matter), my emotions are going to threaten my ability to do my job.

This is why I say… If you want to get off the emotional rollercoaster, you need to align your expectations, and here are three common unrealistic and destructive expectations that prevent new traders from becoming consistently-successful in the long-term.

(1)   You Have to Make Money to Have a Good Day:

If you need to make money to have a “good trading day”, your level of confidence will fluctuate with your PNL throughout the day.

This is dangerous because (in the event of trying to overcome a loss) we want to be out our best when we’re trying to overcome a loss, and with this mindset, our confidence levels are at their lowest when we need them the most, which makes it more difficult to execute our plan correctly.

A “good day” should be defined as a day where you accomplished a specific trading goal, a goal that was within YOUR control, such as using the correctly entry-trigger, or managing the trade correctly.

A “good day” is defined by following your trading rules, using proper risk-management, using stress properly, and not allowing it to become distress.

Yes, we should expect to have “good days”, and those days should produce profit over the long-term, but tying your short-term PNL to your definition of a “good day” is a recipe for disaster.

Ask yourself…”What would make my trading day a success, even if I didn’t make money today?”

If you can focus on the answer to that question, you’re on the right track to a positive and productive mindset, which will make becoming a successful trader a lot easier to achieve.

Key Take-away:

The key take-away from that is to always have trading goals that are within your control.  We don’t control the market, we can only control our entry and exit decisions.  Focus on goals that you can control, and you will have better results.  Set your expectations within your control, and you’ll get off the emotional rollercoaster

(2)   Working Hard Means Trading More:

The second expectation that leads to disaster….

I see this one a lot from new traders… they think that working harder means taking more trades.  They align success with trading more frequently, but this is the opposite of reality.

I do realize that in almost every other industry where you are paid by the hours you work, more work equals more money.

We’re not working by the hour in trading… we’re small business owners, and most of the time, the difference between success and failure in small business is not the opportunities that we take, it’s the opportunities we turn down. 

Make sure you understand, this is NOT working for an hourly wage, there is no benefit to doing more work.

Here are a few tricks…

In my mind, every trade starts as a loss, every trade starts in the red, and I teach this to my clients.

I like to think that every time I enter a new trade, I need to pay the entire amount of risk up-front to my broker.  In other words, In my mind, I have to pre-pay the loss upfront, and this makes me more selective with my entries.

I also like to think that you pay your broker to enter each trade, and you need to make that money back before you can earn a profit on the trade. 

When you shift your thinking about entering new trades, you begin to find it easier to avoid over-trading.

When you combine that with the understanding that LESS is MORE in trading, you’re on your way to long-term success.

Over-trading leads to losing trading, and most rookie traders never survive long enough to learn that valuable lesson.

In my opinion, trading is all about identifying a short-term “edge” over the opposite side of the market, and those edges only happen a few times each day. 

If you trade more often than when those “edges” are truly available, you’re going to make your broker rich, and you will go broke in the process.

Key take-away:

The key take-away is that more trading doesn’t mean more profits, it means the opposite in most cases, so be selective, and feel free to use my trick of mentally “pre-paying” for each trade to encourage yourself to be more selective.

(3)   Success Means Making Money from Week #1

The third destructive assumption, or expectation for new traders…

I don’t know where this comes from, but I can’t even count the number of times I speak to a new trader who thinks they are going to start making money the very first week.

This is likely because a lot of new traders have been successful in other careers, and they don’t see why they cant translate that success into trading… and of course.. the wake-up call is quite disruptive when they realize that a fancy diploma and a 15-year career in another business with NOT come even close to preparing you for the demands of being a successful trader.

As if watching 25 videos on YouTube and the book from Amazon is enough to properly prepare them for developing a strategy, controlling emotions, maintaining a positive mindset, avoiding distress… do you see how unrealistic this expectation is?

I will definitely say…

I have clients who start working with me, they learn my strategy in a few weeks and their making money within a few months… but I’ve taken 10 years to develop my strategy, and its going to take most people a few weeks to learn the strategy, and then a few weeks to just see how they personally respond to the trading environment.

Think of it this way… successful traders make just as much money (if not more than) the other top professions in this world.

Doctors, attorneys, engineers, professional athletes, etc, etc, these skill sets take DECADES, not DAYS.

The reality is, most new traders have seen way too many movies, watched too many fake YouTube videos using magic indicators and fancy software, and have this inflated expectation of what their career is going to look like, and an unrealistic timeframe of them trying to do it on their own.

Successful traders aren’t born, they are developed, just likely any other successful profession.  You have to invest the time up-front with minimal reward at first, but for a big payday in the end.

Again, if you make the wise decision to work with a professional coach, who already has a strategy, and will show you how to avoid the many pitfalls that come with trading, then you can dramatically shorten that learning curve…

…but if you rush into trading, with no plan, no risk-management, no trade-management, no mindset control, and nothing but the feeling of distress in your stomach every morning, with the bill-collector knocking on your door…you’re on a road to disaster.

Key Takeaway:

The key take-away from this, is that the most productive mindset for a new trader is to focus on the process of trading, rather than the profits that come with them. 

If you do that successfully, you will have plenty of profits, but there are no shortcuts, other than working with a professional coach.

If you’re plan is to do this on your own, it can be done, but it’s not going to happen in 90 days, the markets are just too complex for that, I don’t care what your IQ is, or what fancy degree you have on the wall… the markets don’t care.

Let’s Recap…

We’ve covered a lot in this video, here’s a recap.

The question was… how do I get off the emotional rollercoaster?  To do this, you have to understand the following…

·        A positive & confident mindset are essential for a success trading career.
·        Your self-defined expectations will either make it harder or easier to achieve that mindset.
·        New traders often set unrealistic and dangerous expectations for themselves, such as
o   Defining a “good day” as a profitable day
o   Assuming that more trading is more profit
o   Expecting to make consistent profits in week #1 (on their own)
·        We discussed how to remedy these destructive expectations
o   Define a “good day” as one where you reached a specific goal.
o   A specific goal should be something that YOU control.
o   We focus on the process, rather than the profit.
o   We don’t over-trade, we use mental “tricks” to be patient for the best trades
o   We don’t have unrealistic expectations for being consistently profitable, especially if we’re not working with a professional coach.
o   If we are working with a coach, we focus on getting better at following the rules of the trading strategy that we are learning because that will yield the fastest results.


Now, before you finish, here’s some homework for you…

Create a personal mission statement for your trading.

A mission statement is defined as…a formal summary of the aims and values of a company, organization, or individual.

A mission statement something that clearly defines who you are going to be as a trader, and clearly defines what you value most, you expectations for yourself in the first 6 to 12 months of your career, and the actions you will take to get there.

For example, your personal mission statement may say that you are someone who takes following the rules of your strategy seriously, you make capital-preservation a priority, and you strive to maintain a positive and confident mindset by executing your strategy using daily goals that YOU can control.

And before I let you go… I would LOVE to know what YOUR personal mission statement is.

·        Post a comment below this video and tell me what’s your personal mission statement.
·        Have you ever found yourself a victim of these destructive expectations?
·        How did you get off the emotional rollercoaster?  What’s work for you?

Guys… I hope you found value in today’s trading psychology lesson…

…and I would love to hear from you about additional topics that you’re struggling with as traders.

Do me a favor…drop me a comment below this video with any topics you’d like to see me cover in my trading psychology video…

…make sure to give me a thumbs-up if you found value, and share it with a friend who can benefit from this information as well.

It doesn’t matter what market we trade, or the strategy we use, even the best traders battle with their emotions when there’s money on the line.

And don’t forget, you can find me every morning @ 8:00am EST in my trade room with all of our members here at, I have a great free trial on the homepage of our website, I publish my Nightly Newsletter every evening on my blog before 8:00pm EST, and I’m excited to see you again soon on my next trading psychology lesson.

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1 comment:

  1. Thank you Joseph! Another great video. They really help. Your insight is on point and your advise is golden. You deserve the greatest of success. For me, becoming a client of yours has been the smartest move I have ever made. It's been a little over two years since I have joined and I am only able to participate in the trade room occasionally due to my full time job but because of your teaching I am taking less trades and am more profitable trades. In 2018 I will be joining your room full time and look forward to a great future trading. Thank you Joseph! Keep it up!


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