There is an old saying that the market is driven by fear and greed. Anyone that has placed more than a couple of trades will surely have experienced these two emotions.
All traders experience emotion. The distinction between a successful trader and an unsuccessful trader comes down to how they deal with that emotion. Let's look at how these emotions affect a successful trader and an unsuccessful trader in various scenarios:
1. The trader's three previous trades have been losers. The unsuccessful trader will consider this before placing his next trade and be fearful that this trade will also end up a loser. This might result in a delay in placing the trade whilst waiting for the price to confirm that they were right - thus missing a perfectly good entry. The successful trader will have tested their strategy extensively and will be aware that a series of losing trades is very probable. The fear is removed from the trade because they know that several losers in a row is to be expected.
2. Once a trade is entered it immediately moves against the trader. The unsuccessful trader will fear that they have made a mistake. The fear of taking another loss now controls their trading decisions, they might move their stop further out so the market doesn't take them out for a loss. The successful trader, of course, will know from extensive testing of his system that such trades happen and that the trade might come round or it might hit the stop. His stop is in place and it will remain in place - the system dictates where the stop is, not the trader's fears.
3. Once a trade is entered it immediately moves strongly in the traders favour. Greed has now completely taken over his trading decisions and the previous plan (if any) is ignored. The daytrade becomes a position trade
All traders experience emotion. The distinction between a successful trader and an unsuccessful trader comes down to how they deal with that emotion. Let's look at how these emotions affect a successful trader and an unsuccessful trader in various scenarios:
1. The trader's three previous trades have been losers. The unsuccessful trader will consider this before placing his next trade and be fearful that this trade will also end up a loser. This might result in a delay in placing the trade whilst waiting for the price to confirm that they were right - thus missing a perfectly good entry. The successful trader will have tested their strategy extensively and will be aware that a series of losing trades is very probable. The fear is removed from the trade because they know that several losers in a row is to be expected.
2. Once a trade is entered it immediately moves against the trader. The unsuccessful trader will fear that they have made a mistake. The fear of taking another loss now controls their trading decisions, they might move their stop further out so the market doesn't take them out for a loss. The successful trader, of course, will know from extensive testing of his system that such trades happen and that the trade might come round or it might hit the stop. His stop is in place and it will remain in place - the system dictates where the stop is, not the trader's fears.
3. Once a trade is entered it immediately moves strongly in the traders favour. Greed has now completely taken over his trading decisions and the previous plan (if any) is ignored. The daytrade becomes a position trade
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