My basic trading philosophy can be summed up by one simple quote:

"Trade the ticker, not the company" - Nate Michaud

Tuesday, January 28, 2014

Question: "How do you deal with emotions when trading?"

One of the most difficult aspects of trading is controlling your emotions. I won't claim to have all the answers, because I still struggle with this. To some degree, I probably always will. However, there are a few things I've picked up along the way that have certainly helped me improve:

  • "If you're scared, you're in too big"
If you constantly find yourself making emotional decisions or feeling scared while in a trade, one possibility is that you're holding too big of a position. Try decreasing the size you trade with and see if that makes things more comfortable. That doesn't mean stop respecting your stop losses or take the trade less seriously because you aren't in as big. The point of this is so that you're less worried about having money on the line and more worried about what the stock's price action reflects. Your decisions should be based off of price action only.
  • Hide your "unrealized profit/loss" column in your broker(s)
When I finally took this step, it made a surprisingly large difference. I no longer had my unrealized gain or loss staring me in the face. Although I knew in the back of my mind about how much I was up or down, I didn't have to constantly see it. As I mentioned above, this allowed me to focus more on price action and less on my potential profit or loss if I closed the trade that moment. As a trader it is imperative that you are trading primarily on price action. When other factors such as your gains/losses creep in you will begin making trades for the wrong reason.
  • Accept that you're not perfect
Many traders picture the perfect trade. They buy dead bottom, sell dead top, and everyone marvels at what a genius they are. Unfortunately, the vast majority of the time it doesn't work out this way. Rather than trying to nail perfect entries and perfect exits, accept imperfection. On the best setups, you don't have to be perfect. You can catch the meat of the move and still walk away with a very nice gain. Strive for nailing the easy part of the trade, strive for consistency, don't strive for perfection. It is consistent gains that grow accounts, not the rare perfect trade.


  1. I totally can relate to & agree with the hiding of the Unrealized/realized P&L columns. Especially for an open position. By starring at this, it definitely can cause you to start trading your P&L instead of just making sure you are doing the right thing. When I trade my P&L I can tell a difference for sure.

  2. "Strive for nailing the easy part of the trade, strive for consistency, don't strive for perfection".

    Thank you, Tim, what you said make a lot of sense to me.

  3. This blog is a "page turner".
    Can't believe I found it.
    It is pretty meaty. (a good thing)

  4. I know this sounds like a really easy question but, How did u learn to deal with actually trusting your judgment. I am not trading with a large amount of money, and even during SIMPLE price action, I begin to panick and most of the time I sell to early. I would say 90 percent of the time, I would have been correct if I would have just held the stock longer. do you have any tips for situations like this?

    1. It's really just something you have to push through... I went through it myself. I can't think of any one specific thing I did to get over it, I think it just comes with time and getting increasingly comfortable every time you see the same setup and gaining that valuable experience. Wish I had something more specific for you here

  5. Hey thanks for this great post. However before a trade do you ever get the feeling of nervousness or fear? And do you notice that if you are calm and confident before a trade that the probabilty of the trade going in your direction is heightened? Thanks