My name is Tim Grittani (kroyrunner89), and I've been a full-time daytrader since the beginning of 2012. I've learned a lot along the way from my successes and failures and would like to pass along some of these lessons. This blog will hopefully save me time in answering the dozens of questions I get each week through Facebook and Twitter. If not, I guess I just created more work.
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.