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Impact of emotion trading

Discussion in 'TIFU' started by Gray Wolf, May 27, 2016.

  1. Gray Wolf

    Gray Wolf Well-Known Member

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    Been there done that... :(
    upload_2016-5-27_12-11-27.png
     
    Bodacious and T0rm3nted like this.
  2. T0rm3nted

    T0rm3nted Moderator
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    Haha good one!
     
  3. InvestingNewbie

    InvestingNewbie New Member

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    Hmmm.....seems like a really rough emotional roller-coaster. How would a newbie avoid this? Or is it really not something that you can ever really avoid?
     
    Gray Wolf likes this.
  4. Gray Wolf

    Gray Wolf Well-Known Member

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    That is a great question and yes you can certainly avoid it. The way to avoid that roller coaster is to mentally accept that losses are part of the game and by controlling losses on your bad pick and letting your good ones roll you can avoid this roller coaster. You simply establish trading rules and follow them. They vary in terms of details to each individual taste for risk.
    1. establish rules for stocks to hit your watch list (must be above certain price, must have x amount of shares traded per day, growth trading would be earnings focused, value trading would be valuation ratios etc)
    2. establish entry rules. (30 day SMA must be pointed up, MACD must be rising, Stochastic rising or any other of the many studies you can look at)
    3. establish maximum risk and size the trade (see post on this in the education forum on this site)
    4. set a stop loss and move the stop up or change to trailing stop if the stock moves in your favor. Let the stop do it's job if it moves against you.
    5. Follow the rules.

    Easy to say but it can be done and if you do it you will avoid that roller coaster
     
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  5. Ciao (Sheppy)

    Ciao (Sheppy) Well-Known Member

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    Jerry M give you an excellent advice

    we all pass thought there .. some less some more but early mistakes are easy to improve ... IMO experiences play an important part together with mind (psychology)
    if you are a real newbie I would suggest to do some virtual trading and work out a strategy-plan that is working for you and when you are confident (making money) go real.... but watch out real is a different story again

    good luck:):)
     
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  6. Tiptopptrader

    Tiptopptrader Well-Known Member

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    Trade like you are running a business. Read the resume before hiring. If the new hire is not performing give him the axe.
    Translation: Do your DD on each stock before buying and set a stop on your trade.

    Virtual trading is ok I guess but when your putting real money down it's a different ball game. Just like paintball, it is whole lot different when someone is shooting real bullets at you
     
  7. Steven_Burt

    Steven_Burt Well-Known Member

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    @JerryM You have been posting up some very useful information lately - Kudos to ya man!

    I would also add that emotional trading can cost you when your winning to. Lets say you have had a couple of bad trades or days and you start to trade scared. Psychologically you will have the desire to start taking small profits just to be green on the trade. This will hurt you in the long run as trading for most is a 50/50 proposition at best. your winners should be at least twice as profitable as the cost of your losers so if you are selling your position just to be profitable when your system doesn't trigger a sell can be very costly and detrimental to your account.
     
    Wildebeestmode likes this.
  8. InvestingNewbie

    InvestingNewbie New Member

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    Wow, thanks guys for all of the helpful advice. I will definitely read through the education section, and the virtual trading sounds like an excellent idea. Do you recommend any virtual sites, or are they all about the same?
     
  9. Steven_Burt

    Steven_Burt Well-Known Member

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    Yes Thinkorswim, open a live acct through TD Ameritrade and download thinkorswim paper trading from there. You will get more bells and whistles including live data. I don't think you have to fund it but if so a small amount will suffice.

     
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  10. Bodacious

    Bodacious Active Member

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