Is it important to manage your emotions when you trade? Why should you keep your emotions at bay when trading? Controlling your emotions while you trade determines your success or failure in trading CFDs. Being in a good mental state creates an impact on your overall decision-making, especially if you are a new trader. Keeping yourself calm in the face of pressure must be consistently done. Today, we are going to tackle the importance of keeping your emotions on hold when trading.

Controlling Your Emotions

You cannot underestimate the importance of keeping your emotions in control when trading. Imagine yourself trading with high expectations that you will profit from your investment promptly. But then, just as you start to get hyped and your emotions are at their peak, the prices start to go down and you experience a change of tides. You get too devastated and experience extreme sadness. That’s when your emotions take a toll on you.

Read more: SQM Club

But if you have a stronghold of your emotions, you know that the market is unpredictable. There are times when the market may experience a downfall and there are times that the prices are all going up. With your emotions in full control, you can make a good decision out of the current market situation.

Professional traders know the fact that they shouldn’t make rash decisions because it will only damage their trading accounts. They know that it is important to be mindful of their reactions because it might affect their entire trading career. Trading takes a lot of patience and in every position you open, you need to be emotionally prepared no matter its outcome.

Common Emotions Encountered By Traders

There are three common emotions encountered by most traders in the market – fear, excitement, and overconfidence.

Fear

What causes fear when trading? It’s when you trade too big. For newbies, you might think that you can trade big so you can profit big too. However, trading with an improved size will only lead to magnified volatility which later causes mistakes. These mistakes aren’t normally achieved if you keep your positions small according to your experience as a trader. Also, you need to consider your risk appetite when trading because it will help you identify which lot size is perfect for you.

Excitement

It is understandable that first-time traders feel excitement like they are on their way to becoming a millionaire. But before this emotion consumes you, you have to deal with it correctly. You need to be aware that being too excited when trading CFDs will only lead to you making wrong convictions. If you are too excited, you might find it hard to determine if the trade is really right for you or not.

Overconfidence

After a series of successful trades, you will feel the adrenaline rush. It may seem like you can manipulate the financial market right into the palm of your hands. But being overconfident could ruin your original trading plan. You must see to it that you can follow your trading plan strictly and don’t let your confidence ruin your trades.