9 Ways To Prevent Emotions From Taking Over Your Stock Trading

While trading stocks can be extremely rewarding and satisfying, there are probably more moments of “why do we even bother doing this”. How many times have you sold a stock only to see it skyrocket the next day? Although there are numerous ways to limit and reduce risk and uncertainty, there is no 100% full proof way to avoid the unforeseen.

To be honest, majority of our mistakes or “unlucky” situations can usually be blamed on our emotions. We can have all the setups and entry/exit levels we want, but unless we can fight that voice on our shoulder, the emotions will get the best of you more often than not.

The following is a list of 9 ways to prevent EMOTIONS from taking over your stock trading…

1. Don’t watch the ticker. Before entering a stock you should always have some exit plan or strategy. If you already know what to expect, then why subject yourself to following the ticker? It is a loose example, but if we are flying from Miami to Dallas, then why do we care about the traffic in New Orleans? Stalking the ticker, could lead your emotions to take over and doubt yourself, which could ultimately lead to a premature exit.

2. Be a hunter not a gatherer. While you always want to do your due diligence before entering a stock, there is such a thing as doing too much research. With the amount of unreliable and inaccurate information out there, it is very easy for use to gather more information than we need. Keep a list of trusted resources and sites, and try not to put too much emphasis on others.

3. Remember the tortoise and the hare. Making 10% every month for 6 months is better than making 40% in the the first 3 and losing 20% the last 3. In this age, it seems like everybody wants to make the quick buck, so we are inclined to chase when we see a hint of a rally going. Next thing we know we enter into a position, and then suddenly everything goes down. Stay relaxed and prepared, there are way too many stocks in the market to have to be chasing a few.

4. If its happened your late. Kind of carrying over from bullet point 3, if a certain move or really has already happened, then you are already too late. Don’t chase because there will always be more opportunities.

5. Don’t engage in stock chart fraud. Just like the amount of stock news, there is also no shortage of stock chart patterns and indicators. Learn the ones that work best for you, and stick to them. The last thing we want to do is manipulate the charts, so they become something we like.

6. Have a bailout plan. From time to time, there will be stocks you choose that just won’t make it. Just like mentioned in bullet point 1, have an exit/back-up plan. What will you do when trade no longer looks like it will work? How will you know the trade is dead? If you have this all planned out before you enter the stock, then you will save yourself by being prepared.

7. Take your losses AND GAINS and move on. While it is easier said than done, take each loss and gain in stride. Whether you like it or not, when you trade stocks you will always have big gains and big losses. By staying even-keeled, you will be less likely to do anything drastic or risky.

8. Use proper money management. Have a template of shares you will use to buy stocks at different price levels. Many times traders will end up buying way more shares than they normally would just because the stock price is cheaper, but sometimes that means the stock is more risky. Remember to keep a diverse portfolio. The more money you have tied up into one holding; the more frustrated you will get should it go in the opposite direction you want.

9. Avoid the averaging down method. When a stock we are so into heads lower, often times we may feel inclined to pick up more shares. After all we entered this stock because we were confident it would go up. If it gets a little cheaper then why not buy more shares, right? While there are certain occasions where averaging down could work, it ultimately breaks bullet points 6 and 8.