The Counter-intuitive Way To Control Your Emotions In Trading

I don’t know any trader who doesn’t struggle at times with their emotions. Likewise, I don’t know any trader who doesn’t wish that they could control their emotions better. Here’s an excerpt from an email I just received from a trader named Jill:

I have a problem with hesitation. Even though I have a strategy that fits my personality and is consistently profitable, I still hesitate on 2 out of 5 trades. And for some strange reason I always hesitate when the profit would have been the best. My whole body senses that I need to take the trade, but it’s almost like I have another person in my mind who controls me and holds me off from following my intuition.

I’m sure we can all relate to this. I know I can. Sometimes it feels like our emotions literally take over and we are hostage to them. Almost like it’s another person in our mind, as Jill notes. So the natural question becomes: how do you control your emotions while trading?

And the counter-intuitive answer is: You stop trying to control your emotions.

You see, what you have to realize is that it’s not really your emotions that have power over you. Rather, it’s your resistance to your emotions that gives them power over you. Have you ever stopped to think about what an emotion even is and why it’s so powerful? It’s just a feeling after all. So why does it have so much control over you?

The Kid That Has You Enslaved

Picture this: You’re holding the wrist of a kid that is much smaller than you. You’re holding it extremely tight and you won’t let go. But you’re not aware of this. You’ve been drugged and have lost your spatial and bodily awareness. You think he’s holding onto you. Everywhere you go, this kid follows. He sticks to you. You want to get rid of him but you can’t. He seems too powerful and you feel helpless. The more you resist him the more powerful he becomes. Soon you’re at his complete mercy, as he drags you around and controls where you go.

In this analogy, the kid is an emotion. In reality it has no control or power over you, and it’s you that’s holding on to it. And the more you resist it the more powerful it feels, until it literally feels like it’s controlling your every behavior. But it’s just like that little kid. It has little power of its own. You are giving it the power over you.

Do What Feels Unnatural

What if you stopped holding on, resisting, and fighting the emotion? What if you welcomed it instead? I can tell you from extensive experience that this can be one of the most powerful practices you can undertake. Welcoming the emotion is the equivalent of letting go of the kid’s wrist. You’re no longer holding on for dear life and resisting so much. Rather, you’re realizing that it’s just a feeling. And you’re realizing that no matter what that feeling is, it’s OK. It’s OK to feel it. It’s not bad and it’s not wrong. It’s just a feeling.

For instance, if you feel anxiety and panic when entering a trade or when trying to hold for a large profit exit, instead of fighting that feeling and trying to control it (which makes it become more powerful and much larger in your mind), try welcoming and letting the anxiety and panic be there while you sit in a place of still awareness. This feels very unnatural, because our first inclination is to push it away. But if you allow yourself to feel it- even welcome it as you would welcome a friend or a nice feeling- you quickly realize that it’s okay. Panic and anxiety make us feel like our life is in danger and to escape the feelings we behave in a way to make them go away. i.e. We either skip the trade or exit too soon. But if you stopped resisting and let yourself feel the emotion, you would realize that it didn’t kill you after all. And instantly its ‘power’ would dissipate. It wouldn’t be as big of a deal in your mind and you’d quickly feel it as a decrease in the strength of the emotion.

Ultimately, you’ll end up finding out that giving up trying to control your emotions- or like in Jill’s case, the other person in your mind- gives you much greater control. You’ll never be rid of your emotions while trading, so stop trying. They’re actually often a great source of information. Instead, welcome them and feel them from a place of awareness (as if you’re watching them), and let go of your hold on them. They’ve never been the ones controlling you. You’ve always had the control without knowing it.

  • berzerk

    Ziad, how do you use the emotions in your trading? I mean do you simply acknowledge them or let them help you make trading decisions?

    • I do both, depending on the context. For instance if I find myself getting anxious while letting a big winner run, I welcome the emotion, sit with it, and let it dissipate without letting it control my actions. On the other hand if I want to enter long because my contextual analysis says that it makes sense and I have a good support zone, but the market drop is looking scary and I feel fear about buying into such a drop, I use that emotion of fear as information that tells me there’s panic in the air and most other traders are probably liquidating out of fear or are too scared to get long. And that tells me it’s likely a great time to get long. Of course this takes experience because you don’t want to be jumping in front of a trend and you have to understand context, but if you do, then your emotions can often alert you to the best time to enter (or exit).

      • berzerk

        what about a situation when you want to enter long because your contextual analysis says it makes sense but it’s actually not scary to you? You feel good about the trade. Would you take it?

      • berzerk

        What about a situation when you want to enter long because your contextual analysis says that it makes sense but it doesn’t feel scary? you actually feel good about this trade. would you take it?

        • Great question. The answer is yes I would take it, because the main consideration is always my objective (as much as possible) contextual awareness of the market. I recognize that I will feel good about a lot of trades that may look scary to others because I’ve conditioned my mind to look at the market in a certain way over time. But when market action is still producing a feeling of fear, that means there usually is some extra panic or euphoria in the air and it usually gives better timing because the odds are that the move is likely at an exhaustion point. So the emotion helps fine tune the entry at times, but it’s not the sole determinant. Hope that makes sense.

  • Emini

    I know a trader who never trades with emotion, goes but Al, full name algorithm

    • Even Al can succumb to emotion when his creator is compelled to tweak him after a losing streak because fear is setting in ;)

  • Yet, another great article from Opentrader, thanks again for sharing those simple but powerful words….

    • You’re most welcome Nico. Glad you liked it.

  • Shafe

    Hello! Would you re-publish the information that you shared in a recent SFO article on fear? That article is where I heard about your website and impressed me with the information it provided. That mag is no longer available online!

    • I’m not sure which article you’re speaking of. I haven’t published any SFO article… Maybe there’s a mix up?

      • Shafe

        There are two folks running the site, aren’t there? Was it your partner? Or maybe I’m mistaken!

        • No it wasn’t my partner either. We once had an SFO article about our site, but it wasn’t a trading psychology article. Maybe that’s where you first heard of us. Either way, it seems fate has brought you here and we’re happy to have your participation on the blog ;)

          • Shafe

            Yep, happy to be here.

  • som

    Hey Ziad…this is probably a very important topic. I face this numerous times. You know how you can feel the market when u in a trade especially a fast moving mrkt :)… well of late what has worked better is i walk away for a few mins after putting on the trade with a SL in place. Return in a few mins to see whats going on before analyzing anything else. Seems to work at times……but would definitely appreciate more insights on how to hold for longer targets….coz many times i exit for 3/4 pts when market does boo…whereas the original target should have been a 6-8pts.

    Do you think there a solid discipline one can follow to get more in tune with this? so that it can be practiced in daily life and then when in the markets it is a natural thing.

    • Hey Som thanks for the comment. That’s really the million dollar question. Most traders struggle the most with exits. I’ll try to touch upon some things around this subject in the near future.

  • Great post! I think of this concept in terms of “Gaps”.

    We all tend to want to control every aspect of our trading/life. For the vast majority (all?) of people, control=action. But taking constant action without “minding the gap” erases the very edge we hope to maintain in order to gain the financial control we desperately seek!

    So trading all over the chart instead of at ANY consistent point(s), moving stops without having a time/place where you can’t, taking constant action rather than blocks of action divided by spaces (gaps!) etc etc. Just makes you FEEL more in control while you accomplish nothing.


    • Excellent insights MM. Completely agree. Most things we do merely give us the illusion of control. Whereas true control lies within.

  • Paul

    Do you think addressing those childhood issues would benefit
    traders? Not things that happened, but areas of why you feel emotions.
    Often I find myself not confident in myself which equates to self-doubt. I
    recall feeling not confident in my strategy awhile back. When I first started
    trading I had beliefs about the market all those little beliefs that I had
    about the market have slowly evolved over time. I find that I have a lot of
    anxiety when it’s time to rock and roll. When it’s time to take a position I get
    anxious, I often sit there and watch it go in my direction and get frustrated.
    Or when I take a position I put my stop to tight and find myself reenter after
    a stop or two. I wonder if most people feel not good enough to be successful at
    trading, is it that think they’re not good enough for money or their not competent
    to execute the methodology. I’m slowly working through my emotions now. Good
    article. I look forward to future posts.

    • Yes I definitely think that addressing those issues would benefit you as a trader. Any processing of previously unconscious issues you may have repressed could have a positive impact on your trading, because as long as it remains unconscious, it can drive your behavior without you knowing it.

  • Pipwisher

    Regarding the quote about hesitation, I would like to mention my recent experiences on three opportunities which I (unfortunately) did’t take because of hesitation and fear of loss. All three ended up running around 250, 270, and 350 pips while I am watching hesitantly, trying in vain to catch again some level to jump into, hating myself for not listening to my gut feeling in the beginning of the swing.

    For all of these cases I had a plan when to take the trades. Parities came very close to my decided entry point but not exactly on it, and then turned. All my body, my guts, my emotions were saying I should enter, but, since I was so focused and conditioned to my “damned exact plan” I didn’t listen to them and waited desperately for prices to come back to my planned entry level, they didn’t. As the opportunity cost of the lost trade was increasing in time, I hated myself more and more.

    I think what lies under the hesitation is the fear of loss. What I should have done, instead, was to listen to my emotions and enter with a small lot that I wouldn’t bother loosing. As the trade developed in its way, small gains would have given me confidence and I would have easily sized-up.

    So, my take home from these experiences is:
    – Trust your emotions, particularly if you are well prepared for a trade,
    – Don’t try to be too exact, be tolerant and flexible (if you can),
    – You don’t have trade your with “standard size” all the time. Train yourself to size-up/down as the conditions dictate,
    – The last and the first: Appreciate your emotions. If they didn’t exist you wouldn’t be loving trading. Among all the factors affecting our trading (wins and losses) emotions come first, all you need to do is to learn how to control them.

    (Yet, I still hate myself not having taken those trades:-))


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