A day of day trading is made up of statistics, math, and logic, but more than anything else, it’s made up of psychological obstacles.
Dealing with money has a funny way of making people emotional. After all, humans are famous for judging themselves harshly based on their ability to earn money. When you factor in the pressure day traders put themselves under, it’s no wonder that psychology plays a huge role in a day trader’s success.
Common Emotions in Day Trading
In the course of a day of trading, you’ll most likely have good trades and bad trades. This, in turn, will lead you to experience a lot of emotions, like fear, anger, and excitement. All of these feelings are natural for traders, but that doesn’t mean they’re good.
Emotions are one of the factors that affect the stock market, but they also carry a great deal of financial risk for individual traders. Let’s look at some of the most common bad feelings day traders experience, their risks, and how to combat them:
Fear is probably the emotion that most traders are familiar with. The biggest risk of fear is that it can cause a trader to make a move too suddenly, often before they should. Some people who want to trade are so afraid they don’t even try.
Day traders can eliminate fear by quantifying it. Instead of trying to justify your fear-based decisions, take a step back and try to figure out what you’re so afraid of. Once you know what’s causing your fear, you can work toward eliminating the triggers that encourage fear.
Fear plus a lack of education equals uncertainty. After all, why would anyone risk their money on something they don’t truly understand?
Day traders can eliminate uncertainty by educating themselves. Research the stocks that you’re interested in and learn more about those companies. Read studies and review the financial histories of the industries you trade within. Since one of the most important things we teach in our day trader courses is the ability to recognize patterns, you can even consider going over old charts to help improve your recognition skills.
Greed and hope are more similar than you might think. While greed is when we tell ourselves we should hold out for just a little bit more, hope is us telling ourselves that we might actually get it. Both can cause traders to deviate from well-thought-out plans in favor of taking a risk.
Day traders can eliminate hope and greed by sticking to their trading plan. Once you do this, your former emotions will transform. You’ll stop hoping you’re making the right decisions and start being confident that you are. You’ll stop taking greedy risks for minor gains in favor of remaining optimistic that your plan will work.
Never has the expression “seeing red” been more appropriate than when describing an angry trader. Anger can cause traders to judge themselves too harshly and make split decisions.
Day traders can eliminate anger by taking a break. It’s much better to just take a break than it is to lose a bunch of money because you’re angry. If you’re too upset to trade, don’t.
Another all-too-common human emotion is regret. Every day trader out there has moves they regret making and moves they wish they’d made. The biggest downside of regret is that it can cause many traders to feel like they have to “make up for it” on the next trade.
Day traders can eliminate regret by letting it go. Don’t make poor decisions trying to make up for what you perceive as a mistake. Instead, learn from it, study what you did wrong, and make a plan to ensure you don’t make the same mistake twice.
Thankfully, there are ways to balance out these bad emotions. Yes, traders must be disciplined and calculated in their actions but, above all else, they must be patient.
How to Be a Patient Day Trader
Patience is the single most useful tool a day trader can have in their arsenal. It’s the key to staying consistent and executing trades based on your predetermined plan. Patience is what stands between frustration and joy as well as failure and success.
At Day Trader Architects, we know staying patient is easier said than done. Here are a few of the tips we share with our traders to help them stay patient:
- Don’t worry about the news. As we’ve discussed in our blog about tariffs, we encourage our traders to avoid trading based on current events of any kind. If the news or other traders’ opinions are making you anxious, it’s best to avoid consuming this information altogether.
- Do something to relieve stress. For some traders, this may be as simple as doing some deep breathing or having a short meditation session. Others may need to take a walk or even schedule a massage to help them release built-up tension and improve overall patience.
- Take your least profitable hour off. Over time, you’ll learn when the stocks you trade are less volatile. This is the perfect time to take a nap, read a book, or schedule a lunch date.
- Keep the big picture in mind. Remember, day trading is not a get rich quick scheme. You won’t become a millionaire overnight and you certainly won’t succeed if you make moves based on the short term. It takes time to get good at anything and, with the help of Day Trader Architects, you will persevere.
- Let it go. Nobody controls the market; not you or anyone else. Accepting the way things are and letting negative thoughts go will go a long way toward improving your patience.
What’s better than being a cool, calm, and collected trader? Being a consistent trader. At Day Trader Architects, we firmly believe that the best way to stay patient and consistent is to develop a strong trading plan and stick to it. That’s what we help our students do.
The best part of our philosophy is it works – and we have plenty of happy and successful traders to prove it. Why waste time when you can kickstart your day trading career with Day Trader Architects? We have classes to suit every need and every budget. Contact us if you have any questions or if you’re ready for your first day as a day trader!