Managing Emotions While Day Trading

Managing your emotions while day trading is what separates winners from losers. It's not the strategy, technical analysis, etc. That's the easy part.

That said, what works for you? How are you managing your emotions?

I have a trading strategy that I have throughly backtested. It's a profitable tragedy. The problem is that my winners are often smaller than my losers because I sell too quickly from the fear of loss.

How do you overcome this?

I've recently thought about setting my profit target, entering a trade and walking away and letting it either hit my profit target or stop loss.

Is that a good idea, or is that irresponsible or short-sided?
It could be that you're strat is built to look good on a ToS backtest, so you might want to check that out. It's easy to write a script that builds up an insane 1,000 ROI, but actually loses in real life.

You could try paper trading or playing with a tiny amount of money first and see if your return is similar to what you would have expected in that time period. If so, you have nothing to be afraid of :)

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Ok then you have a problem called fear of loss and you are not able to accept the loss(defeat) consider this

1.Trade location-choose your trade location in a way that you have a defined risk and you are happy with that risk.(reduce the number of contracts if the risk is too big)
2.Bring you stop loss to break even or take partial profit on the way on some contracts.
3.If your strategy is good then you will win in long run(series of trades) You CANNOT define success based on few trades.
4.Remember once you put on a trade then it can go either way ,therefore you must be at peace with loss should it go against you.

Watch you tube video by mark douglas-psychology of trading
There are many aspects that need to be considered when it comes to trading... Self-discipline is an ongoing learning experience, even for seasoned traders... Whether entering a trade at the wrong time or holding out for a reversal of losses can severely damage your trading account... Been there, done that...

FOMO, or Fear Of Missing Out, can cause a trader to jump into a trade without validating indicators and will invariably lead to increased losses... I fight this every day as the trading session opens each morning... If the market is up at the open it can be difficult to hold back from jumping into a trade to ride the market up when prices are rising rapidly... Unfortunately, more times than not, without validating through indicators, you will enter trades either just before or just as momentum is diminished... The trade goes the wrong way in a hurry and you can potentially turn what was expected to be a winning trade into a loser... Do that on a couple trades right at the open and you can turn what could be a profitable day into one where you are just trying to recoup your impulse based losses with what capital... Sometimes it's best to just sit on your hands and watch how things shake out before entering any trades...

FOL, or Fear Of Losing, is another way to lose a lot of money quick... It can be difficult at times to accept that a trade hasn't gone the way you had envisioned prior to opening the trade... You may think the trade will recover so you move your stop loss to allow more room for a turnaround... Then as the trade worsens you move it again, and perhaps again, hoping that you can turn your losing trade into a winner... That rarely happens... You end up in a trade that has little chance of being salvaged... And if you tried averaging down throughout the process you have only compounded your problem... If you think closing only part of your position will help, think again... Due to the FIFO, First In/First Out method used for positions, closing only part of the position will incur the greatest losses, overall... If you truly want to wait for a reversal you should hold the entire position because you incur the biggest loss by closing what is essentially your opening position first... However, if you get lucky, you might be able to increase your position size and recover if you can increase the position size once a reversal happens... But this is rarely a successful strategy, especially when day trading - but a possibility nonetheless...

Confession time... I lost a major portion of my trading account back when the market plummeted earlier this year... The first Friday the market started to collapse was my most profitable trading day to date and, I have to admit, I got a bit cocky... I loaded up on option contracts late in the day, as I had done successfully many times before the collapse, and over-positioned my account funds... I had visions of getting rich quick come the opening bell on the following Monday morning... You can probably guess what happened next... Monday morning came and the bottom fell out of the market, leaving virtually all of my option contracts WAY out of the money... I had no choice but to watch almost all of those option contracts expire worthless because I couldn't even sell them for pennies on the dollar prior to expiration... My winning streak had ended in a big way... So much for getting cocky... Way more than a few thousand lessons learned the hard way... Then I took a couple more hits in the following weeks as things went from good to bad in a hurry, as the markets plummeted after rallying, and I was reluctant to take early losses which, subsequently, turned into bigger losses... I finally got rattled to the point where I didn't trade for a number of days... Once I started trading again I got overly cautious and backed out of a few trades prematurely, which led to more losses - albeit much smaller... Many of those trades turned profitable as I sat on the sidelines with no more trading funds for the day... All of this happened when I had a full understanding of exactly what was happening... Jumping in too quick, due to FOMO, and jumping out too quick, due to FOL... I spent long nights poring over the days charts, proving that I truly know how to trade and was simply making dumb mistakes that I knew were dumb when I made them...

So, how did I get back to normal trading without getting rattled into making bad choices...??? I pored back over everything I was doing... I checked every study and strategy I had been using, settings and all, to make sure they truly worked for my trading style... Those that weren't a good fit were dumped... Those that were a good fit were kept and tweaked for optimal performance... When a trade unexpectedly goes bad, I get out before getting mired in losses... I take small profits when necessary rather than allowing a good trade to go bad due to greed... If the markets aren't working for me, or I don't feel like I'm on top of my trading game, I don't feel bad about walking away from my trading station... I remind myself that there will be more trades and tomorrow will be a better trading day filled with ample opportunities... The more money I have to make profitable trades with, the better off I will be - both psychologically and financially...

Sorry for being long winded but if my experience helps anyone avoid the dumb mistakes I knew I was making then it was worthwhile...
A channel I discovered recently that has a lot of good content and am really enjoying is traderTV Live. They also have a live trading channel for the morning trading time period of 9 am to 12 noon EST. Here is their vid on FOMO and dealing with it.

I don't discount any of the psysch stuff but have two suggestions-

1. think of trading like running a walmart, lots of stuff for sale, but if today people buy hula hoops, you buy and sell hula hoops. if tomorrow they want tricycles, well, ticycles, it is. You're simply looking/hoping to find a wave and ride it a little.
2. try reading 'reminiscences of a stock operator', old book, but valuable lessons. basic idea is names of the players change, the things they do never change.

Good luck, make millions!
As a day trader, I have a simple multi-time frame analysis strategy that uses the 5 and 15 EMA's, True Momentum Oscillator, and the TTM Squeeze indicators. I've limited the tickers I trade to TQQQ, SQQQ, NUGT, DUST, LABU, and LABD. I monitor each of these throughout the day.

Even though it's been back tested with a high win-rate, I often hesitate to take trades from the fear of loss, and then I impulsively revenge trade and enter a trade that doesn't quite meet my criteria and then I lose.

I'm in this perpetual state of 1 step forward and 2 steps backwards.

Question: If you're a day trader, how do you avoid hesitation when your setup appears, and prevent impulsive trades when you're setup isn't quite ready?

Would a trading community help me maintain accountability?
@GetRichOrDieTrying I can relate... I'm trying to work through a bout of lack of trading confidence myself... Part of mine is due to being in a general funk, perhaps partially due to this whole pandemic isolation thing, and partially from several losses directly related to TOS platform issues causing trade losses... I didn't even trade yesterday or today even though I have been waiting for NIO to take off and now I've probably missed out on all or a majority of the move... Maybe tomorrow...

Part of it is recognizing when it isn't a good day to trade... Not because of the markets, per se, but because of "you"...!!! If you're not up to it, and force yourself, you potentially might just make bad trades... Even if it means missing out... It's not just about the money, it's about "you"...!!!

Tomorrow is another day...
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@GetRichOrDieTrying You need to have faith in your strategy in order to enter trades confidently. Make sure your stop strategy reflects the level of risk you find acceptable so losses won't affect you mentally.

Backtesting numbers are not totally real. Your actual results are what count and will build your confidence. Paper trade your strategy extensively, maintain a spreadsheet of your trades, and then Monday-morning-quarterback your trades. What worked, what didn't, and why.

I don't trade the instruments that you do, so I can't say if what I do would be the same for you. When my strategy signals, I don't immediately enter a trade. Some of the other items that I consider, I keep in a detached study so I can quickly access the overall condition of this trade:



Your basic strategy seems sound but if you are having a large percentage of bad trades that will shake your confidence. You need to review those trades. Were the losses avoidable? Did you miss something? Do you need to review your risk assessment? If my spreadsheet analysis indicates that the loss is just part of the game and not something I missed, if it is within my acceptable risk level and my strategy overall is profitable. I tend to trade pretty confidently.

Lastly, don't trade if your strategy does not signal, and/or overall conditions aren't met. It requires the development of discipline and self-control. Just say No. Don't eat that 3rd brownie and don't enter half-baked trades. :)

If you provide a link to your strategy and a list of your buy/sell orders; one of us here can plug some of your trades into our grids and perhaps give you some insight into where some of your issues lie.
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@rad14733, you are my twin from another mother. I get trading funks, though I am not totally sure why. Like you, I also experienced chart/workspace corruption in my TOS app (which I probably caused) but I didn't know my app was corrupted and that caused ENDLESS frustration that I haven't quite gotten over (now, I keep a clean, virgin shared workspace that I load whenever I think things might be corrupted or going wonky). AND I uninstall the app, run CCleaner, and reinstall on a regular basis (can you tell, the experience made me paranoid?).

I get out of my funks by stepping away from my computer for an hour or a day. I bake brownies or take the dog for a walk.
@GetRichOrDieTrying - you're trying too hard. You're also trading highly leveraged ETFs which are affected by a range of stuff besides buy/sales. Maybe consider the micro futures or a FANG stocks which are a bit cleaner from a structural viewpoint.

On 'revenge' trading unless you're a GS/JPM etc, and can move the market by your trades, you're better off taking a few days off, enjoy the sun, your family etc. This is a job and although we've all seen the trading movies of millions raining down on seemingly inconsequential people, its like winning the lottery, maybe, but hasn't happened yet to me. Nobody does this 24/7/365 and we all need a break.

Maybe think of your losses as 'tuition' about what doesnt work and not as I just pushed a BMW 7 off a cliff.

Good luck and make millions!
I just came out of a trading funk myself. My personal journey has been full of ups and downs. Every time I thought I found my groove for a few trades I would fail miserably the next few, leading me to question myself and my setups. I have changed setups multiple times and had been using an endless stream of indicators with mixed results.

I then fell into fear of losing. So much so that I was never profitable for more than a few trades and the profit would be small compared to losses. The funny thing is more often than not I was right. I was so right that a lot of otm option trades I took ended becoming itm options and the potential profit I had left on the table was a lot. In my opinion leaving money on the table is worse than losing. (example I remember having an APPL put, paid $170 per contract. It loses $80 of value down to $90. I panic sell. within the same trading day it goes on to be worth close to $800)

So at the end of June I was at my brink. I was considering of taking a very long break from trading, maybe even permanent, but I couldn't do it. Too much time, energy, and money have been poured into my trading for me to give up.

So I did some internal reflections: Why was I losing? What about my trading that is causing me the most frustration? Why did I sell early? Did I even like trading options? What is my risk tolerance? Am I able to hold on to a trade for more than 1 day? etc..

My end result was that I was trading an instrument that I was not compatible with. I hated trading options. I loved the profit potential, the low amount needed to trade, plus the 1 day turnover of funds, but I hated the movement of them. I figured out that I do not like holding trades for long periods of time.

Also I decided to stick to one setup. Nothing fancy but one that I trusted and believed in. My mindset is that if I can focus on that one setup and nothing else I can anticipate the shortcomings of it and adjust accordingly. When I analyze a stock now I know if I want to trade it within a few moments, so I can sift through my watchlist at max efficiency.

So as of now I trade low float stocks. It has it's ups and downs but it suits me. I am comfortable trading it and I have defined risk and exits. I have been profitable since July. I rarely have total losses for the day, I usually end up a little over break even or a great days profit. Most important I enjoy my trading day. I don't dread it and I am not scared.

Sorry for the long post but I always find it helpful to let others know they are not alone when they fail.
@jezzer46 I totally hear you on the too much time, energy, and money have been poured into my trading for me to give up, as well as closing out of trades at a loss right before they take off for big profits... Once you've lost an uncomfortable amount of your trading funds the whole once bitten twice shy effect kicks in... In addition, I've also fallen victim to trying so many indicators that the waters have muddied... The problem is I know how to trade successfully but I've become my own worst enemy...

I really want to get in a trade today but feel that I need to go through everything and make sure I'm comfortable with myself and my setup before doing so... Another disproportionate number of losing trades will pretty much seal the deal for me to halt trading for a while - mainly because I won't have enough funds left to trade with successfully... I just need a confidence boost...
@rad14733 I feel what you are going through. The one thing with options that I put in perspective is that the risk is subjective. Sometimes the option price doesn't correlate with what the stock price is doing. Value is completely dependent on volatility and volume. So if I defined a risk exit on the stock price a lot of times the option price would drop dramatically. For me I couldn't handle that.

Ive seen your work on these forums and it's really good. You know what to do and how to do it. If you lose you lose, if you win you win. The one thing not to do is put your bias against the market. Trust your setup and execute.
I've been an active day trader for over 2 years, and after those two years I have very little to show for the time and money spent trying to become a consistently profitable trader.

I often hear professionals say that most unsuccessful traders fail because they constantly change their strategy, which prevents them from being able to determine if their strategy is profitable, because they never reach a statistically significant sample size of trades before they inevitably make tweaks and change their strategy entirely.

My challenge is psychological. I'm not sure how to break it. When I go through losing streaks, I freak out, and switch to a new strategy.

So here's the question...

If you're a consistently profitable trader, how did you develop the discipline to stick to a single strategy? Also, is this even necessary? Perhaps you think changing strategies is ok. If so, why?

I'm hoping that this thread not only helps me, but helps others who are struggling as well.
Perhaps you think changing strategies is ok. If so, why?

I think more than one strategy is necessary because market conditions vary. What I look for in a quick scalp in a range isn't what I look for in a trend trade that I hope to hold longer.

Just curious, are you keeping a trade journal? Are you looking at your stats to determine if you tend to have more wins or losses at certain times of day? On particular instruments? Or timeframes? Looking at losses isn't the highlight of my day, but it has certainly taught me a lot. For example, because of my trade data, I know that if I want to make a quick scalp trade, there are 2 times of the day and four instruments that I should be looking at for setups. If I use that scalp strategy at any other time of day or on a wide range of instruments, my win rate plummets. Someone else could probably succeed with the strategy at other times of day and on all kinds of instruments. I just can't do it. That's the kind of thing that keeping stats on all your trades can help you figure out. Knowing that I'm taking a trade at the time of day and on an instrument where the strategy is most likely to succeed for me, given my personal trade history, is a big confidence booster.

If a losing streak causes you to "freak out," I would encourage you to make sure you're only trading with speculation capital that you can afford to lose. If potential loss of your trading funds poses any risk to your overall financial health, please remember that there are other ways to invest your money. I don't say that to discourage you. I say that to encourage you to look at ALL your investment options, not just day trading, if trading losses cause you significant distress or pose risk to your financial well-being.

Best wishes.
You folks are simply trying to hard by scanning for every stock or trading everything that others talk about. Simply choose a small handful of names (4 or 5) and a pattern that makes sense to you and stick with it. There will always be a new guru who "beat" the system, but really, do you need more advice?

This isnt hard, just repetitive and sometimes quite boring
@GetRichOrDieTrying so just use your backtested strategy that's profitable. If its profitable that means the strategy has a exit plan. However you are saying you exit early? why would you exit early? Sounds like your exit plan isn't being followed. It appears more like you backtested for MAX profits but didn't really have a exit plan, if that's the case as is with most traders and why they lose money, no strategy is complete without the proper exit plan. Most people focus on entry, when exit is the most important (that's when money is made...or lost )...i find it quite interesting.

Think of it like this... you should be able to buy in at the ALL TIME HIGH on a fundamentally sound asset and still return a profit if your strategy and risk management allows for it. Its all about strategy and risk management. You can buy 1/100th of your portfolio at the ATH and it goes down and buy on the drawdown with 2/100th or 3/100th of your portfolio and should return a gain if your strategy allows for it. Most people want fast gains, which is faster losses and with no strategy and risk management im sure you know where that ends up... the narrative of constant high % gains weekly/monthly "doubling up" is just that, its a nice story narrative. Anyone on wall st will tell you the same... as a matter of fact they will capitalize of your high risk and/or uneducated trades.

#1 Moral of the story is make sure you have a good entry and exit plan and even better risk management trading low risk/high probability trades.
#2 Trading is simple and can be profitable, people make it complicated by their greed and lack of patience.

most people that fail will fall in atleast one of the two above, maybe even both.
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@Trader Raider Thanks for taking the time to provide such an in depth response.

To answer your questions...

1.) Yes I keep a trade journal. If you're more specifically referring to something like Tradervue where I can get stats on best time of day I'm profitable, etc. I'm not keeping a trading journal that is that in depth specifically because I visually have never seen correlations with those types of things.

I only day trade TQQQ and SQQQ. They are Long and Short 3X leveraged Nasdaq ETF's. I trade those exclusively because I don't like having to deal with scanning for stocks. Instead I have a breakout and dip buying strategy that I use when the setup appears. The problem is that the setup doesn't appear often, so I think what's happening is I'm forcing low probability trades that don't meet my full criteria.

Lately, I've been thinking about setting up a scanner so that the exact requirements of my setup are in tact when taking a trade on other stocks besides the aforementioned.

2.) As far as freaking out about losses, it's not the money lost that I freak out about. My risk management plan is solid. It's the fear of a loss reinforcing my deepest concern which is that my strategy doesn't work, and I'm wasting my time and money. When I have losing days or losing weeks, it feels like the world is coming to an end.
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