Managing Emotions While Day Trading

[GetRichOrDieTrying]

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?

 

[Trader Raider]

@GetRichOrDieTrying, Excel spreadsheets are the only thing I've used. When I'm evaluating an indicator or strategy, I copy & paste a screenshot of the chart at trade entry and exit. Later I go back and record indicator values in the spreadsheet to look for patterns that may point to optimal entry/exit. And I have a column to note the things @MerryDay mentioned to record factors related to losses. Taking note of what I failed to do (check for news, mark S/R, trade against higher timeframe, etc.) helps refine entry criteria and protect me from myself.

The reason I started recording time of trade entry/exit was because I was losing badly. My win rate was worse than flipping a coin. So I decided to record every trade parameter I could think of to see if any patterns emerged. It came as a great surprise that certain times of day were highly correlated to wins/losses with certain instruments but not others.

I can't give you advice about TQQQ and SQQQ because I trade more traditional instruments. Regarding your strategy though, you said it's a MTF strat. Have you actually plotted it on a MTF grid? Have you plotted it on a workspace with a different timeframe in each cell to be sure your indicator on the lower timeframe is actually giving you good information from the higher timeframe?

Regarding revenge trades, I have blown up accounts more times than I'm going to admit here. @MerryDay is right again when she says it's development of discipline and control. Once you successfully fight the urge a few times, it becomes easier to walk away. You could amend your trade plan to put in a loss limit, such as 2 losses and I'm out, or $X loss, and I'm out. When I hit my loss limit, if the thought of more trades even enters my mind, I say to myself, "Play stupid games, win stupid prizes. You really gonna do that?" Then I shut off the computer and WALK AWAY. Find something similar you can say to motivate yourself to WALK AWAY when the urge hits.

Finally, if you're using good risk management, you've conquered one of the biggest hurdles. Please don't lose sight of that achievement while you're refining other aspects of your trade plan

Best wishes!

 

[GetRichOrDieTrying]

@Trader Raider Thanks again for taking the time to provide such a detailed response. I really appreciate it.

MTF: Yes. I'm using a Grid with 4 time frames. 1M, 5M, 15M, Daily. As I mentioned in my previous response, I think what's happening, is I'm not entering trades that meet 100% of my criteria. I'm doing this because my setup doesn't happen often enough on the 2 ETF's I limit myself too, so I get impatient, and take C- quality trades. This destroys my edge and results in a net negative P/L. Furthermore, I'm not setting a daily max loss. I measure losses in Risk multiples (R's). I shouldn't allow more than 2 losses, considering that my average R profit is 3R. If I cap my max losses to 2/day, that alone will likely make a huge impact on my P/L.

 

[codydog]

If you're actively managing your positions, you may want to consider reading Virtu's disclosures - they see win/loss and breakeven as important. personally, I'd rather pay commission and re-establish a position then take a loss hoping it comes back.

 

[BillW]

Have you forward tested simulated trading?