Don’t Let Emotions Control Your Trading
In this video, Roger Hawes, an analyst at Corellian Academy, discusses the challenges associated with managing emotions while trading, particularly during times of high market volatility. Hawes illustrates the importance of emotions in decision-making as well as the difficulty in navigating rapid market reversals through the example of the oil market.
The importance of understanding the market dynamics and the headlines that drive market sentiment is highlighted by Hawes, who emphasizes that minor changes in news can have a significant impact on market sentiment. In addition to emphasizing the importance of good and bad emotions, several concepts are highlighted that may negatively affect trading decisions. An example given, is by overtrading to recover losses or being too aggressive due to anger can result in losses.
To manage emotions while trading, Hawes proposes an approach that is disciplined, continuous, and process-driven. According to the 80-20 thumb rule, 80% of the attention should be devoted to method, formula, and risk assignment, while 20% should be devoted to the trading style and instinct. Keeping risk management, paying attention to details, and evaluating one's trading process continually is what Hawes emphasizes to avoid repeating mistakes.
In conclusion, Hawes advises traders to maintain confidence in their process, particularly during challenging market conditions. Decompressing and then reentering the market with less risk when emotions become overwhelming is suggested. To mitigate the impact of emotions and enhance long-term success, trading should be conducted in a structured manner.
