We spend a lot of time preparing for trading. As a trader you need to research a lot of things: recent news, upcoming events, study the charts, find patterns that will help you determine strategies, set your Stop Loss, and take care of risk management. However, one crucial aspect of the preparation is always overlooked, that is emotions! While analysis is crucial, so is the state of mind before we open a trade.
Here’s a brief check-list of the most important points you should pay attention to while getting ready for trading.
1. Take care of the basics
Being at your best physical capacities has proven to be a direct influence on your emotional state. According to the theory of Abraham Maslow, your needs are divided into five different categories that form a pyramid. At the very bottom of it, you can find everything physical. Until those needs are met, you can’t fully function at higher levels.
In other words, make sure you cover your basic needs before getting ready for a trading session. Have a good night rest, eat, stay hydrated, dress comfortably. This way, you won’t face any unnecessary irritation or distraction that may come from being tired and overall, physically uncomfortable.
2. Set the neutral mood
It goes without saying, trading when you are in a bad mood is not the best idea. On the other hand, being overly happy, energetic, or enthusiastic won’t do you any good as well. Falling from one emotional extreme to another can make you act differently from your usual behaviour pattern without you even realising it.
Sad? Negative thinking. Angry? Loss of patience. It’s pretty apparent how those things can negatively affect your trading, but what about happy emotions?
Well, the answer is less obvious. Once we feel happy and energetic, our body tends to produce hormones that make us view reality in a more positive way that it is. Also, those emotions can make us overly-confident. That can lead to a person overestimating their abilities or the situation they are in. Obviously, not the best choice for trading.
So, what’s the right answer here?
The perfect conditions include you being in the most neutral mood possible. What you need to look for is being calm, collected, focused.
That’s what can help you reach that state:
Listening to relaxing, neutral music (try background sounds playlists on YouTube)
Drinking water (surprisingly, keeping your water balance will help your emotional balance as well)
Things you should probably avoid before trading:
Caffeine. There is no need to raise your adrenaline and blood pressure
Running errands. Adulting is stressful enough on its own
3. Manage your schedule
It’s important not to overwork yourself. People tend to focus on their tasks too much once they are in the ‘business mode’. Trading is not a walk in a park, of course, it needs your attention. It requires significant effort, but in the long run, overworking yourself might be counterintuitive.
Make sure to plan breaks to regain balance by taking a pause. At least once an hour, you should spend about 10 minutes changing your focus. Walk a little bit. Read an article (not related to trading). Write down your plans for the next day. And try not to get distracted by social media, so that you will be able to come back to your trading tasks refreshed and full of energy.
4. Set the rules
This point is crucial, especially for those struggling with emotional control. Before you start trading, write down a set of rules that you will follow in case of an emergency.
For example, you think you could potentially become frustrated with unsuccessful deals or confusing chart data. Write down the conditions: “if it happens, I take a 15-minute break to come back to my trading strategy and review it one more time”. You must promise yourself you’ll follow the rules you have set no matter what.
By the end of the day, review your experience. Did certain conditions help you? Would you use them during your next trading session, or do you need to change them?
Emotional preparation is just as essential as your theoretical training. Remember, we are only human, which means that we need to take care of more than one aspect to function at your best possible level. Take your time figuring out what works for you specifically. Self-improvement is a journey, not a destination.