How Emotion affect Day Trading

Despair = Losing Money – Trading Better


Do not despair look at your losses as part of doing business and as paying tuition fees to the markets.

Disappointment = Expectations – Reality

Enter trading with realistic expectations. You can realistically expect 20%-35% annual returns on capital with great trading. More than that is possible but unlikely.

Regret = Disappointment in a loss+ Caused by lack of Discipline

If you followed your trading plan and lose money because the market did not move in your direction so be it, but if you went off your plan and traded based on your feelings and opinions then you should feel regret and stop being undisciplined.

Enjoying your Trading = Winning Trades – Fear of Ruin

Trading is much more enjoyable when you are risking 1% of your capital in the hopes of making 3% on your capital with a zero chance of ruin. It is not enjoyable when you are putting a huge percentage of your capital on the line in each trade and are only a few bad trades away from your account going to zero.

Wisdom = Square Root of Experience through years of successful trading

To get good at trading you have to trade real money. Wisdom comes from putting real money on the line for years and proving to yourself that you can come out a winner in the long term.

Faith in your system = Belief through back testing + Experience of winning with it for years

While you have to hold the opinion of whether each trade is a winner or loser it is different for your trading method. A lot of emotional trading can be overcome when you do not have doubts about your method. When you hold an almost religious fervor over believing in your method, system, risk management, and your own discipline you will overcome many of the emotional problems that arise with other traders in the heat of action.


  1. Bramesh said:

    I do not read books so will not be able to advise

    September 23, 2015
  2. Dear Bramesh, could you please let me know a good book on Option open interest? I would like to buy that and go through it. your response is highly appreciated.

    September 23, 2015
  3. A Chakraborty said:

    Brilliant introspection. Interested to see your article on if “You can realistically expect 20%-35% annual returns on capital with great trading”, how can it be wiped out so quickly? as end result is a number game both on the positive or negative sides.

    September 23, 2015

Leave a Reply